ACCT 2302 Chapter 3 Study Guide

T/F: When raw materials are purchased, they are recorded as an asset.

True

Under a job-order costing system, the dollar amount transferred from Work in Process to Finished Goods is the sum of the costs charged to all jobs: A) started in process during the period. B) in process during the period. C) completed and sold during the period. D) completed during the period.

D) completed during the period.

T/F: In the Schedule of Cost of Goods Manufactured, Total raw materials available = Ending raw materials inventory + Purchases of raw materials.

False

11) In a job-order costing system, indirect labor cost is usually recorded as a debit to: A) Manufacturing Overhead. B) Finished Goods. C) Work in Process. D) Cost of Goods Sold.

A) Manufacturing Overhead.

Hougham Corporation uses a job-order costing system and has provided the following partially completed T-account summary for the past year. Bal. 1/1: 15,000 Credits Debits: 109,000 Bal. 12/31 21,000 The cost of raw materials requisitioned for use in production during the year was: A) $109,000 B) $145,000 C) $103,000 D) $124,000

C) $103,000 Explanation: Raw materials inventory, 1/1: $ 15,000 Add: Debits (purchases of raw materials): 109,000 Materials available for use: 124,000 Deduct: Raw materials inventory, 12/31: 21,000 Materials requisitioned for use in production: $103,000

Emigh Corporation's cost of goods manufactured for the just completed month was $146,000 and its overhead was overapplied by $5,000. The beginning finished goods inventory was $35,000 and the ending finished goods inventory was $37,000. The company closes out any underapplied or overapplied manufacturing overhead to cost of goods sold. How much was the adjusted cost of goods sold on the Schedule of Cost of Goods Sold? A) $144,000 B) $146,000 C) $181,000 D) $139,000

D) $139,000 Explination: Schedule of Cost of Goods Sold Beginning finished goods inventory $ 35,000 Add: Cost of goods manufactured 146,000 Cost of goods available for sale 181,000 Deduct: Ending finished goods inventory 37,000 Unadjusted cost of goods sold 144,000 Deduct: Overapplied overhead 5,000 Add: Underapplied overhead 0 Adjusted cost of goods sold $139,000

T/F: If a company uses a predetermined overhead rate, actual manufacturing overhead costs of a period will be recorded in the Manufacturing Overhead account and will be recorded on the job cost sheets.

False

Tatar Corporation is a manufacturer that uses job-order costing. The company has supplied the following data for the just completed year: Beginning inventories: Raw materials: $37,000 Work in process: $15,000 Result of Operations: Raw Materials Purchased on account: $480,000 Raw materials (All direct) requisitioned for use in production: $434,000 How much is the ending balance in the Raw Materials inventory account? A) $37,000 B) $120,000 C) $83,000 D) $517,000

C) $83,000 Explanation: The ending balance in Raw Materials is computed as follows: Balance, beginning 37,000 Purchases 480,000 Raw Materials used in production: 434,000 *$37,000 + $480,000 − $434,000 = $83,000

If manufacturing overhead is underapplied, then: A) actual manufacturing overhead cost is less than estimated manufacturing overhead cost. B) the amount of manufacturing overhead cost applied to Work in Process is less than the actual manufacturing overhead cost incurred. C) the predetermined overhead rate is too high. D) the Manufacturing Overhead account will have a credit balance at the end of the year.

B) the amount of manufacturing overhead cost applied to Work in Process is less than the actual manufacturing overhead cost incurred.

T/F: Assume that a company closes out any manufacturing overhead overapplied or underapplied to cost of goods sold. Then in the Schedule of Cost of Goods Sold, Adjusted cost of goods sold = Unadjusted cost of goods sold + Overapplied overhead - Underapplied overhead.

False

T/F: The journal entry for cost of goods manufactured includes the costs of units that are partially completed.

False

In a job-order costing system, manufacturing overhead applied is recorded as a debit to: A) Raw Materials inventory. B) Finished Goods inventory. C) Work in Process inventory. D) Cost of Goods Sold.

C) Work in Process inventory.

In a job-order costing system, which of the following events would trigger recording data on a job cost sheet? A) the purchase of direct materials B) the payment of fire insurance on the factory building C) the payment for product advertising D) none of the choices

D) none of the choices

T/F: Advertising costs should NOT be charged to the Manufacturing Overhead account.

