Job-Order Costing

What is job-order costing?

• A costing system that assigns costs to each individual job or batch.

• A system used to calculate costs for continuous production of identical products.

• A method of estimating the market value of a product.

• A system that allocates costs based only on direct materials.

In which of the following scenarios would job-order costing most likely be used?

• A bakery producing large batches of identical cookies.

• A consulting firm working on custom client projects.

• A paper mill manufacturing standardized paper rolls.

• An oil refinery processing crude oil into gasoline.

What is an allocation base in job-order costing?

• The total cost of direct materials used in a job.

• A measure, such as direct labor hours or machine hours, used to assign overhead costs to jobs.

• The estimated cost of overhead divided by the number of jobs.

• A fixed cost that remains constant across all jobs.

What is the formula for calculating the predetermined overhead rate?

• Total Actual Overhead Costs/Total Actual Direct Labor Costs

• Total Direct Materials Costs/Total Machine Hours

• Total Fixed Overhead Costs/Total Estimated Units Produced

• Total Estimated Overhead Costs/Total Estimated Allocation Base

A manufacturing company estimates its total overhead costs to be Php5,000,000 and its total machine hours to be 25,000 for the upcoming year. What is the predetermined overhead rate the company should use?

• Php220 per machine hour

• Php180 per machine hour

• Php200 per machine hour

• Php250 per machine hour

A manufacturing company uses a predetermined overhead rate of Php120 per machine hour and Php80 per direct labor hour. Job#305 required 300 machine hours and 250 direct labor hours. Calculate the total overhead applied to Job#305.

• Php48,000

• Php36,000

• Php56,000

• Php66,000

How can job-order costing assist managers in planning and decision-making?

• By providing detailed cost information for individual jobs to estimate profitability and set pricing strategies.

• By standardizing production costs across all jobs to ensure consistent pricing.

• By focusing only on indirect costs to streamline overhead allocation.

• By eliminating the need for tracking direct materials and labor.

Why is the choice of an allocation base important in job-order costing?

• It ensures that only direct costs are applied to jobs.

• It eliminates the need for predetermined overhead rates.

• It standardizes the cost of materials across all jobs.

• It determines how overhead costs are distributed among jobs, affecting cost accuracy and decision-making.

Why might a company use multiple predetermined overhead rates instead of a single determined overhead rate?

• To allocate overhead based only on direct material costs.

• To simplify the calculation of overhead costs.

• To reflect the cost structures and activities of various departments of production processes.

• To apply a uniform overhead rate across all departments regardless of activity levels.

Which of the following shows the correct step-by-step process of job order costing?

• Apply overhead - Assign direct costs - Prepare job cost sheet - Complete the job

• Assign direct costs - Apply overhead - Complete the job- Prepare job cost sheet

• Identify the job - Prepare job cost sheet - Assign direct cost - Apply overhead - Complete the job

• Complete the job - Assign direct costs - Apply overhead - Prepare job cost sheet