ACCT II Ch. 2

Given the following, compute the cost of goods manufactured. Direct material cost: $40,000, Direct labor cost: $100,000, Applied overhead: $120,000, Actual overhead: $130,000; Beginning work in process inventory: $30,000 Ending work in process inventory: $12,000.

$278,000 Reason: $30,000 + $40,000 + $100,000 + $120,000 - $12,000 = $278,000

True or false: Materials purchases are initially recorded in Raw Materials and then all materials used are transferred to Work in Process.

False Reason: Direct materials are transferred to Work in Process and indirect materials are transferred to Manufacturing Overhead.

The first step in assigning manufacturing overhead is to determine the _______ or cost driver

allocation base

Given the following, calculate total current 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

$186,000 Reason: $62,000 + $78,000 + $46,000 = $186,000. Total manufacturing costs is calculated using applied, not actual overhead.

Direct materials used for the period cost $66,000; Direct labor cost $80,000; Applied overhead was $60,000; Actual overhead was $50,000; Beginning work in process inventory was $27,000; and Ending work in process inventory was $25,000. Calculate the cost of goods manufactured.

$208,000 Reason: $27,000 + ($66,000 + $80,000 + $60,000) - $25,000 = $208,000

Labor costs ______.

are recorded in basically the same way as material costs may be direct or indirect

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. The purchases included $28,000 of indirect materials that were put into manufacturing overhead during the period. Calculate the cost of direct materials used during the period.

$74,000 Reason: Cost of direct materials = Beginning Inventory + Purchases - Indirect Materials - Ending Inventory ($27,000 + $100,000 - $28,000 - $25,000 = $74,000)

Costs are transferred from raw materials inventory to ______.

either work in process or manufacturing overhead

To calculate a predetermined overhead rate, divide estimated total manufacturing overhead by the ______.

estimated total cost driver

An allocation base is a(n) ______.

measure of activity used to assign overhead costs to products and services

When actual manufacturing overhead costs are incurred, ______.

the manufacturing overhead cost is debited

The major difference between job order and process costing is ______.

whether the products produced are similar or different

Jonas Corporation used $20,000 of direct materials, incurred $40,000 of direct labor cost, and applied $30,000 of manufacturing overhead to jobs this period. No jobs were incomplete at the beginning of the period, but at the end of the period, jobs with a total cost of $25,000 were unfinished. What was the cost of goods manufactured for this period?

$65,000 Reason: ($20,000 + $40,000 + $30,000) + $0 - $25,000 = $65,000

Which 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 Make a direct adjustment to Cost of Goods Sold

When is the predetermined overhead rate calculated?

Before the period begins

Which of the following items are included on a cost of goods manufactured report?

Beginning and ending raw materials inventory Applied manufacturing overhead Beginning and ending work in process inventory

The journal entry to record depreciation on office equipment debits ______.

Depreciation Expense and credits Accumulated Depreciation Reason: Depreciation on office equipment is not a manufacturing overhead.

True or false: Job-order costing can only be used in manufacturing firms.

False Reason: Job-order costing is often used in service industries.

True or false: The cost of each individual unit is tracked to products under both job order and process costing.

False Reason: Because each unit is the same, there is no reason to track the costs of each unit individually under process costing.

What is the most common method for disposing of the balance in Manufacturing Overhead?

Making a direct adjustment to Cost of Goods Sold

What document specifies the type and quantity of direct materials used on a specific job?

Materials requisition form

Which of the following would most likely NOT be classified as a direct material?

Nails and screws Reason: The cost of insignificant materials is considered manufacturing overhead (indirect materials).

All materials that will be used in future production are first recorded in the ________ inventory account

Raw Materials

When materials are purchased they are first recorded in the ______ account.

Raw Materials Inventory

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

Which of the following is not a manufacturing cost category?

Selling & administrative costs

When a job is completed, its costs are transferred out of ______.

Work in Process

When a job is completed, which account is credited?