True

T/F: In the Schedule of Cost of Goods Manufactured, Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory - Ending work in process inventory.

True

T/F: The following entry would be used to record depreciation on manufacturing equipment: Manufacturing Overhead XXX Accumulated Depreciation XXX

True

Refer to the T-account below: (2) 9,000 (12) 167,000 (3) 15,000 (4) 80,000 (5) 30,000 (6) 25,000 159,000 167,000 Bal. 8,000 The ending balance of $8,000 represents which of the following? A) Underapplied overhead. B) Manufacturing overhead that will be carried over to the next period. C) Overapplied overhead. D) A bookkeeping error.

C) Overapplied overhead.

In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the "Total raw materials available" is computed by adding together the "Beginning raw materials inventory" and: A) Ending raw materials inventory B) Raw materials used in production C) Purchases of raw materials D) Indirect materials included in manufacturing overhead

C) Purchases of raw materials

Refer to the T-account below: Bal. 15,000 (9) 75,000 (5) 85,000 Bal. 25,000 Entry (5) could represent which of the following? A) Payments for raw materials. B) Requisitions of raw materials to be used in production. C) Purchases of raw materials. D) Overhead cost applied to Work in Process.

C) Purchases of raw materials.

Fisher Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. The following information about Fisher Corporation's Work in Process inventory account has been provided for the month of May: May 1 balance: $26,000 Debits During May: Direct Materials: $40,000 Direct Labor: $50,000 Manufacturing Overhead: $37,500 During the month, Fisher Corporation's Work in Process inventory account was credited for $120,500, which represented the Cost of Goods Manufactured for the month. Only one job remained in process on May 31; this job had been charged with $9,600 of applied overhead cost. The amount of direct materials cost in the unfinished job would be: (Round your intermediate calculations to 2 decimal places.) A) $10,600 B) $16,700 C) $12,800 D) $23,400

A) $10,600 Explanation: Work In process Bal: 26,000 120,500 40,000 50,000 37,500 33,000 Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred $37,500 = Predetermined overhead rate × $50,000 Predetermined overhead rate = $37,500 ÷ $50,000 = 0.75 $9,600 = 0.75 × Amount of the allocation base incurred by the job Amount of the allocation base incurred by the job = $9,600 ÷ 0.75 = $12,800 Work In Process inventory = Direct materials + Direct labor + Manufacturing overhead $33,000 = Direct materials + $12,800 + $9,600 Direct materials = $33,000 - ($12,800 + $9,600) = 10,600

Leelanau Corporation uses a job-order costing system. The following data are for last year: Work in process beginning balance: $10,500 Work in process ending balance: $19,000 Cost of goods manufactured: $323,000 Direct materials: $115,000 Direct Labor: $78,000 Leelanau applies overhead using a predetermined rate. What amount of overhead was applied to work in process last year? A) $138,500 B) $121,500 C) $130,000 D) $203,500

A) $138,500 Explanation: Cost of Goods Manufactured Direct materials $115,000 Direct labor $78,000 Manufacturing overhead cost applied to work in process X Total manufacturing costs $193,000 + X $10,500 Add: Beginning work in process inventory $203,500 + X Deduct: Ending work in process inventory $19,000 Cost of goods manufactured: $184,500 + X $323,000 = $184,500 + X X = $323,000 - $184,500 = $138,500

Shane Corporation has provided the following data concerning last month's operations. Direct materials: $23,000 Direct Labor $58,000 Manufacturing overhead applied to work in process: $92,000 (Beignning - Ending) Work in process inventory: 56,000 - 69,000 Finished goods inventory: 33,000 36,000 How much is the unadjusted cost of goods sold on the Schedule of Cost of Goods Sold? A) $161,000 B) $157,000 C) $160,000 D) $193,000

B) $157,000 Direct Materials: 23,000 Direct Labor: 58,000 Manufacturing overhead cost applied to work in process: 92,000 total manufacturing costs: 173,000 Add: Beginning work in process inventory: 56,000 Deduct: Ending work in process inventory: 69,000 Cost of goods manufactured: 160,000 Beginning finished goods inventory: 33,000 Cost of goods manufactured: 160,000 Beginning finished goods inventory: 33,000 Add: Cost of goods manufactured: 160,000 Cost of gods available for sale : 193,000 Deduct: ending finished goods inventory: 36,000 Unadjusted cost of goods sold: 157,000

