Question & Answer: 1. Costs are accumulated and summarized by department in a job order cost system. T/F…..

1. Costs are accumulated and summarized by department in a job order cost system. False (F)

Job costing accumulates costs by individual jobs. Process costing accumulates costs by process or department.

2. As jobs are completed, their costs become part of finished goods inventory. True(T)

Under Job order costing, as and when jobs are completed all costs are assigned to finished goods.

3. A materials requisition is used as the basis for a journal entry that records the issuance of materials. True (T)

The materials requisitions are the supporting documents for the month-end journal entry debiting the Work in Process Inventory account and crediting the Materials Inventory account for all direct materials delivered from the warehouse to the factory.

A predetermined factory overhead rate is calculated by dividing the estimated activity base by the estimated total factory overhead costs. False(F)

The correct formula for predetermined factory overhead rate is  Estimate total factory overhead costs divided by estimated activity base.

5. A debit balance in the factory overhead account is called over-applied factory overhead. False(F)

If manufacturing overhead account shows a debit balance, it means the overhead is under-applied. On the other hand; if it shows a credit balance, it means the overhead is over-applied.