Job-Order Costing: Cost Flows and External Reporting Chapter 3

Martin Industries had unadjusted cost of goods sold of $450,000. Overhead was underapplied by $30,000. Adjusted cost of goods sold is ______.

$480,000

Given the following, calculate the cost of goods available for sale. Cost of goods manufactured of $410,000 Beginning Finished goods inventory of $110,000 Ending Finished goods inventory of $125,000

$520,000

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

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.

The journal entry to record the more accurate allocation of overapplied or underapplied overhead includes entries to ______.

Cost of goods sold Finished goods Manufacturing overhead Work in process

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

A journal entry that debits Finished goods and credits Work in process records the ______.

completion of a job

Finished goods ______.

consists of completed, unsold goods

The amount transferred from Work in Process to Finished Goods is ______.

cost of goods manufactured

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 costs incurred. (

credit; debit

When companies incur selling and administrative costs, those costs ________. - should be treated as product costs - do not flow through the three inventory accounts - should flow through the Manufacturing Overhead account - should flow through the Work in Process account

do not flow through the three inventory accounts

The cost of jobs still unfinished at the end of a period are included in ______.

ending Work in process inventory

Labor costs charged to Manufacturing Overhead represent ______ labor costs.

indirect

The journal entry to record a cash payment of $400 for insurance on administrative office equipment debits ______ and credits cash.

insurance expense

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

Actual overhead costs may not be proportional to the actual amount of the allocation base used because ______.

many actual overhead costs are fixed overhead spending may not be under control

A credit balance in the Manufacturing Overhead account means overhead was _____

overapplied

The difference between overhead applied to work in process and actual overhead is ______.

overapplied or underapplied overhead

Cost of goods manufactured is the ______.

sum of all jobs transferred from Work in process to Finished goods

The journal entry to record expired prepaid insurance on factory equipment is debit ______.

Manufacturing Overhead and credit Prepaid Insurance

Unadjusted cost of goods sold is calculated by subtracting ______.

ending finished goods inventory from goods available for sale

A journal entry debiting Cost of goods sold and crediting Finished goods is made when ______.

goods are sold

The cost of goods _____ is the sum of all amounts transferred from Work in process to Finished goods during a period.

manufactured

Applied manufacturing overhead will most likely ______ actual manufacturing overhead.

not equal

When labor costs are incurred, _________ labor costs are added directly to the Work in Process account.

only direct

The schedule of cost of goods _____ summarizes costs that remain in Work in process inventory and that have been transferred from Work in process to Finished goods inventory.

manufactured

sales minus cost of goods sold equals

gross margin

Cost of goods manufactured ______.

includes the manufacturing costs of goods finished during the period

The journal entry to record expired prepaid factory insurance debits ______.

Manufacturing Overhead and credits Prepaid Insurance

Which account is credited when manufacturing overhead is applied?

Manufacturing overhead

Which of the following is a clearing account?

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

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

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

Any purchased materials that will go into the finished product are first recorded in the ______ ______ inventory account

Raw Materials

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

Overapplied or underapplied overhead is the difference between ______.

actual total overhead and total overhead applied

To calculate the adjusted cost of goods sold ______.

add underapplied overhead to or subtract overapplied overhead from unadjusted cost of goods sold

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

When preparing financial statements in a job-order costing system, finished goods flow first to the _____ _____ and then to the _____ _____

balance sheet; income statement

To calculate cost of goods manufactured add ______.

beginning work in process to total manufacturing costs, then deduct ending work in process

The simpler method of closing out the balance of Manufacturing overhead is ______.

closing it out to Cost of goods sold

The journal entry to record $20,000 in depreciation on factory equipment is debit ______.

Manufacturing Overhead $20,000 and credit Accumulated Depreciation $20,000

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

$278,000

Which of the following are used to calculate Cost of goods available for sale on the schedule of cost of goods sold?

Beginning finished goods inventory Cost of goods manufactured

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

finished goods

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

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

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

$186,000

Direct materials used for the period cost $66,000; Direct labor cost $80,000; Applied overhead was $60,000; 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

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.

$228,000

Estimated manufacturing overhead $500,000 Estimated direct labor hours 200,000 Actual manufacturing overhead $625,000 Actual direct labor hours 260,000 The company applies overhead using direct labor hours as the cost driver. Calculate the amount that overhead was overapplied or underapplied.

$25,000 overapplied

Fillia, Inc. worked on three jobs this period: Job 14C, which cost $15,000; Job 23A, which cost $28,000, and Job 45B, which cost $23,000. At the end of the period, only Job 14C was still in process (unfinished). The cost of goods manufactured this period is $

51,000

Which of the following costs are charged directly to the income statement?

Administrative costs; Selling costs

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 occurs when manufacturing overhead is applied to Work in Process? - Debit to Cost of Goods Sold. - Debit to Manufacturing Overhead - Credit to Work in Process. - Credit to Manufacturing Overhead.

Credit to Manufacturing Overhead.

Which of the following occurs when a job has been completed and transferred to the finished goods warehouse? - Debit to Cost of Goods Manufactured. - Debit to Cost of Goods Sold. - Credit to Finished Goods. - Credit to Work in Process.

Credit to Work in Process.

