Chapter 3

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 $200,000 ÷ 1,000 × 600 = $120,000

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

Always the debit side

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.

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

Finished Goods

Which account is credited when manufacturing overhead is applied?

Manufacturing overhead

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

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

Units of product that are only partially complete are contained in the _____ _____ _____ inventory.

Work In Process (WIP)

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 issuing both direct and indirect materials into production debits ______.

Work in process and Manufacturing overhead

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

as they are incurred

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

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

Completed units that have not yet been sold are found in ______ _____ inventory.

finished goods

Selling and administrative costs first appear on the ______.

income statement

Labor costs charged to Manufacturing Overhead represent ______.

indirect labor costs

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

issuance of materials

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

manufactured

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

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

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.

produced

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

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

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. Multiple choice question. $

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

Meep Industries had unadjusted cost of goods sold of $300,000. Overhead was overapplied by $20,000. Adjusted cost of goods sold is ______.

$280,000 $300,000 - $20,000 = $280,000.

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 $450,000 + $30,000 = $480,000

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

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.

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

Which of the following would not be charged to the Manufacturing overhead account?

Nonmanufacturing costs

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.

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

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

accounts payable

Work in Process consists of ______.

actual direct materials cost applied manufacturing overhead actual direct labor cost

Overhead is overapplied if ______.

actual overhead is less than applied overhead

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

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

an expense account and credits Cash or a liability

Underapplied or overapplied overhead is the ______.

difference between overhead applied to work in process and actual overhead

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

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

Manufacturing overhead costs include ______.

the factory supervisor's salary factory insurance

Cost of goods manufactured is the ______.

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

A debit balance in Manufacturing overhead means overhead was _____.

underapplied

Overhead is underapplied if ______.

actual overhead is more than applied overhead

To calculate the adjusted cost of goods sold ______.

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

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