Computerized Accounting With
PEACHTREE COMPLETE ACCOUNTING 2012
CONTENT CHECK ANSWERS
Chapter 11
Multiple Choice
1.
2.
3.
4.
5.
D
D
C
D
B
Short Essay Response
1. Job Costing keeps track of the costs associated with different aspects of a particular job. For
example, management might want to track labor costs or material costs to determine the
appropriate amounts to charge its customers or to determine the level of profitability of the job.
Assuming the cost information is current, management can quickly make changes in personnel or
materials in order to reduce costs and increase profits.
2. Large jobs can take several years to complete. With Peachtree’s ability to track phases, companies
can evaluate the costs and profitability for different parts of a project, without having to wait for
the entire project to be completed. This can be especially valuable in large construction or
manufacturing projects. For example, a high-rise office building or a large ship may take more
than a year to complete. If the company bills the client based on a percentage of completion, the
cost information is necessary to determine interim profitability or adjustments.
3. The construction company needs to consider several factors in determining whether to use phases
and codes.
• Management must first decide on the degree of detail it desires. A small project may not
require the use of job costs. However, larger projects require job costing to make the
accounting process more manageable.
• The time of completion and whether the project will be completed after the end of the fiscal
year is a factor.
• Management needs to consider the billing procedures agreed to in the contract. If billing is to
be done in phases, the cost should be tracked for each phase.
• Is the revenue to be billed on a cost-plus basis? If so, each phase can be billed when completed
and the costs for each phase must be tracked.
• Management may want to evaluate the profitability of different phases. If problems are
detected early in a particular phase, those problems can be isolated and addressed.
• Management can evaluate labor and material usage more easily if cost codes are used.
4. The Job Profitability Report lists and identifies costs, expenses, and revenue for individual jobs
and acts as the starting point for management’s evaluation of the project.
5. The steps for setting up a project for job costing include:
• Select Maintain from the Main Menu,
• Select Job Costs from the drop-down list,
• Select Jobs and key the required information.
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6. The five different cost types include:
• Labor, which includes all labor costs.
• Materials, which includes all material costs.
• Equipment, which can include the depreciation expense or lease expense for equipment used
on the project.
• Subcontractors, which includes the cost of all subcontractors used on the project. For example,
plumbers or electricians that are not employees of the company, but are contracted from
outside to perform a particular job.
• Other, which can include any other cost that a company wants to track, such as leases and
permits.
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