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Job order cost system, finished goods inventory, applied overhead

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1. For which of the following businesses would the job order cost system be appropriate?
a) Meat processor
b) Automobile manufacturer
c) Oil refinery
d) Construction contractor

2. Which of the following costs are NOT included in finished goods inventory?
a) Direct labor
b) Factory overhead
c) Company president's salary
d) Direct materials

3. At the end of the year, overhead applied was $2,800,000. Actual overhead was $2,000,000. Closing over/under applied overhead into cost of goods sold would cause net income to increase/decrease by?
a) Increase by $800,000
b) Decrease by $800,000
c) Not effect net income
d) Decrease net income by $200,000

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The solution has answered and explained MCQ on Job order cost system, fininished goods inventory, over/under applied overhead.

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1. For which of the following businesses would the job order cost system be appropriate?
a) Meat processor
b) Automobile manufacturer
c) Oil refinery
d) Construction contractor

Answer: d) Construction contractor
Job order costing is used for production of large, unique, high-cost items (built to order rather than mass produced) such as special-order printing, ...

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