Part 1 : 07/28/10 08:53:22

Question 1 - CIA 578 IV-1 - Job-Order and Life-Cycle Costing

Job-order costs are most useful for
A. Estimating the overhead costs included in transfer prices.
B. Determining the cost of a specific project.
C. Controlling indirect costs of future production.
D. Determining inventory valuation using LIFO.
A. Other costing methods may also be used to estimate overhead costs included in transfer prices.
B. Job-order costs are useful to determine the cost of a specific project. Job-order costing is used when a
company has unique and identifiable projects or jobs.
C. Job-order costs do not influence future prices any more than any other method.
D. LIFO inventory method may be used with other costing methods besides job-order costing.

Question 2 - CMA 1296 3-29 - Job-Order and Life-Cycle Costing

Life-cycle costing
A. Emphasizes cost savings opportunities during the manufacturing cycle.
B. Includes only manufacturing cost, selling expense, and distribution expense.
C. Includes only manufacturing costs incurred over the life of the product.
D. Is sometimes used as a basis for cost planning and product pricing.
A. Life-cycle costing looks for savings opportunities in all parts of the value-chain, not only in the manufacturing cycle.
B. All non-manufacturing costs such as research and development and advertising are also considered in life-cycle
costing.
C. Non-manufacturing costs such as research and development and advertising are also considered in life-cycle
costing.
D. Life-cycle costing takes into account all costs associated with a product, including those that come
before production and after the sale. This method is often in cost planning and product pricing when there
are significant non-production costs that need to be recovered.

Question 3 - CMA 1296 3-18 - Job-Order and Life-Cycle Costing

Which one of the following alternatives correctly classifies the business application to the appropriate costing system?
Job Costing System / Process Costing System
A. Print shop / Beverage drink manufacturer
B. Wallpaper manufacturer / Oil refinery
C. Paint manufacturer / Retail banking
D. Aircraft assembly / Public accounting firm
A. A print shop would use job order costing and a beverage drink manufacturer would probably use process
costing.
B. A wallpaper manufacture would probably use a process costing system.
C. A paint manufacturer would probably use process costing.
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D. A public accounting firm would use a job-order costing system.

Question 4 - CIA 590 IV-3 - Job-Order and Life-Cycle Costing

The loan department of a financial corporation makes loans to businesses. The costs of processing these loans are
often several thousand dollars. The costs for each loan, which include labor, telephone, and travel, are significantly
different across loans. Some loans require the use of outside services such as appraisals, legal services, and
consulting services, whereas other loans do not require these services. The most appropriate cost accumulation
method for the loan department of the corporation is
A. Process costing.
B. Job-order costing.
C. Joint product costing.
D. Differential costing.
A. Process costing is often used in an assembly line when similar products are being used. This is not the situation in
this question.
B. Job-order costing is used when each item is unique. Since each loan has different costs associated with
it, job-order costing should be used.
C. Joint product costing is used when more than one product is produced sharing the same production process. This
is not the case in this question.
D. Differential costing is used in decision making to compare the differences between two or more options. This is
not appropriate in this situation.

Question 5 - CIA 589 IV-4 - Job-Order and Life-Cycle Costing

A corporation provides management consulting services to hospitals. Consulting engagements vary widely from
hospital to hospital, both in terms of the nature of the consulting services provided and the scope of the consulting
engagements. The most appropriate product costing system for the corporation is a
A. Just-in-time costing system.
B. Operations costing system.
C. Process costing system.
D. Job-order costing system.
A. Just-in-time costing would be used together with a JIT inventory system, which is not in use here.
B. Operations costing is used when the items produced share some, but not all costs and materials.
C. Process costing is used when the units produced (or services provided) are similar.
D. Job-order costing is used when the item (or in this case service) produced is unique, as is the case in a
consulting company.

Question 6 - CIA 1188 IV-5 - Job-Order and Life-Cycle Costing

A shipbuilding company, employing 30 workers, constructs custom-built yachts. Which of the following is an
appropriate product-costing method for this operation?

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A. Job-order costing.
B. Variable cost transfer pricing.
C. Step-down allocation of costs.
D. Process costing.
A. Job order costing is used when the items produced are unique from each other, as in the case of
anything hand-made.
B. Variable cost transfer pricing is used when transferring the product between different parts of the same company.
It is not used as a product-costing method.
C. The step-down allocation of costs is the process of allocating service department costs. It is not a full
product-costing method.
D. Process costing is used when the units produced are similar.

Question 7 - CIA 593 IV-4 - Job-Order and Life-Cycle Costing

A new advertising agency serves a wide range of clients including manufacturers, restaurants, service businesses,
department stores, and other retail establishments. The accounting system the advertising agency has most likely
adopted for its record keeping in accumulating costs is
A. Job-order costing.
B. Operation costing.
C. Relevant costing.
D. Process costing.
A. Job order costing should be used when each job is unique and able to be separated from all of the other
jobs. This is the case in this situation.
B. Operation costing is used when the company produces similar goods that are slightly different.
C. Relevant costing is related to decision making, not the method of accumulating costs.
D. Process costing is used mostly in an assembly-line type production process.

Question 8 - CIA 591 IV-7 - Job-Order and Life-Cycle Costing

Companies characterized by the production of heterogeneous products will most likely use which of the following
methods for the purpose of averaging costs and providing management with unit cost data?
A. Direct costing.
B. Relevant costing.
C. Process costing.
D. Job-order costing.
A. Direct costing includes only the direct costs of production and would not be used by management in unit costing.
B. Relevant costing is not used to provide management cost data. Relevant costing would be related to future
decision making.
C. Heterogeneous means dissimilar and in the production of dissimilar products, job-order costing is usually the best
choice. Process costing is used in the production of similar products.
D. Job-order costing would most likely be used in the production of heterogeneous (dissimilar) units.

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(c) HOCK international, page 4