Ch 3 Job-Order Costing
Job #4260 consisted of 1,000 units at a total cost of $200,000. The cost transferred to COGS for the sale of 600 units is:
$120,000 ($200,00/1,000 X 600)
What are some examples of non manufacturing costs?
-Salaries expense -depreciation expense (of office furniture, not factory) -advertising expense -administrative salaries
How is manufacturing overhead applied to products?
1) predetermined ovh rate = est. manu ovh/est.allocation base 2) predetermined rate X actual activity level = amount of overhead need to apply to the job
When jobs are finished the total of those completed jobs =
COGM
The __________ side of the manufacturing overhead account is always used to record manufacturing overhead applied to production and the _________ side is always used to record the actual manufacturing costs incurred.
Credit - Debit -
Record $80,000 in Raw Materials were purchased on Account.
DR- Raw Materials 80,000 CR-Accts. Payable 80,000
What accounts are debited when Goods are sold on account?
DR-Accts Receivable Cr-Sales DR-Cost of Goods Sold CR-Finished Goods
Record general selling and administrative costs:
DR-Advertising Expense DR-Selling and Administrative Expense CR-Accts Payable
Record $1000 in expired insurance on factory equipment:
DR-Manufacturing ovh CR- Prepaid Insurance
Record accrued property taxes for a factory building:
DR-manufacturing ovh CR-Property taxes payable
Underapplied overhead for the period leaves MOH with a
Debit balance. To close, need to: DR-COGS CR-MOH
Record: $94,000 in Raw Materials were purchased for Cash.
Dr-Raw Materials 94,000 CR-Cash 94,000
When jobs are sold, they are transferred out of the
Finished Goods to the COGS
The difference between the entries to record depreciation on office equipment and depreciation on factory equipment is that:
Office equipment: DR-depreciation Expense CR-Accumulated Depreciation Factory equipment: DR-manufacturing overhead CR-Accumulated depreciation
The purchase of indirect materials would require a debit to
Raw Materials Inventory
Any purchased materials that will go into the finished product are first recorded in the
Raw materials inventory account
The schedule of COG___ summarizes costs that remain in FG inventory and that have been transferred to COGS.
S (sold)
Calculate net operating income:
Sales - COGS -Selling & Admin Expenses
Calculate Gross margin:
Sales - COGS
When a job is completed, the job cost are transferred out of
Work in Process
The journal entry to record issuing both direct and indirect materials into production, debits
Work in Process and Manufacturing Overhead Credits: Raw Materials
Units of product that are only partially complete are contained in the ______ ____ ______________ inventory.
Work in process
underapplied manufacturing overhead
amount of overhead cost actually incurred exceeds the amount of overhead cost applied to WIP. Will have a debit balance.
overapplied manufacturing overhead
amount of overhead cost applied to work in process exceeds the amount of overhead cost actually incurred. Will have a credit balance
Raw materials inventory is an
asset
Finished goods consists of _______________.
completed, unsold goods.
The value of work in process is equal to the
cost of all unfinished jobs
The _____________ (credit/debit) for ________________ on factory equipment would be to accumulated depreciation.
credit; depreciation
Normal costing system, actual MOH and indirect materials incurred are always
debited in the MOH Acct.
a journal entry that ___________(debits/credits) WIP and ________ (debits/credits) manufacturing overhead is recording the application of manufacturing overhead to Work in Process.
debits; credits
Cost of jobs still unfinished at the end of a period are included in:
ending WIP inventory
When preparing financial statements in a job-order costing system, FG flow from
first to the Balance sheet and next to the income statement
Labor costs charged to manufacturing OVH =
indirect labor costs
When calculating cost of direct materials on the schedule of COGM, the cost of indirect materials:
is subtracted from Raw Materials used in production
Which source document is used to summarize all of the costs incurred for a specific job?
job cost sheet
Applied overhead cost, based on predetermined rate only appears on
job costs sheets and WIP account
Manufacturing overhead consists of all:
manufacturing costs other than direct labor and direct materials
What account is debited to record indirect labor costs?
manufacturing overhead
Following cost not charged directly to income statement
manufacturing overhead direct labor direct materials
Applied manufacturing overhead will most likely ________ actual manufacturing overhead since it is based on a predetermined rate established a the beginning of the period.
not equal
Credit side of Manufacturing overhead is always used to
record manufacturing overhead applied to work in process
Debit side of Manufacturing overhead is always used to
record the actual manufacturing overhead costs (indirect materials incurred)
A journal entry that debits Raw Materials and credits Account Payable is
recording the purchase of materials
Following costs charged directly to income statement
sellings costs administrative costs
COGM
summarizes costs that remain in WIP inventory and that have been transferred from WIP to FG inventory.
manufacturing overhead acct closed when
the period ends
In a normal costing system, if manufacturing overhead has a debit balance at year end, it means that overhead for the year was
underapplied
When only a portion of the units involved in a job are sold, the ________ _________ __________ must be used to determine how much product cost should be removed from Finished Goods and charged to Cost of Goods Sold.
unit product cost
Nonmanufacturing costs ________________ (would/would not) be charged to the manufacturing overhead account.
would not
What is the difference between Total Manufacturing Costs and Cost of goods manufactured?
Total Manufacturing Costs = Direct materials + Direct Labor + Manufacturing OVH applied to WIP ------------------------------------------ Cost of goods manufactured = Total Manufacturing Costs + Beg WIP inventory - End WIP inventory
Record: MOH $152,000 was applied to production using the company's predetermined overhead rate.
DR-WIP 152,000 CR-MOH 152,000
Calculate total manufacturing costs?
