Chapter 2
Job Order Costing
TRUE/FALSE
1. Cost accounting systems are used to supply cost data information on costs incurred by a manufacturing process or department.
ANS: T
2. A manufacturer may employ a job order cost system for some of its products and a process cost system for others.
ANS: T
3. A job order cost accounting system provides for a separate record of the cost of each particular quantity of product that passes through the factory.
ANS: T
4. A process cost accounting system provides for a separate record of the cost of each particular quantity of product that passes through the factory.
ANS: F
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a. | Job order cost system | b. | General cost system | c. | Replacement cost system | d. | Process cost system |
ANS: A
5. For which of the following businesses would the job order cost system be appropriate? a. | Meat processor | b. | Automobile manufacturer | c. | Oil refinery | d. | Construction contractor |
ANS: D
6. For which of the following businesses would the process cost system be appropriate? a. | Book retailer | b. | Dress designer | c. | Lumber mill | d. | Printing firm |
ANS: C
7. Which of the following is not a characteristic of a job order costing system? a. | It accumulates cost for each department within the factory. | b. | It provides a separate record for the cost of each quantity of product that passes through the factory. | c. | It is best suited for industries that manufactures custom goods. | d. | Uses only one work in process account. |
ANS: A
8. Which of the following products probably would be manufactured using a job order costing system? a. | Number 2 pencils | b. | Computer monitors. | c. | Wedding invitations. | d. | Paper. |
ANS: C
9. Job order costing and process costing are a. | pricing systems. | b. | cost accounting systems. | c. | cost flow systems. | d. |
Please choose from one (1) of the scenarios below. Note: The scenario that you choose in this assignment will be the one (1) with which you continue for Assignment 2.
Process order cost systems are based on multiple work in process accounts and determine total manufacturing costs at the end of a time period. Multiple outsourced
Process order cost systems are based on multiple work in process accounts and determine total manufacturing costs at the end of a time period. Multiple outsourced
1.For which of the following products would job order costing be least likely to be used?
“Companies can choose to use the accounting job order costing method when they have a single product line or numerous products to manufacture. However, it is less costly and less time-consuming if they elect to use process costing when calculating the manufacturing of a single product line. With similarities
Thirdly, at the product activity level, the two Operations costs are likely to vary mainly with the Number of Units Produced and the three Sales costs are also likely to vary mainly with the Number of Units Produced.
In my opinion, the four criteria, quality, customer service, technical capability, and competitive cost position, are very appropriate to classify its products because this company considered most all of aspect of products to catalog and classify and this way can help this company to find out which type product should use which method to reduce its costs.
Armstrong Helmet Company would find it useful, using a process costing system, to identify the cost of each production batch of bicycle helmets. 6. If Armstrong Helmet Company decides to produce additional helmets
However, this system was found to be “ineffective for costing and bidding individual parts.” Id. While some machines produced low cost parts at high volume, other machines were producing high cost parts at low volume, which created cost discrepancies between various machines and thus misallocation of
Cost accounting is a type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital equipment. Cost accounting will first measure and record these costs individually, then compare input results to output or actual results to aid company management in measuring financial performance (Cost Accounting, n.d.).
1. Define and explain the meaning of a predetermined manufacturing overhead rate that is applied in a job-order costing system.
Process costing typically used by companies that produce large quantities of identical products that are made in long, continuous production runs through a series of process centers (departments). Process costing accumulates costs in a department for an accounting period and then spreads them evenly, or on an average basis, over all units produced that month.
The Coca-cola company is a homogeneous product manufacturer company. With 1.7 Billions units sold a day, the company is the largest soft drink manufacturer in the world and hence it becomes important to have a simple accounting system to determine how much these products should be sold at. The process costing determines the average cost for each unit so that it is easy to sell both a large amount of products or a small amount and understand how much profit is being made on the products. This type of accounting system would not be as effective if the company was creating many different items that had different costs of tasks throughout the process.
The current method of apportioning production overheads based on direct labour hours can be described as a traditional approach to product costing. In a manufacturing company’s financial statements, each item produced must be allocated some of the production overheads to make the statements compliant. Sometimes the individual costs of these items can be calculated incorrectly based on overall production overhead and the system of allocating in place, however the overall financial statement can still be accurate. This traditional method of allocating the production
Process costing is a system which mostly practices by a company whereby the manager of the company wants to know the cash flow from one department to another. Process costing give a clarify information to managers, therefore this activities is very important.