Which of the following best describes the journal entry to record the withdrawal of raw materials from the storeroom for use as direct and indirect materials in production? -Debit Work in Process and credit Raw Materials. -Debit Work in Process, debit Manufacturing Overhead, and credit Direct Materials. -Debit Work in Process, debit Manufacturing Overhead, and credit Raw Materials. Correct -Debit Manufacturing Overhead and credit Raw Materials

Debit Work in Process, debit Manufacturing Overhead, and credit Raw Materials.

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

Depreciation expense and credits Accumulated depreciation

Which of the following costs are found on the balance sheet of a manufacturer?

Direct Labor Manufacturing Overhead Raw Materials

True or false: Actual overhead costs appear in the Work in Process account but not on the job cost sheet.

False

True or false: Job B was not completed by April 30. If an April balance sheet is prepared, the costs accumulated for Job B will NOT appear on it.

False

When jobs are sold their costs are transferred out of ______.

Finished Goods

The journal entry to record a completed job debits ______.

Finished goods

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

The accounts credited when goods are sold on account are ______.

Finished goods and Sales

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

Which of the following statements are true?

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.

All the costs appearing on the job cost sheets of the jobs that are being worked on are found in the ______ account.

Work in Process

Sexton Company uses an Excel spreadsheet to track its account balances. When the company applies overhead to production for the month of May, how will the company's account balances be affected on that spreadsheet?

Work in Process will increase.

Manufacturing overhead is applied with a debit to ______.

Work in process

A company incurred $10,000 in direct labor costs and $8,000 in indirect labor costs. The journal entry to record this transaction debits ______.

Work in process $10,000 and Manufacturing overhead $8,000 and credits Salaries and wages payable $18,000

The journal entry to record issuing both direct and indirect materials into production debits ______.

Work in process and Manufacturing overhead

The journal entry to record selling and administrative salaries debits ______.

an expense account and credits Cash or a liability

A journal entry that debits Work in process and credits Manufacturing overhead is recording the ______.

application of manufacturing overhead costs

Job cost sheets and the work in process account contain ______ manufacturing overhead.

applied

To calculate total manufacturing costs, add direct materials, direct labor and ______.

applied manufacturing overhead

Work in Process consists of ______.

applied manufacturing overhead; actual direct materials cost; actual direct labor cost

Actual manufacturing overhead costs are recorded in the Manufacturing Overhead account ______.

as they are incurred

Raw Materials is a(n) _____ account.

asset

Raw materials inventory is an ______.

asset

Actual manufacturing overhead is ______ to the Manufacturing overhead account.

debited

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 $500

A journal entry that debits Manufacturing overhead and credits Accumulated depreciation records ______.

depreciation on factory equipment

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

The journal entry that debits Work in Process and Manufacturing overhead and credits Salaries and Wages Payable is recording ______.

direct and indirect labor costs

A journal entry that debits Manufacturing overhead and credits Accounts payable would not be used to record ______.

direct labor costs

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 rent factory maintenance wages factory utilities

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 inventory.

finished goods

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 _____ _____ inventory account.

raw materials

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

raw materials

A journal entry that debits Manufacturing overhead and credits Property taxes payable records the ______.

recognition of accrued property taxes

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

A journal entry that debits Advertising expense and credits Cash would record the incurrence of a ______.

selling cost

The schedule of cost of goods _____ summarizes costs that remain in Finished goods inventory and that have been transferred to Cost of goods sold

sold

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

The value of work in process is equal to ______.

the cost of all unfinished jobs

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

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

Costs of partially completed units are accounted for in ______.

work in process

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

A journal entry that involves Manufacturing overhead, Work in process, Finished goods, and Cost of goods sold is recorded to ______.

dispose of underapplied or overapplied overhead

The accounts involved in closing underapplied or overapplied overhead using the simpler method are ______.

Cost of goods sold and Manufacturing overhead

Gross margin is calculated by subtracting ______ from ______.

cost of goods sold; sales

When overhead is underapplied, a _____ must be made to the Manufacturing overhead account to close it out.

credit

Which of the following best describes the journal entry to record the use of direct and indirect labor in production? - Debit Work in Process and credit Salaries and Wages Payable. - Debit Work in Process, debit Manufacturing Overhead, and credit Direct Labor. - Debit Work in Process, debit Manufacturing Overhead, and credit Salaries and Wages Payable. - Debit Manufacturing Overhead and credit Salaries and Wages Payable.

Debit Work in Process, debit Manufacturing Overhead, and credit Salaries and Wages Payable.

Which of the following occurs when finished jobs are shipped to customers? - Debit to Cost of Goods Sold - Debit to Finished Goods - Debit to Work in Process. - Credit to Raw Materials.

Debit to Cost of Goods Sold.

Which of the following statements about manufacturing overhead costs is not correct? - All manufacturing costs other than direct materials and direct labor are classified as manufacturing overhead costs. - All manufacturing costs other than direct materials and direct labor are entered directly into the Manufacturing Overhead account. - Depreciation on factory equipment is recorded with a debit to Depreciation Expense. - Manufacturing overhead costs are recorded with a debit to Manufacturing Overhead account as they are incurred.

Depreciation on factory equipment is recorded with a debit to Depreciation Expense.