man acct
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
Murphy Manufacturing estimated $100,000 in manufacturing overhead and 5,000 direct labor hours for 2016. Actual overhead for the year was $120,000 and 7,500 actual direct labor-hours were used. How much overhead was applied to a job completed during 2016 that used 200 direct labor-hours? $4,000 $3,200 $4,800 $100,000
$4,000
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
Based on the following information, calculate net income for Dana's Dress Shop using the traditional format.Sales: $360,000Gross Margin: $140,000Contribution Margin: $110,000Total Selling & Administrative Exp.: $60,000
$80,000
A bill of materials contains the ______.
- quantity of each direct material needed to complete a unit of product - type of each direct material needed to complete a unit of product
--
--
---
---
The US requires
-absorption costing for tax reports
when preparing financial statements in a job-order costing system, finished goods..
-finished goods flow first to the balance sheet and then to the income statement
Predetermined Overhead Rate
-is used to apply manufacturing overhead to jobs; determined BEFORE the period begins POHR=Estimated total manufacturing overhead cost/Estimated total amount of the allocation base
production order
-issued when an agreement has been reached with the customer concerning the quantities, prices, and shipment date for the order
Product costs ______. A. "attach" to units of product as they are purchased for resale or produced B. Include all costs involved in making and selling a product C. Are also called inventoriable costs D. Are always expensed in the same period in which the related products are produced.
A , C
Minor items such as nails and glue are usually considered to be ______.
Indirect Materials
What type of activity is the purchase of equipment for cash?
Investing Activity
which of the following is a clearing account? WIP FG RM Manufacturing overhead
Manufacturing overhead
Nonmanufacturing costs include ______.
Company president's salary sales commissions
Work in Process consists of ______.
applied manufacturing overhead actual direct materials cost actual direct labor cost
The total cost of a job is calculated by adding the total of direct labor cost, direct materials cost and ______.
applied manufacturing overhead cost
Which of the following is not a method used to estimate the fixed and variable portions of mixed costs? a. High-low method b. Relevant range analysis c. Scattergraph plot d. Engineering approach
b. Relevant range analysis
Cost behavior is considered linear whenever: a. the difference between cost and activity is zero b. a straight line approximates the relationship between cost and activity c. a straight line approximates the difference between cost and activity d. the relationship between cost and activity cannot be represented by a line
b. a straight line approximates the relationship between cost and activity
A fixed cost remains fixed ____ within the relevant range of activity. a. per unit b. in total
b. in total
How individual costs react to changes in activity level is referred to as cost
behavior
Which of the following is an operating activity? a. Sale of equipment for land b. Making a loan to another entity c. Payment of interest d. payment of cash dividend
c. Payment of interest
Which of the following is not an element of manufacturing OH
Sales managers salary
Direct labor is also called ______ labor
Touch
Total manufacturing cost per unit
Unit material costs plus unit conversion cost
Equivalent units of production
Work done during a period expressed in fully completed units
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
Prior to being recorded on the income statement, manufacturers' product costs flow through ______.
Work in Process Finished Goods Raw Materials
The cost of the products that are partially complete
Work in Process Inventory
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
When the company assigns factory labor costs to jobs, the direct labor cost is debited to
Work in process inventory
Units that are partially complete are found in ______.
Work in progress
The relative proportion of each type of cost in an organization is known as the company's ___
cost structure
When goods are sold to customers, ______. costs are transferred from Finished Goods to Sales Revenue costs are transferred from Work in Process to Finished Goods the inventory accounts are not affected costs are transferred from Finished Goods to Cost of Goods Sold
costs are transferred from Finished Goods to Cost of Goods Sold
Costs are transferred from raw materials inventory to ______. finished goods inventory only manufacturing overhead only work in process inventory only either finished goods or work in process either work in process or manufacturing overhead
either work in process or manufacturing overhead
Unadjusted cost of goods sold is calculated by subtracting ______.
ending finished goods inventory from goods available for sale
The United States requires absorption costing for ______ financial reports.
external
In the equation Y = a + bX, a = total ______ cost.
fixed
The contribution approach to constructing income statements distinguishes between ______ costs.
fixed and variable
Direct materials and direct labor are both __ costs
manufacturing
Costs expensed on the income statement when incurred are ____ cost and ____ costs become part of inventory on the balance sheet.
period, inventoriable
In the formula Y = a + bX, a represents the estimated ______.
total fixed manufacturing overhead cost
True or false: Job cost sheets serve as a subsidiary ledger to the overall Work in Process Inventory account.
true
___ costs remain constant per unit and vary in total
variable
The average manufacturing overhead cost per unit tends to ______.
vary from one period to the next
cost of goods manufactured equation?
Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory - Ending work in process inventory
The journal entry to record applying overhead during the production process is:
Dr- WIP Cr- Mfg Oh
Luver Corporation's Gross profit is $100,000, Cost of goods sold equals $70,000, and Selling and administrative expenses total $45,000. Calculate the net operating income (loss).
$55,000
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. $102,000 $130,000 $70,000 $74,000
$74,000
a multiple predetermined overhead rate system is more accurate than a plantwide overhead rate system because..
-it reflects differences in how overhead costs are incurred within departments
Companies that use just-in-time systems
-often require suppliers to use sophisticated quality control programs -may require suppliers to certify delivered items are free of defects -receive parts from suppliers at the time needed to fill orders
Committed fixed costs include ______. 1. public relations 2. top management salaries 3. real estate taxes 4. research
2, 3
Based on the following information, compute the cost of goods sold for Spengler Merchandising Corporation. Sales $400,000 Purchases $300,000 Beginning inventory $50,000 Ending inventory $90,000 Selling expenses $70,000 Administrative expenses $30,000 Accounts receivable $110,000
260,000
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 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.
Units of product that are only partially complete are contained in the _____ _____ _____ inventory.
Work In Process (WIP)
Within the relevant range of activity, variable costs: (select all that apply) a. remain constant per unit b. vary in total c. vary per unit d. remain constant in total
a and b
Prime cost are: (select all that apply) a. direct materials b. manufacturing overhead c. selling and administrative expenses d. direct labor
a and d
A normal cost system assigns overhead to jobs using ______.
a predetermined overhead rate
The rise-over run formula for the slope of a line is the basis of: a. the high-low method b. a scattergraph c. least square regression
a. the high-low method
A cost that changes in direct proportion to changes in the activity level is a ____ cost. a. variable b. mixed c. fixed
a. variable
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
maintenance and depreciation of test equipment are examples of ___ cost
appraisal
Actual manufacturing overhead costs are recorded in the Manufacturing Overhead account ______.
as they are incurred
Zimmer, Inc. started the month of January with beginning finished goods inventory of $20,000. The cost of goods manufactured during the month was $120,000 and the ending finished goods inventory was $50,000. What is the unadjusted cost of goods sold for January? $90,000 $120,000 $140,000 $150,000
$90,000
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.
Opportunity costs
-should be considered in decision making -are benefits that are given up when selecting one alternative over another
Overhead application
-the process of assigning overhead cost to jobs -the POHR is based on estimates and determined before the period begins Formula: Overhead applied to a particular job=Predetermined overhead rate x Amount of the allocation base incurred by the job (so direct-labor hours)
Indirect labor costs are charged..
-to the manufacturing overhead incurred account
the unit product cost is the same as..
-total job cost/# of units -average product cost per unit
Which of the following are differences between the traditional and contribution format to income statements?
-traditional income statements focus on cost classifications. contribution format statements focus on cost behavior -compared to traditional statements, contribution format statements provide management with a tool to make decision making easier
Production cost repair
A summary of both production quantity and the cost data for a production department.
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
Differential costs ______.
can be fixed or variable
Ideally an allocation base should ______. be a cost associated with producing the firm's goods should not be a cost driver be calculated using a predetermined overhead rate explain or influence the amount of overhead incurred
explain or influence the amount of overhead incurred
True or false: Job-order costing can only be used in manufacturing firms.
false
Factory materials, such as cleaning supplies, that are not components of finished products are classified as
manufacturing overhead
indirect materials include
nails, glue, and thread
The difference between overhead applied to jobs and actual overhead is ______. cost of goods manufactured ending work in process inventory overapplied or underapplied overhead cost of goods sold
overapplied or underapplied overhead
The difference between overhead applied to work in process and actual overhead is ______.
