 in this presentation we will take a look at multiple choice questions related to a job cost system first question labor costs in production are either a high or low b indirect or hourly c salary or hourly d indirect or expense and e direct or indirect okay let's go through this again using the process of elimination labor costs in production are either a high or low that's possible they could be in between too right so labor costs within there could be high or low this seems kind of arbitrary you know it might seem correct it could be either high or low they got to be one or the other or in between but it'll seem like they're kind of made up terms so high or low doesn't seem to be the types of terms we're looking at here so let's see b says indirect or hourly and those seem like two payroll terms they are two payroll kind of terms but they're not really contradictory or they don't seem to match indirect or hourly hourly is the type of wages indirect would be support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a u2 page we also include added resources such as excel practice problems pdf files and more like quickbooks backup files when applicable so once again click the link below for a free month membership to our website and all the content on it whether it's applied to a specific job or not so I don't think it's that those don't seem to go together c says salary or hourly and those are two payroll items that that seem to go together so I would think that you know maybe that maybe that would be it because how else would we pay people either hourly or salary so and then d says indirect or expense and again these two don't seem to exactly go together indirect is a payroll kind we applied to payroll and and expense those two things don't seem to be two terms that are that are exactly related so I don't think it's d and then e says direct or indirect and again those two terms kind of ring together that sounds direct or indirect those are two terms that sound like they go together so I'll keep that right c and e so let's go through this again we're going to say direct costs in production are either c salary or hourly or e direct or indirect now the the key here is that's in costs in production so if we're talking about the production costs I think the more proper one the one we're looking for is either they're direct or indirect which is a little deceiving because probably this one sounds pretty reasonable too because how else do we pay people either salary or hourly that would make sense but that's not really applying that that's this is true for all payroll really I mean we're paying people either on a salary basis or an hourly basis it's not something that applies to cost of production which we're talking about here costs of production we're typically trying to think of how we're going to apply this stuff out to jobs and either we're talking about labor that is directly related to a job or labor that is indirect so given those terms I think e is the one that we're looking for so we have labor costs in production are either e direct labor or indirect labor and by the way this is just one of those where you might see this and say well this you know this isn't technically wrong possibly because there's and we could pay people some kind of hybrid between the between the two you know we can have different kind of payroll topics but you might say well this seems right from a from a completely uh standpoint of it of it being true or not but this is one of those questions as many multiple choice questions are which will be we're looking for the most correct answer the one that fits the picture the most and so you're usually going to lose that argument and you might as well try to go for the one that's going to be related to the to the topic we're we're working on next question a perpetual record of raw materials is a materials ledger card b materials requisition c purchase order d materials list g general ledger let's go through this again using the process of elimination a perpetual record of raw materials is either a materials ledger card now if we if we hear that we might think well that sounds like a thing it sounds like a term materials ledger card so i'll keep that for now b says materials requisition and that should sound familiar to but it doesn't really sound like a perpetual record it sounds like a requisition it's requesting so it sounds like a request doesn't really sound like the perpetual record of inventory kind of as we go so i don't think it's going to be b c says purchase order and that has to do with materials too possibly but that's really the request for us to purchase the materials from the vendor so it's not really a perpetual record of our materials that's the forum that's going to tell the vendor hey we would like some materials please so i don't think it's going to be that one d says materials list that sounds kind of kind of reasonable it's going to be a list of materials could be a perpetual perpetual list of materials and then e says the general ledger the general ledger will be kind of a perpetual ledger in some case but it's not really a subsidiary ledger which we would think of that we would need for for inventory we would need the general ledger every account has a general ledger that gives the detail by date what we really need is the detail by cost of inventory tracking inventory items we need some kind of subsidiary ledger so i don't think it's e so let's go through this again a perpetual record of raw materials is a materials ledger card or d materials list now of those two i think a is actually going to be the one a materials list sounds like it's just going to kind of list out the materials we have but what we really need is the cost of those materials as they go through the system so what we what we purchased what was still on hand versus what we have sold and the cost of those and this is the materials ledger card it's going to be very similar to what we do in a merchandising company and we might have to use a similar cost flow assumption like first in first out last and first out average cost method the only difference being that you know we're still using the purchase order the inventory is still coming into us in the same kind of similar process as with a merchandising company but then of course we're not selling the inventory but the inventory is still leaving the warehouse in a similar fashion as with a merchandising company it's just that it's going to the factory to the production process instead of to a customer at that time so we have the same kind of issues with inventory that we would have which a merchandising company tracking the inventory and finding methods to to do that next question the balance in the work in process inventory is equal to once again the balance in the work in process inventory is equal to a the sum of the costs for all jobs finished but not yet sold b raw materials used in production c the sum of costs for all jobs in process but not yet completed d the costs of all jobs started finished during the current period e says the sum of all materials labor and overhead costs paid during the period okay let's go through this again using the process of elimination the balance in the work in process inventory is equal to either a the sum of the costs for all jobs finished but not yet sold it sounds kind of like it's possible so i'll keep that for now b says raw materials in production now you might think well that's if they're in production they're in work in process so the raw materials are included in work in process but the raw materials aren't going to be the balance of of of the work in process account because the work in process account includes everything that's going into the process including raw materials but also the factory overhead as we go and the labor so this would just be one factor it can't be that it can't be equal to them to the total c says the sum of costs for all jobs in process but not yet completed so that sounds kind of reasonable i'll keep that for now d says the costs of all jobs started i think it should be and finished during the current period so i i the sum of the jobs that were both started and finished now this might be something that if you looked at a process cost system you might be that might start to ring like something that sounds familiar if you're using like a first in first out process cost system or something but it's not really something we do in a job cost i mean whether it was started and finished during the same time period doesn't necessarily tie out to the work in process it's a permanent account work in process a balance sheet account so it's not it's not d and then he says the sum of all materials labor and overhead costs paid during the period and again that might sound reasonable i'll keep that for now so let's go through this again the balance in the work in process inventory is equal to either a the sum of costs for all jobs finished but not yet sold and note that that one's very similar to c which says the sum of costs for all jobs in process but not yet completed the fact that these two are very similar in in the form makes could make us suspicious that one of those are going to be the answer as opposed to e that says the sum of all materials labor and overhead costs paid during the period so of those three i'm thinking that a or c are probably it given the fact that they're they're similar it doesn't have to mean that they're it but that's often the case if the two answers are very similar with one you know kind of twist then one of those are probably possibly it a lot of time he says the reason this sounds good is because it has materials labor and overhead which are the three things that we kind of look for in the work in process account the reason it's not correct is because it's cost during the period and it's not necessarily the working process could could go over the like it could be working process some of the costs were there from last month it's a permanent account so it's not like working process is going to clear out at the end of the month like a like an inventory or temporary or income statement account so it doesn't necessarily need to be the case that these costs all happen during this period and again the reason this one might sound more familiar is if you have looked at a process cost system where we have instances in which we need to look at costs that happened during a period so it's not going to be e so we're left with a and c and between these two we're looking for the for the ones that are still in process and that's going to be c the sum of costs for all jobs in process but not yet completed so if we add up all the jobs that we're still working on they're still in process they're not completed then that should add up to the working process amount on the trial balance in other words the trial balance represents all the open jobs which are supported by the job cost sheets all those job costs sheets then that we add up which have not been done yet are these as opposed to a which is the sum of all costs for all jobs finished but not sold that would be the finished goods so if we summed up all those jobs they're done that would be equivalent to finished goods not working process so final answer the balance in the working process inventory is equal to c the sum of the costs of all jobs in process but not yet so but not yet completed