Chapter 3: Job-Order Costing

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 Reason: $200,000 ÷ 1,000 × 600 = $120,000

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 ______.

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

What side of the Manufacturing overhead account is applied manufacturing overhead entered on?

Always the credit side

What side of the Manufacturing overhead account is actual manufacturing overhead entered on?

Always the debit side

A debit balance in Manufacturing overhead means overhead was

underapplied

Costs of partially completed units are accounted for in ______.

work in process

Units of product that are only partially complete are contained in

work in process

When a job is completed, the job costs are transferred OUT OF ______.

work in process

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.

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

Finished Goods

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

The journal entry to record issuing materials to be used in production credits ______.

Raw materials

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

accounts payable

Overhead is underapplied if ______.

actual overhead is more than applied 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.

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

application of manufacturing overhead costs

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

closing it out to Cost of goods sold

Finished goods ______.

consists of completed, unsold goods

Cost of goods manufactured ______.

includes the manufacturing costs of goods finished during the period

A journal entry that debits Work in process and Manufacturing overhead and credits Raw materials records the:

issuance of materials.

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

only direct

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

raw materials

The schedule of cost of goods - summarizes the portions of those costs that remain in ending Finished Goods inventory and that are transferred out of Finished Goods into Cost of Goods Sold. (Enter only one word per blank.)

sold

Cost of goods manufactured is the ______.

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

The cost of goods - is the sum of all amounts transferred from Work in process to Finished goods during a period. (Enter only one word per blank.)

finished/manufactured/completed/produced

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

Completed units that have not yet been sold are found in

finished goods

A credit balance in the Manufacturing Overhead account means overhead was

overapplied

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

Luver Corporation's Gross margin is $100,000, Cost of goods sold equals $70,000, and Selling and administrative expenses total $45,000. Net operating income is ______.

$55,000 Reason: $100,000 - $45,000 = $55,000

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

raw materials

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 Reason: Cost of direct materials = Beginning Inventory + Purchases - Indirect Materials - Ending Inventory ($5,000 + $27,000 - $12,000 - $4,000 = $16,000)

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

Cost of goods sold and Manufacturing overhead

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 includes Manufacturing overhead and Cost of goods sold is recorded to ______.

dispose of underapplied or overapplied overhead

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

Manufacturing overhead costs include ______.

- the factory supervisor's salary - factory insurance

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.

Work in Process consists of ______.

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

A journal entry that debits Manufacturing overhead and credits Accounts payable could be made to record ______.

-rent expense on factory equipment -factory utilities expense

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

Administrative Salaries

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.

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

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

as they are incurred

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

cost of goods manufactured

Labor costs charged to Manufacturing Overhead represent ______ labor costs.

indirect

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. (Enter only one word per blank.)

manufactured or produced

Which account is credited when manufacturing overhead is applied?

manufacturing overhead

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

-Administrative costs -Selling costs

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 debits ______.

Work in process $40,000, debit Manufacturing overhead $30,000 and credit Raw materials $70,000

The Manufacturing Overhead account is debited when ______.

actual overhead costs are incurred

Overhead is overapplied if:

actual overhead is less than applied overhead.

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. (Enter either debit or credit in each blank.)

credit debit