Work in process Inventory

What of the following may be credited in the journal entry to record the purchase of materials?

accounts payable

The most common method for disposing of the balance in Manufacturing Overhead is ______.

adjusting Cost of Goods Sold

The basic formula for process costing is ______.

average unit cost = total manufacturing cost/total units produced

Because service firms tend to be labor-intensive, the primary driver used to assign cost is ______________

billable hours

The most common driver used to assign costs in a service firm is ______.

billable hours

Finished Goods Inventory ______.

consists of completed, unsold goods

The total cost transferred out of Work in Process inventory into Finished Goods inventory is ______.

cost of goods manufactured

When goods are sold to customers, ______.

costs are transferred from Finished Goods to Cost of Goods Sold

When overhead is underapplied, a _____ must be made to the Manufacturing overhead account to eliminate the balance.

credit

When overhead is overapplied, a ______ entry is required to dispose of the balance in the Manufacturing Overhead account

debit

The document used to record the time workers spend on each job and task is a ______.

direct labor time ticket

Major inputs such as lumber and fixtures that can be easily traced to a specific job are called __________

direct materials

When materials are requisitioned into production, ______.

direct materials are recorded on the job cost sheet direct materials are recorded in Work in Process

The formula for a predetermined overhead rate is ______.

estimated total manufacturing overhead cost ÷ estimated total cost driver

cost of goods ______ is the total cost of jobs completed during the period. (Enter only one word per blank.)

finished

The cost of jobs that have been completed but not yet sold are contained in __________ inventory

finished goods

When a job is completed, which account is debited?

finished goods inventory

Process costing ______.

is used for mass production is used for homogeneous products

Companies that use job-order costing ______.

make unique products

Actual manufacturing overhead consists of all ______.

manufacturing costs other than direct labor and direct materials

Factory labor charges that cannot be easily traced to a job are treated as ______.

manufacturing overhead

Categories of manufacturing costs include ______.

manufacturing overhead direct materials direct labor

The difference between overhead applied to jobs and actual overhead is ______.

overapplied or underapplied overhead

The predetermined overhead rate is multiplied by the actual cost driver usage for a job to calculate the ______ the job.

overhead applied to

The balance of work in process inventory may be calculated by ______.

summing the costs of all jobs in process

Nonmanufacturing costs increase ______.

the Selling, General & Administrative expense accounts

Costs are transferred out of Finished Goods inventory ______.

when goods are sold

Costs of partially completed units are accounted for in ______.

work in process inventory

Applied manufacturing overhead costs are credited to the Manufacturing Overhead account ______.

as the costs are applied to jobs

The first step in assigning manufacturing overhead costs using a predetermined overhead rate is to ______.

determine the cost driver

Underapplied or overapplied overhead is the ______.

difference between overhead applied to jobs and actual overhead

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

Nonmanufacturing costs incurred during a period are treated as ______.

period expenses

The formula for applying overhead to a specific job is ______.

predetermined overhead rate × the actual cost driver usage for the specific job

The journal entry to record the purchase of materials debits ______.

raw materials inventory

Materials requisition forms are used to ______.

record the cost of raw materials in the accounting system control the flow of materials from inventory into production

Overhead costs are debited to Work in Process when ______.

they are applied to jobs

A direct labor _________ is a document used to record how long workers spend on each job and task. (Enter only one word per blank.)

time ticket

Given the following, calculate total current 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

$260,000 Reason: Total manufacturing costs = $40,000 + $100,000 + $120,000 = $260,000

When a job is completed, its costs are transferred into ______.

Finished Goods

A journal entry debiting Salaries expense and crediting Salaries and wages payable could record ______.

administrative salaries (non manufacturing cost) Reason: Assembly workers' wages are debited to Work in Process. Reason: Maintenance salaries are debited to Manufacturing Overhead. Reason: Factory supervisors' salaries are debited to Manufacturing Overhead.

The cost of goods manufactured report includes ______ manufacturing overhead costs.

applied Reason: The difference between applied and actual overhead is adjusted to Cost of Goods Sold on the income statement.