Job Order Costing Questions and Answers

Job Order Costing Questions and Answers:


  1. Cost accounting is said to consist of three different phases. Name them. See answer.
  2. Name four control accounts concerned primarily with cost determination. See answer.
  3. What subsidiary record or ledger supports each of the control accounts mentioned in answering Question 2? See answer.
  4. What is the primary objective in job order costing system. See answer.
  5. What is the rational supporting the use of process costing. instead of job order costing system  for product costing purposes? See answer.
  6. What is a cost sheet? See answer.
  7. How is control over prime costs achieved in job order costing system? See answer.
  8. What is the function of work in process (WIP) account in job order costing system? See answer.
  9. What is factory overhead? See answer.
  10. Explain briefly: (a) actual factory overhead (b) applied factory overhead. See answer.
  11. When a sale is made, an asset is debited and sale is credited. If a cost system, including perpetual inventory accounts, is used, what additional entry is required for this transaction? See answer.
  12. Select the answer which best completes the statement:
    Of the following production operations, the one most likely to employ job order cost accumulation is: (1) soft drink manufacturing; (2) shipbuilding; (3) crude oil refining; (4) candy manufacturing.
    (b) Under job order cost accumulation, the dollar amount of the entry involved in the transfer of inventory from work in process (WIP) to finished goods is the sum of the costs charged to all jobs: (1) started in process during the period; (2) in process during the period; (3) completed and sold during the period; (4) completed during the period. See answer.


  1. The three phases of cost accounting (managerial accounting) are: cost determination; cost planning and control through budgets and standards; and cost analysis for decision making.
  2. Four control accounts concerned primarily with cost determination are: materials; factory overhead; work in process and finished goods.
  3. Materials–materials ledger cards or other forms of perpetual inventory. Factory overhead control–expense ledger and departmental expense analysis sheet. Work in process (WIP)–cost sheets or cost of production reports. Finished goods–finished goods ledger cards.
  4. The primary objective in job order costing is to determine the cost of materials, labor, and factory overhead used to produce a specific order or contract. Cost estimates are made when the order is taken, and the job order procedures are designed to reveal costs as the order goes through production, thereby giving an opportunity to control costs.
  5. The type of cost accumulation method used by a company will be determined by the type of manufacturing operation performed. A manufacturing company should use process cost accumulation for product costing purposes when like units are continuously mass production, when custom made or unique goods are produced, job order costing would be more appropriate. Process costing is often used in industries such as chemicals, food processing, oil, mining, rubber and clerical appliances. With a continuous mass production of like units, the center of attention is the individual process (usually a department). The unit costs by cost category as well as total unit cost for each process (department) are necessary for product costing purposes.
  6. A cost sheet is a convenient printed form for collecting classifying and summarizing the costs incident to a particular job, lot, or contract. In essence, it is a statement of profit or loss for each job, prepared as the work progresses, and is therefore a guide to management in controlling costs.
  7. Job order cost sheet serve a control function. Comparisons are made between estimates of a job costs and costs actually accumulated for the job. In addition, cost control is enhanced by accumulating direct materials and labor as well as factory overhead costs by cost centers or departments, and by comparing the actual costs to cost center budgets.
  8. The work in process account is a control account in the general ledger, reflecting total costs assigned or applied to jobs. The individual job cost sheets form the work in process (WIP) account’s subsidiary ledger, indicating the direct materials, direct labor, and factory overhead charged to job.
  9. Factory overhead is all the production costs, other than direct materials and direct labor, necessary to manufacture a product.
  10. Actual factory overhead is the actually experienced used-up cost that occurs during a specific time period. Applied factory overhead is an estimated amount of overhead that is assigned to work done.
  11. The additional entry is:

    Cost of goods sold ……. Dr
    Finished goods……………Cr.

  12. (a) 2
    (b) 4

You may also be interested in other useful articles from “job order costing system” chapter:

  1. Measuring Direct Materials Cost in Job Order Costing System
  2. Measuring Direct Labor Cost in Job Order Costing System
  3. Application of Manufacturing Overhead
  4. Job Order Costing System – The Flow of Costs
  5. Multiple Predetermined Overhead Rates
  6. Under-applied overhead and over-applied overhead calculation
  7. Disposition of any balance remaining in the manufacturing overhead account at the end of a period
  8. Predetermined Overhead Rate and Capacity
  9. Recording Non-manufacturing Costs
  10. Recording Cost of Goods Manufactured and Sold
  11. Job Order Costing in Services Companies
  12. Use of Information Technology in Job Order Costing
  13. Advantages and Disadvantages of Job Order Costing System
  14. Job Order Costing Discussion Questions and Answers
  15. Job Order Costing Exercises
  16. Case Studies

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