Lister Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year: Estimated total manufacturing overhead at the beginning of the year: $624,000 Estimated direct labor-hours at the beginning of the year: 39,000 direct labor-hours Results of operations: Actual direct labor-hours: 36,000 direct labor hours Manufacturing Overhead: Indirect Labor cost: $131,000 Other manufacturing overhead costs incurred: $543,000 The total amount of manufacturing overhead applied to production is: A) $1,547,000 B) $576,000 C) $624,000 D) $674,000

B) $576,000 Explanation: Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $624,000 ÷ 39,000 direct labor-hours = $16.00 per direct labor-hour Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred = $16.00 per direct labor-hour × 36,000 direct labor-hours = $576,000

In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the cost of goods manufactured is computed according to which of the following equations? A) Cost of goods manufactured = Total manufacturing costs + Ending work in process inventory - Beginning work in process inventory B) Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory - Ending work in process inventory C) Cost of goods manufactured = Total manufacturing costs + Beginning finished goods inventory - Ending finished goods inventory D) Cost of goods manufactured = Total manufacturing costs + Ending finished goods inventory - Beginning finished goods inventory

B) Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory - Ending work in process inventory

Refer to the T-account below: Bal. 30,000 (8) 9,000 Entry (8) could represent which of the following? A) Payment of insurance for the upcoming period. B) Insurance cost incurred on the factory which is added to the Manufacturing Overhead account. C) Overhead cost applied to Work in Process. D) Overhead cost applied to Finished Goods.

B) Insurance cost incurred on the factory which is added to the Manufacturing Overhead account.

Frankin Corporation has provided the following data concerning last month's operations. Purchases of raw materials $26,000 Indirect materials included in manufacturing overhead $ 6,000 Direct labor cost $58,000 Manufacturing overhead applied to Work in Process $97,000 (Beignning - Ending) Work in process inventory: 11,000 - 17,000 Finished goods inventory: 52,000 66,000 How much is the cost of goods manufactured for the month on the Schedule of Cost of Goods Manufactured? A) $175,000 B) $221,000 C) $155,000 D) $169,000

C) $155,000 Explanation: Direct materials: Beginning raw materials inventory $ 11,000 Add: Purchases of raw materials $26,000 Total raw materials available: $37,000 Deduct: Ending raw materials inventory: $17,000 Raw materials used in production 20,000 Deduct: Indirect materials included in manufacturing overhead $6,000 $ 14,000 Direct labor $58,000 Manufacturing overhead cost applied to work in process $97,000 Total manufacturing costs $169,000 Add: Beginning work in process inventory $52,000 221,000 Deduct: Ending work in process inventory 66,000 Cost of goods manufactured $155,000

Piekos Corporation incurred $90,000 of actual Manufacturing Overhead costs during June. During the same period, the Manufacturing Overhead applied to Work in Process was $92,000. The journal entry to record the application of Manufacturing Overhead to Work in Process would include a: A) debit to Manufacturing Overhead of $92,000 B) debit to Work in Process of $90,000 C) credit to Manufacturing Overhead of $92,000 D) credit to Work in Process of $90,000

C) credit to Manufacturing Overhead of $92,000 Explanation: To record application of Manufacturing Overhead to Work In Process: Work in Process $92,000 Manufacturing Overhead $92,000

Overapplied manufacturing overhead would result if: A) the plant was operated at less than normal capacity. B) manufacturing overhead costs incurred were less than estimated manufacturing overhead costs. C) manufacturing overhead costs incurred were less than manufacturing overhead costs charged to production. D) manufacturing overhead costs incurred were greater than manufacturing overhead costs charged to production.

C) manufacturing overhead costs incurred were less than manufacturing overhead costs charged to production.

14) When manufacturing overhead is applied to production, it is added to: A) the Cost of Goods Sold account. B) the Raw Materials account. C) the Work in Process account. D) the Finished Goods inventory account.

C) the Work in Process account.

Which of the following statements is true? I. Overhead can be applied slowly as a job is worked on. II. Overhead can be applied when the job is completed. III. Overhead should be applied to any job not completed at year-end in order to properly value the work in process inventory. Which of the following statements is true? I. Overhead can be applied slowly as a job is worked on. II. Overhead can be applied when the job is completed. III. Overhead should be applied to any job not completed at year-end in order to properly value the work in process inventory.

D) Statements I, II, and III are all true.