Chapter 3
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 would debit ______.
Work in process $40,000, debit Manufacturing overhead $30,000 and credit Raw materials $70,000
Selling and administrative costs first appear on the ______.
income statement
The journal entry to record selling and administrative salaries debits ______.
an expense account and credits Cash or a liability
Finished goods ______.
consists of completed, unsold goods
Labor costs charged to Manufacturing Overhead represent ______.
indirect labor costs
A company reports Gross margin of $100,000, Cost of goods sold of $70,000, and Selling and administrative expenses of $45,000. Net operating income (loss) is ______.
$55,000
When a job is completed, the job costs are transferred OUT OF ______.
work in process
The (1) side of the manufacturing overhead account is always used to record manufacturing overhead applied to production and the (2) side is always used to record the actual manufacturing costs incurred. (Enter either debit or credit in each blank.)
1. credit 2. debit
A journal entry that debits Work in process and credits Manufacturing overhead is recording the ______.
application of manufacturing overhead costs
The journal entry to record the purchase of materials debits ______.
raw materials
Actual manufacturing overhead costs are recorded in the Manufacturing Overhead account ______.
as they are incurred
A journal entry that debits Raw Materials and credits Accounts Payable is recording the ______.
purchase of materials
The schedule of cost of goods (1) summarizes costs that remain in Finished goods inventory and that have been transferred to Cost of goods sold. (Enter only one word per blank.)
1. sold
Any purchased materials that will go into the finished product are first recorded in the (1) (2) inventory account. (Enter only one word per blank.)
1. raw 2. materials
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
Costs of partially completed units are accounted for in ______.
work in process
Raw materials inventory was $5,000 at the beginning of the year and $12,000 at the end of the year. During the year, a total of $27,000 in raw materials were purchased, including $4,000 of indirect materials that were put into manufacturing overhead during the period. Calculate the cost of direct materials used during the period.
$16,000
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.
$74,000
Completed units that have not yet been sold are found in (1) (2) inventory. (Enter only one word per blank.)
1. finished 2. goods
The cost of goods (1) is the sum of all amounts transferred from Work in process to Finished goods during a period. (Enter only one word per blank.)
1. manufactured
The schedule of cost of goods (1) summarizes costs that remain in Work in process inventory and that have been transferred from Work in process to Finished goods inventory. (Enter only one word per blank.)
1. manufactured
A debit balance in Manufacturing overhead means overhead was (1). (Enter either overapplied or underapplied.)
1. underapplied
Select all that apply Which of the following costs are charged directly to the income statement?
Administrative costs Selling costs
Applied manufacturing overhead is entered on what side of the Manufacturing overhead account?
Always the credit side
Select all that apply What methods can be used to dispose of underapplied or overapplied manufacturing overhead?
Close it to Cost of goods sold. Allocate it to Work in process, Finished goods, and Cost of goods sold.
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.
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
When a job is completed, its costs are transferred into ______.
Finished Goods
Which account is credited when manufacturing overhead is applied?
Manufacturing overhead
George Corporation recognized $1,000 of accrued property taxes on its manufacturing facility. The journal entry to record this debits ______.
Manufacturing overhead $1,000 and credits Property taxes payable $1,000
The journal entry to record accrued property taxes for a factory building debits ______.
Manufacturing overhead and credits Property taxes payable
Which of the following would not be charged to the Manufacturing overhead account?
Nonmanufacturing costs
The journal entry to record issuing materials to be used in production credits ______.
Raw materials
Manufacturing overhead is applied with a debit to ______.
Work in process
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 the purchase of materials credits ______.
accounts payable
The Manufacturing Overhead account is debited when ______.
actual overhead costs are incurred
Overhead is overapplied if ______.
actual overhead is less than applied overhead
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 simpler method of closing out the balance of Manufacturing overhead is ______.
closing it out to Cost of goods sold
Actual manufacturing overhead is ______ to the Manufacturing overhead account.
debited
A journal entry that debits Manufacturing overhead and credits Accounts payable would not be used to record ______.
direct labor costs
A journal entry that debits Work in process and Manufacturing overhead and credits Raw materials records the ______.
issuance of materials
Manufacturing overhead consists of all ______.
manufacturing costs other than direct labor and direct materials
When labor costs are incurred, _________ are added directly to the Work in Process account.
only direct labor costs
Selling and administrative costs incurred are treated as ______.
period expenses
A journal entry that debits Manufacturing overhead and credits Property taxes payable records the ______.
recognition of accrued property taxes
Select all that apply A journal entry that debits Manufacturing overhead and credits Accounts payable could be made to record ______.
rent expense on factory equipment factory utilities expense
Net operating income is calculated by subtracting ______ from ______.
selling and administrative expenses; gross margin
When calculating the cost of direct materials on the schedule of cost of goods manufactured, the cost of indirect materials is ______.
subtracted from raw materials used in production
Cost of goods manufactured is the ______.
sum of all jobs transferred from Work in process to Finished goods
Select all that apply Work in Process consists of ______.
applied manufacturing overhead actual direct labor cost actual direct materials cost
Units of product that are only partially complete are contained in the (1) (2) (3) inventory. (Enter only one word per blank.)
1. work 2. in 3. process
Select all that apply 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.
True or false: The transfer of costs from one inventory account to the next parallels the physical transfer of goods from one inventory to the next.
True
The journal entry to record issuing both direct and indirect materials into production debits ______.
Work in process and Manufacturing overhead
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
Select all that apply Manufacturing overhead costs include ______.
factory insurance the factory supervisor's salary
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
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 credit balance in the Manufacturing Overhead account means overhead was (1). (Enter either overapplied or underapplied.)
1. overapplied
Gross margin minus selling and administrative expenses equals ______.
net operating income