For each of the following, indicate whether the statement is true or false.
Statement:
The main difference between job order and process costing systems is the amount of detail captured for
a. each product.
Most companies apply indirect costs (overhead) based on direct materials because materials are tangible
b. and visible.
Overallocated overhead occurs when the actual overhead is less than the estimated overhead.
If a company wants accurate job records, the company will insist on recording actual direct materials, actual
d. direct labor, and actual overhead costs.
Companies frequently use a normal cost system for simplicity, to smooth out the effects of seasonal
fluctuations, and so that each job can be allocated a representative amount of indirect costs as the job is
produced. Otherwise, a company could not assign actual correct indirect costs until the end of the period
because overhead costs such as rent are spent in groups and are not individually traceable to a given job.
If the difference between allocated overhead and actual overhead is small, the difference is usually recorded
as an adjustment of cost of goods sold rather than spread over all the jobs in the work in process, finished
f. goods, and cost of goods sold accounts.
The work in process account is a temporary expense account that is reported on the income (profit/loss)
g. statement.
True or
False?
