Chapter 3 Accounting

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 Reason: $18,000 + $234,000 - $24,000 = $228,000

Cost of goods manufactured of $410,000; beginning finished goods inventory of $110,000 and ending finished goods inventory of $125,000, calculate unadjusted cost of goods sold.

$395,000 Reason: $110,000 + $410,000 - $125,000 = $395,000

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

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 Reason: Cost of direct materials = Beginning Inventory + Purchases - Indirect Materials - Ending Inventory ($27,000 + $100,000 - $28,000 - $25,000 = $74,000)

When overhead is underapplied, a _____ must be made to the Manufacturing overhead account to close it out. (credit or debit)

credit

Actual manufacturing overhead is ______ to the Manufacturing overhead account.

debited

If overapplied overhead is closed out to Cost of goods sold, the Cost of goods sold account will be (increased/decreased)

decreased

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

A debit balance in Manufacturing overhead means overhead was

underapplied

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

Applied manufacturing overhead is entered on what side of the Manufacturing overhead account?

Always the credit side

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

Always the debit side

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

Overhead is overapplied if

actual overhead is less than applied overhead

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

A credit balance in the Manufacturing Overhead account means overhead was (under or over)

overapplied

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

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

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