Multiple Choice
All else constant, under the periodic inventory system, when using the weighted average cost method, the cost of goods sold (COGS) is calculated:
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
Multiple Choice
In a job costing system, which of the following statements is true regarding the assignment of actual overhead costs to jobs?
A
Overhead costs are never considered in job costing systems.
B
Actual overhead costs are not assigned directly to jobs; instead, overhead is applied using a predetermined overhead rate.
C
Only direct materials and direct labor are assigned to jobs; overhead is excluded.
D
Actual overhead costs are assigned directly to each job as they are incurred.
Verified step by step guidance1
Understand the concept of a job costing system: A job costing system is used to allocate costs to specific jobs or projects. It tracks direct materials, direct labor, and overhead costs associated with each job.
Clarify the role of overhead costs: Overhead costs are indirect costs that cannot be directly traced to a specific job. Examples include factory rent, utilities, and equipment depreciation.
Explain the use of a predetermined overhead rate: In a job costing system, actual overhead costs are not assigned directly to jobs. Instead, a predetermined overhead rate is calculated at the beginning of the accounting period based on estimated overhead costs and an allocation base (e.g., direct labor hours or machine hours).
Describe how overhead is applied: Overhead is applied to jobs by multiplying the predetermined overhead rate by the actual amount of the allocation base incurred by the job. This ensures a consistent and systematic allocation of overhead costs.
Highlight the distinction between direct costs and overhead: Direct materials and direct labor are directly assigned to jobs because they can be traced specifically to each job. Overhead, being indirect, is applied using the predetermined rate rather than being assigned directly.
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