True False Questions

02-1 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Chapter 02 Job Order Costing and Analysis

True / False Questions

• Cost accounting systems accumulate costs and then assigns them to products or services.

True False

• A company that uses a cost accounting system normally has only two inventory accounts: Finished

Goods Inventory and Work in Process Inventory.

True False

• Cost accounting information is helpful to management for pricing decisions but has no effect on

controlling costs.

True False

• There are two basic types of cost accounting systems: job order costing and periodic costing.

True False

• A company that produces a large number of standardized units would normally use a job order

costing system.

True False

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02-2 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

• Job order production systems would be appropriate for companies that produce custom homes,

specialized equipment, and special computer systems.

True False

• Job order production systems would be appropriate for companies that produce compact disks or

disposable cameras.

True False

• A job order costing system would be appropriate for a manufacturer of automobile tires.

True False

• Job order production systems would be appropriate for companies that produce training films for

a specific customer or custom-made furniture to be used in a new five-star resort hotel.

True False

• A company's file of job cost sheets jobs not yet completed equals the balance in the Finished

Goods Inventory account.

True False

• The direct materials section of a job cost sheet shows the materials costs assigned to a job, but the

direct labor section only shows the total hours of labor allocated to the job.

True False

02-3 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

• The collection of cost sheets for unfinished jobs makes up a subsidiary ledger controlled by the

Work in Process Inventory account in the general ledger.

True False

• A job cost sheet is useful for developing financial accounting numbers but does not contain

information that is useful for managing the production process.

True False

• Job cost sheets are used to track all of the costs assigned to a job, including direct materials, direct

labor, overhead, and all selling and administrative costs.

True False

• When a job is finished, its job cost sheet is completed and moved from the file of jobs in process

to the file of finished jobs that are yet to be delivered to customers.

True False

• The file of job cost sheets for completed but undelivered jobs equals the balance in the Work in

Process Inventory account.

True False

• Both direct and indirect labor costs are recorded on the individual job cost sheets.

True False

02-4 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

• Service firms, unlike manufacturing firms, should only use actual costs when determining a selling

price for their services.

True False

• Job order costing is applicable to manufacturing firms only and not service firms.

True False

• The cost of all direct materials issued to production is debited to Work in Process Inventory.

True False

• A materials requisition is a source document used by production managers to request materials for

production and also used to assign materials costs to specific jobs or to overhead.

True False

• When materials are used as indirect materials, their cost is debited to the Factory Overhead

account.

True False

• A materials requisition is a source document used by materials managers of a manufacturing

company to order raw materials from suppliers; it serves the same purpose as a purchase order in a merchandising company.

True False

• Materials requisitions and time tickets are cost accounting source documents.

True False