Q: A law firm wants to earn a profit of 75% on its total job cost. If the total cost for a client is $2,000, what should the price be?

$$ 2,000 \times 1.75 = 3,500 $$

Question 1

Which of the following best distinguishes job order costing from process costing?

Accepted Answer

Job order costing accumulates costs by job for unique products or services, while process costing accumulates costs by process for identical units.

Question 2

A company estimates its total manufacturing overhead for the year to be $$120,000 and its total direct labor hours to be 15,000. What is the predetermined overhead allocation rate?

Provide your answer in $$ per direct labor hour.

Accepted Answer

$$ \frac{120,000}{15,000} = 8 $$ per direct labor hour

Question 3

Smart Touch Learning uses direct labor cost as the allocation base. If the predetermined overhead allocation rate is 40% and the direct labor cost for Job 27 is $1,250, what is the allocated manufacturing overhead for Job 27?

Accepted Answer

$$ 1,250 	imes 0.40 = 500 $$

Question 4

Which of the following journal entries correctly records the use of $$355,000 in direct materials and 17$$,000 in indirect materials?

Accepted Answer

Debit Work-in-Process Inventory $$355,000; Debit Manufacturing Overhead 17$$,000; Credit Raw Materials Inventory $372,000

Question 5

A company incurs $$197,000 in total labor costs, of which 169$$,000 is direct labor and $28,000 is indirect labor. How should these costs be recorded?

Accepted Answer

Debit Work-in-Process Inventory $$169,000; Debit Manufacturing Overhead 28$$,000; Credit Wages Payable $197,000

Question 6

Which of the following is NOT a typical cost driver for allocating manufacturing overhead?

Accepted Answer

Direct materials cost

Question 7

If actual manufacturing overhead costs are $$70,000 and allocated manufacturing overhead costs are 67$$,600, what is the adjustment needed for the Manufacturing Overhead account?

Accepted Answer

Debit Cost of Goods Sold $$2,400; Credit Manufacturing Overhead 2$$,400

Question 8

A company completed jobs with a total cost of $644,600 during the year. Which account is debited when these jobs are completed?

Accepted Answer

Finished Goods Inventory

Question 9

A service company estimates $300,000 in indirect costs and 10,000 direct labor hours for the year. What is the predetermined overhead allocation rate per direct labor hour?

Accepted Answer

$$ \frac{300,000}{10,000} = 30 $$ per direct labor hour

Question 10

Which of the following statements about underallocated and overallocated overhead is correct?

Accepted Answer

Underallocated overhead occurs when actual overhead costs are greater than allocated overhead costs.

Question 11

A law firm wants to earn a profit of 75% on its total job cost. If the total cost for a client is $2,000, what should the price be?

Accepted Answer

$$ 2,000 	imes 1.75 = 3,500 $$

Question 12

Which of the following best describes the flow of costs in a job order costing system?

Accepted Answer

Raw Materials Inventory → Work-in-Process Inventory → Finished Goods Inventory → Cost of Goods Sold

Question 13

If a company sells jobs with a sales price of $$1,200,000 and a cost of 584$$,600, what is the gross profit?

Accepted Answer

$$ 1,200,000 - 584,600 = 615,400 $$

Question 14

Which of the following is a reason why managers use job order costing systems?

Accepted Answer

To determine unit costs for pricing and inventory valuation

Question 15

A company’s actual manufacturing overhead for the year is $$85,000, but only 80$$,000 was allocated. What is the effect on Cost of Goods Sold after adjusting for underallocated overhead?

Accepted Answer

Cost of Goods Sold will increase by $5,000

Job Order Costing: Structured Study Notes for Managerial Accounting

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