ACC Ch3
Luver Corporation's Gross margin is $100,000, Cost of goods sold equals $70,000, and Selling and administrative expenses total $45,000. Net operating income is
$100,000 - $45,000 = $55,000
Which of the following is a clearing account?
manufacturing overhead
The journal entry to record expired prepaid insurance on factory equipment is debit
manufacturing overhead and credit prepaid insurance
Does applied manufacturing overhead usually equal actual manufacturing overhead?
no
Which of the following would not be charged to the Manufacturing overhead account? factory rent depreciation on factory equipment non-manufacturing costs supervisor's salary
non manufacturing costs
A credit balance in the Manufacturing Overhead account means overhead was
over applied
True or false: Underapplied or overapplied overhead occurs because overhead is applied to jobs using a predetermined rate based on estimates of costs and activity levels.
true
Units of product that are only partially complete are contained in
work in process inventory
When a job is completed, the job costs are transferred OUT OF
work in progress
What methods can be used to dispose of underapplied or overapplied manufacturing overhead?
Allocate it to Work in process, Finished goods, and Cost of goods sold. Close it to Cost of goods sold.
What side of the Manufacturing overhead account is applied manufacturing overhead entered on?
Always the credit side
Which of the following statements are true? Raw materials inventory represents the cost of materials not yet used in production. When materials are purchased they are recorded in the Raw materials inventory account. Raw materials inventory only includes the cost of direct materials. When materials are purchased they are recorded in the Raw materials inventory account.
Raw materials inventory represents the cost of materials not yet used in production. When materials are purchased they are recorded in the Raw materials inventory account.
The difference between overhead applied to work in process and actual overhead is
overapplied or underapplied overhead
Actual overhead costs may not be proportional to the actual amount of the allocation base used because
overhead spending may not be under control many actual overhead costs are fixed
Work in process consists of
Actual direct materials cost, actual direct labor cost, applied manufacturing overhead
The accounts involved in closing underapplied or overapplied overhead using the simpler method are
Cost of goods sold and Manufacturing overhead
Underapplied or overapplied manufacturing overhead can be disposed of by closing it to
Cost of goods sold or allocating it to Work in process, Finished goods, and Cost of goods sold
Manufacturing overhead applied to production is always recorded on the _____ side of the manufacturing overhead account and the ______ side is always used to record the actual manufacturing cost incurred
Credit, debit
The journal entry to record the more accurate allocation of overapplied or underapplied overhead includes entries to
Finished goods Work in process Cost of goods sold Manufacturing overhead
Himber, Inc. just completed a job that cost $14,000 in direct materials, $12,000 in direct labor, and $8,000 in applied manufacturing overhead. The journal entry to record completion of the job debits
Finished goods $34,000 and credits Work in process $34,000
A company requisitioned $40,000 in direct materials and $30,000 in indirect materials from the storeroom to be used in production. The journal entry to record this transaction debits
Work in process $40,000, debit Manufacturing overhead $30,000 and credit Raw materials $70,000
The journal entry to record the purchase of materials credits
accounts payable
Overhead is underapplied if
actual overhead is more than applied overhead
A journal entry debiting Salaries expense and crediting Salaries and wages payable could record
administrative salaries
The more accurate method of closing out the balance in Manufacturing overhead is
allocating it among Work in process, Finished goods, and Cost of goods sold
What side of the Manufacturing overhead account is actual manufacturing overhead entered on?
always the debit side
The journal entry to record selling and administrative salaries debits
an expense account and credits an expense account
A journal entry that debits Work in process and credits Manufacturing overhead is recording the
application of manufacturing overhead costs
To calculate total manufacturing costs, add direct materials, direct labor and
applied manufacturing overhead
Raw materials inventory is an
asset
Raw materials is what kind of account?
asset
Finished goods
consists of completed, unsold goods
The amount transferred from Work in Process to Finished Goods is
cost of goods manufactured
Actual manufacturing overhead was $50,000, while overhead applied to jobs was $45,000. Work in process contained 10% of applied overhead, Finished goods contained 40%, and Cost of goods sold contained 50%. The entry to dispose of underapplied or overapplied overhead using the allocation method
debits Work in process $5001
Actual manufacturing overhead is ______ to the Manufacturing overhead account.
debuted
The journal entry to record depreciation on office equipment debits
depreciation expense and credits accumulated depreciation
A journal entry that debits Depreciation expense and credits Accumulated depreciation records
depreciation on office equipment
underapplied or overapplied overhead is the
difference between overhead applied to work in process and actual overhead
A journal entry that includes Manufacturing overhead and Cost of goods sold is recorded to
dispose of underapplied or overapplied overhead
Unadjusted cost of goods sold is calculated by subtracting
ending finished goods inventory from goods available for sale
To calculate direct materials on the schedule of cost of goods manufactured, add purchases to beginning raw materials inventory and subtract
ending raw materials inventory and Indirect materials used
A journal entry that debits Manufacturing overhead and credits Prepaid insurance records the
expiration of prepaid factory insurance
Manufacturing overhead costs include
factory insurance the factory supervisor's salary
True or false: Period costs flow from Finished Goods to Cost of Goods Sold.
