Chapter 3 AC 361

Gemini had Sales of $50,000, Cost of goods sold of $20,000, and Selling and administrative expenses of $25,000. Gross margin is ______.

$50,000 - $20,000 = $30,000

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.

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 or produced

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

manufactured, completed, produced, or finished

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

Gross margin minus selling and administrative expenses equals ______.

net operating income

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

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 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 the purchase of materials credits ______.

accounts payable

The Manufacturing Overhead account is debited when ______.

actual overhead costs are incurred

A journal entry debiting Salaries expense and crediting Salaries and wages payable could record ______.

administrative salaries

Work in Process consists of ______.

applied manufacturing overhead actual direct materials cost actual direct labor cost

Raw Materials is a(n) ? account

asset

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

balance sheet, income statement

Finished goods ______.

consists of completed, unsold goods

Gross margin is calculated by subtracting ______ from ______.

cost of goods sold; sales

The difference between the entries to record depreciation on office equipment and depreciation on factory equipment is that one ______.

debits Depreciation expense, while the other debits Manufacturing overhead

Labor costs charged to Manufacturing Overhead represent ______ labor costs.

indirect

Applied manufacturing overhead will most likely ______ actual manufacturing overhead.

not equal

A credit balance in the Manufacturing Overhead account means overhead was

overapplied

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

raw materials

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

Cost of goods manufactured is the ______.

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

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

insurance expense

Manufacturing overhead consists of all ______.

manufacturing costs other than direct labor and direct materials

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

Depreciation expense and credits Accumulated depreciation

Given the following, calculate the cost of goods available for sale. Cost of goods manufactured of $234,000 Beginning Finished goods inventory of $18,000 Ending Finished goods inventory of $24,000

Goods available for sale = $234,000 + $18,000 = $252,000

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 ______.

Gross margin - Selling & administrative expenses: $100,000 - $45,000 = $55,000

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

Finished Goods

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

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

Manufacturing overhead costs include ______.

factory insurance the factory supervisor's salary

Milton Corporation sold goods costing $50,000 for $75,000. Journal entries to be made could include entries debiting _____

Cost of Goods Sold for $50,000 and Accounts Receivable for $75,000

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

Cost of goods manufactured = $30,000 + $40,000 + $100,000 + $120,000 - $12,000 = $278,000

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

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

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 Reason: Overhead is underapplied by $5,000. To dispose of the underapplied overhead, overhead is credited and the other accounts including Work in process, Finished goods, and Cost of goods sold are debited by $500 (10%), $2,000 (40%), and $2,500 (50%), respectively.

A journal entry that debits Depreciation expense and credits Accumulated depreciation records ______.

depreciation on office equipment

Costs of partially completed units are accounted for in ______.

work in process

Cost of goods manufactured ______.

includes the manufacturing costs of goods finished during the period

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

Manufacturing Overhead and credit Prepaid Insurance

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

Manufacturing Overhead and credits Prepaid Insurance

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

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

Manufacturing overhead and credits Accumulated depreciation

The Manufacturing Overhead account is debited when ______

actual overhead costs are incurred

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

cost of goods manufactured

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

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.

($500,000 ÷ 200,000) = $2.50 × 260,000 = $650,000 applied. Actual overhead = $625,000, so overhead is $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 $

28,000+23,000=51,000

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

Administrative costs Selling costs

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

Direct Labor Raw Materials Manufacturing Overhead

Period costs flow from Finished Goods to Cost of Goods Sold.

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

Completed units that have not yet been sold are found in ? inventory

Finished Goods

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.

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

Manufacturing overhead is applied with a debit to ______.

Work in process

The journal entry to record a completed job credits ______.

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 selling and administrative salaries debits ______.

an expense account and credits Cash or a liability

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

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

as they are incurred

Actual manufacturing overhead is ______ to the Manufacturing overhead account.

debited

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 Accounts payable could be made to record ______.

factory utilities expense rent expense on factory equipment

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

false

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

recognition of accrued property taxes

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

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

$410,000 + $110,000 = $520,000

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?

Cost of goods manufactured = ($20,000 + $40,000 + $30,000) + $0 - $25,000 = $65,000

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

Cost of goods sold and Accounts receivable

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

Cost of goods sold and 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

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

Total manufacturing costs = $40,000 + $100,000 + $120,000 = $260,000

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

Work in process and Manufacturing overhead

Unadjusted cost of goods sold is calculated by subtracting ______.

ending finished goods inventory from goods available for sale