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.