Direct Materials used in production + Manufacturing OVH applied to work in process + Direct labor -------------------------------------------------- = Total Manufacturing Costs
Calculate total manufacturing costs:
Direct materials + Direct Labor + Applied Manufacturing ovh
Underapplied or overapplied manu ovh can be disposed of by closing it out to
COGS or allocating it among WIP, FG and COGS
Overhead is applied to WIP
CR- manufacturing ovh
Overapplied overhead for the period leaves MOH with a
Credit balance. To close, need to: DR-MOH CR-COGS
Record: All completed jobs were shipped to customers. Total $342,000
DR-COGS $342,000 CR-FG $342,000
Record COGS
DR-COGS (increase) CR-FG (decrease)
Record: All completed jobs in process at end of month were completed totaling $342,000.
DR-FG 342,000 CR-WIP 342,000
Humber, Inc. just completed a job that cost $14,000 in direct materials, $12,000 in direct labor, and $8,000 in applied manufacturing overhead. What is the journal entry.
DR-Finished Goods $34,000 CR-Work in Process $34,000
Record: Add'l MOH costs $143,000 were incurred and paid.
DR-MOH 143,000 CR-Cash 143,000
Record: Depreciation of $175,000 was incurred on factory equipment.
DR-MOH 175,000 CR-Accumulated Depreciation 175,000
WIP Account
DR-MOH applied DR-Direct Materials
Record: Incurs $2,000 factory rent, $1000 factory utilities, $5,000 miscellaneous factory costs
DR-Manufacturing OVH 8,000 CR-Accts Payable 8,000
Record $20,000 in depreciation on factory equipment:
DR-Manufacturing ovh CR-Acccumulated Depreciation
Record the application of MOH to the jobs of the period:
DR-WIP CR-MOH
Record: Total labor wages of $112,000 were paid in cash. Of this amt, $101,000 was for direct labor and the remainder was for indirect labor.
DR-WIP 101,000 (direct labor used in production) DR-MOH 11,000 (indirect labor) CR-Cash 112,000
Record this journal entry: $20,000 of Raw Materials was withdrawn form the storeroom to be used in production. Of this amt, $15,000 consists of direct materials and $5,000 consists of indirect materials.
DR-WIP 15,000 DR- MOH 5,000 CR-Raw Materials 20,000
Record: $89,000 in Raw Materials were used in production. Of this amt, $78,000 was for direct materials and the remainder was for indirect materials.
DR-WIP 78,000 DR-MOH 20,000 CR-Cash 132,000
Record $71,000 in Raw Materials were used in production. Of this amount, $62,000 was for direct materials and remainder was for indirect materials.
DR-WIP inventory $62,000 DR-MOH 9,000 CR-Raw Materials 71,000
Time tickets included $60,000 direct labor and $15,000 indirect labor incurred. Journal entry:
DR-Work in Process DR-Manufacturing OVH CR-Salaries and Wages Payable
Actual overhead is incurred
DR-manufacturing ovh
The amount transferred from WIP to Finished Goods is _______________.
Cost of Goods Manufactured (COGM)
What 2 accounts involved when underapplied or overapplied overhead is closed out using the simpler method?
Cost of Goods Sold Manufacturing OVH
Calculate a predetermined overhead rate:
estimated manufacturing overhead ---------------------------------------- estimated allocation base
The cost of goods ____________________ is the sum of all amounts transferred from WIP to FG during a period.
manufactured
In a normal costing system, if manufacturing overhead has a credit balance at year end, it means that overhead for the year was
overapplied
What is the difference between overapplied and underapplied manufacturing overhead?
overapplied manufacturing overhead means that there was too much predetermined overhead applied. (actual was less than the predetermined rate) underapplied manufacturing overhead means that there was not enough predetermined overhead applied (actual was more than the predetermined rate)
Underapplied or overapplied overhead is the difference between
overhead applied to WIP and actual overhead
A journal entry that debits manufacturing overhead and credits Accounts Payable could be made to record:
Utilities 21,000 Rent on factory equipment 16,000 Miscellaneous factory costs 3,000 ------------------------------------------ 40,000 DR-Manufacturing OVH 40,000 CR-Accts Payable 40,000
When a job is completed, what do you Credit?
WIP
Actual Manufacturing Overhead costs are recorded in Manufacturing OVH acct as they are
incurred
How are non manufacturing costs reported in financial statements? Which one?
reported on income statement as part of selling and administrative expenses in accounting period in which they are incurred.
Calculate how much overhead was either under or overapplied: Estimated MOH 500,000 Estimated Direct Labor Hours 200,000 Actual MOH 624,000 Actual Direct Labor Hours 260,000
500,000/200,000 = $2.50 $2.50 X 260,000 (actual direct labor hours) = $650,000 applied - 625,000 actual overhead _________________________________________ = 25,000 overapplied
Calculate unadjusted COGS
Beg FG inventory + COGM -End FG inventory __________________________
Calculate COG available for sale:
Beg FG inventory + COGM ____________________________
Calculate the FG ending inventory balance
Beg FG inventory +COGM -COGS _____________________________
Calculate the adjusted cost of goods sold:
Beg Finished goods inventory +COGM -End Finished goods inventory +Underapplied overhead (or - overapplied ovh) ----------------------------------------------- = adjusted COGS
Calculate direct materials used in production?
Beg RM Inventory + Purchases of RM - End RM - Indirect Materials ---------------------- = Direct materials used in production
Calclutate cost of direct materials used during the period:
Beg Raw Materials + Purchases - Indirect Materials - Ending Inventory ----------------------
Calculate COGM
Beg WIP inventory + Total Manufacturing Costs - End WIP inventory