false
Completed units that have not yet been sold are found in
finished goods
When jobs are sold their costs are transferred out of
finished goods
Cost of goods manufactured
includes the manufacturing costs of goods finished during the period
Labor costs charged to Manufacturing Overhead represent
indirect labor costs
A journal entry that debits Work in process and Manufacturing overhead and credits Raw materials records the
issuance of materials
Which account is credited when manufacturing overhead is applied?
manufacturing overhead
The journal entry to record accrued property taxes for a factory building debits
manufacturing overhead and credits property taxes payable
The journal entry to record $10,000 in manufacturing overhead applied to Job #40 debits
work in process $10,000 and credits Manufacturing overhead $10,000
The journal entry to record a completed job credits
work in progress
When labor costs are incurred, what labor costs are added directly to the Work in Process account?
only direct
A debit balance in Manufacturing overhead means overhead was
underapplied
When only a portion of the units involved in a job are sold, the
unit product cost is used to calculate the amount transferred from finished goods to cost of goods sold
Given: Cost of goods manufactured of $234,000; beginning finished goods inventory of $18,000; and ending finished goods inventory of $24,000, calculate unadjusted cost of goods sold.
$18,000 + $234,000 - $24,000 = $228,000
If a company incurs $2,000 of factory rent, $1,000 of factory utilities, and $5,000 of miscellaneous factory costs, the journal entry to record these transactions would be to debit
Manufacturing overhead $8,000 and credit Accounts payable $8,000
Given the following, calculate total manufacturing costs: Direct materials cost: $62,000 Direct labor cost: $78,000 Manufacturing overhead applied: $46,000 Actual manufacturing overhead: $51,000 Beginning Work in process inventory: $32,000 Ending Work in process inventory: $35,000
Total manufacturing costs= $62,000 +$78,000 + $46,000 = $186,000. Adjust for work in process when calculating the cost of goods manufactured.
Selling and administrative costs incurred are treated as
period expenses
A journal entry that debits Raw Materials and credits Accounts Payable is recording the ______.
purchase of materials
Any purchased materials that will go into the finished product are first recorded in the
raw material inventory account
A journal entry that debits Manufacturing overhead and credits Property taxes payable records the
recognition of accused property taxes
A journal entry that debits Manufacturing overhead and credits Accounts payable could be made to record
rent expense on factory and factory utlilities expense
Net operating income is calculated by subtracting
selling and administrative expenses from gross margin
The schedule of cost of goods ____ The schedule of cost of goods
sold
Cost of goods manufactured is the
sum of all jobs transferred from Work in process to Finished goods
The schedule of cost of goods manufactured
summarizes costs that remain in Work in process inventory and that have been transferred from Work in process to Finished goods inventory
What is the sum of all amounts transferred from Work in process to Finished goods during a period?
the cost of goods manufuactured
Given: Cost of goods manufactured of $410,000; beginning finished goods inventory of $110,000 and ending finished goods inventory of $125,000, calculate unadjusted cost of goods sold.
$110,000 + $410,000 - $125,000 = $395,000
Job #4260 consisted of 1,000 units at a total cost of $200,000. The cost transferred to Cost of Goods Sold for the sale of 600 of the units is
$120,000
Martin Industries had unadjusted cost of goods sold of $450,000. Overhead was underapplied by $30,000. Adjusted cost of goods sold is
$450,000 + $30,000 = $480,000
Which of the statements regarding closing out over or underapplied overhead is correct?
Closing to Cost of goods sold is simpler, and allocating is more accurate.
Raw materials inventory was $27,000 at the beginning of the year and $25,000 at the end of the year. During the year, $100,000 in raw materials were purchased, including $28,000 of indirect materials that were put into manufacturing overhead during the period. Calculate the cost of direct materials used during the period.
Reason: Cost of direct materials = Beginning Inventory + Purchases - Indirect Materials - Ending Inventory ($27,000 + $100,000 - $28,000 - $25,000 = $74,000) $74,000
Given the following, calculate total manufacturing costs: Direct materials: $40,000; Direct labor: $100,000; Manufacturing overhead applied: $120,000; Beginning Work in process inventory: $30,000; Ending Work in process inventory: $12,000
Reason: Total manufacturing costs = $40,000 + $100,000 + $120,000 = $260,000
The Manufacturing Overhead account is debited when
actual overhead costs are incurred
Overhead is overapplied if
actual overhead is less than applied overhead
Meep Industries had unadjusted cost of goods sold of $300,000. Overhead was overapplied by $20,000. Adjusted cost of goods sold is
$300,000 - $20,000 = $280,000.