JOB-ORDER COSTING: COST FLOWS AND EXTERNAL REPORTING QUESTIONS WITH CORRECT ANSWERS

Learning Objectives CORRECT ANSWER 1) Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs 2) Use T-accounts to show the flow of costs in a job-order costing system 3) Prepare schedules of cost of goods manufactured and cost of goods old and an income statement 4) Compute under applied or over applied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts 5) Use Microsoft Excel to summarize the flow of costs in a job-order costing system Chapter 3 CORRECT ANSWER Describes how companies use job-order costing to prepare a balance sheet and an income statement for external reporting purposes Job-order costing CORRECT ANSWER a costing system in situations where many different products, jobs, or services are produced each period Absorption costing CORRECT ANSWER a costing method that includes all manufacturing costs--direct materials, direct labor, and both variable and fixed manufacturing overhead--in the cost of a product Allocation base CORRECT ANSWER a measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects Predetermined overhead rate CORRECT ANSWER a rate used to charge manufacturing overhead cost to jobs that is established in advance for each period