overapplied or underapplied overhead
Refer to the T-account below: Manufacturing Overhead (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?
overapplied overhead
when actual manufacturing overhead costs are less than overhead applied to products
overapplied overhead
If the Manufacturing Overhead account has a credit balance at the end of the period that indicates that overhead was ______ and Cost of Goods Sold must be ______.
overapplied, decreased
The predetermined overhead rate is multiplied by the actual cost driver usage for a job to calculate the __ job
overhead applied to
The predetermined overhead rate is multiplied by the actual cost driver usage for a job to calculate the ______ the job. overhead applied to total cost of predetermined overhead rate for actual overhead for
overhead applied to
The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find ______.
overhead applied to the job
manufacturing overhead applied
overhead rate x actual activity
To keep track of labor time and costs, many firms have replaced ______.
paper time tickets with computerized systems
differential costs is
the difference in cost between 2 alternatives
In a job-order costing system costs flow first to ______. the income statement and then to the inventory accounts the inventory accounts and then to cost of goods sold cost of goods manufactured and then to the inventory accounts the inventory accounts and then to the Finished Goods account
the inventory accounts and then to cost of goods sold
In the equation Y = a + bX, Y is the
total mixed cost
A debit balance in Manufacturing overhead means overhead was
underapplied
Carlisle, Inc. had Sales revenue of $500,000, Unadjusted cost of goods sold of $395,000, Underapplied manufacturing overhead of $5,000, and Selling and administrative expenses of $50,000. Calculate gross profit. $100,000 $110,000 $50,000 $105,000
$100,000
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
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? $115,000 $25,000 $65,000 $90,000
$65,000
Significant Non-cash activities are part of the statement of cash flows.
True
Under applied OH means that the overhead assigned to work in process is less than OH incurred.
True, actual OH > OH applied = underapplied
Step-variable costs: (select all that apply) a. can be adjusted quickly as conditions change b. may include total salaried employee expense c. are generally treated as fixed costs
a and b
If the contribution margin is not sufficient to cover fixed expenses:
a loss occurs.
In computing equivalent units using the weighted average method, _______________________ is NOT part of of the equivalent units of production formula. a) beginning work in process b) units transferred out c) ending work in process d) none of the choices are correct
a) beginning work in process
True or false: Assembly-line workers' wages are period costs. a. False b. True
a. False
The journal entry to record selling and administrative salaries debits ______.
an expense account and credits Cash or a liability
Committed fixed costs include: (select all that apply) a. public relations b. research c. top management salaries d. real estate taxes
c and d
Beginning merchandise inventory + Purchases - Ending merchandise inventory =
cost of goods sold
Gross margin is calculated by subtracting ______ from ______.
cost of goods sold; sales
To calculate the unit product cost using the job cost sheet ______.
divide the total job cost by the number of units produced
how to calculate net income using the traditional format
gross margin - (total selling & admin expense)
Select all that apply Manufacturing overhead costs ______. include some materials and labor must be manufacturing costs are indirect costs must be traceable to specific jobs
include some materials and labor must be manufacturing costs are indirect costs
Cost of goods manufactured ______.
includes the manufacturing costs of goods finished during the period
Selling and administrative costs first appear on the ______.
income statement
As the level of activity moves outside of the relevant range, fixed costs
increase or decrease in discrete steps
As the level of activity moves outside of the relevant range, fixed costs, ______.
increase or decrease in discrete steps
A manufacturing cost that cannot be easily traced to a specific cost object is a(n) ___ cost
indirect
Labor costs charged to Manufacturing Overhead represent ______ labor costs.
indirect
Manufacturing overhead costs include
indirect materials, factory supervisors' salaries, and factory depreciation
Product costs are also called ___ costs
inventoriable
A contribution approach income statement ______. is prepared primarily for external reporting purposes separates costs into their fixed and variable components reports both gross margin and net income can assist with management decision making
separates costs into fixed and variable component can assist with management decision making
The job cost sheet serves as a(n) __ __to the overall Work in Process Inventory account.
subsidiary ledger
The balance of work in process inventory may be calculated by ______. subtracting the cost of goods sold from the sum of all manufacturing costs summing the sales value of all jobs in process summing the costs of all jobs in process subtracting the cost of finished goods inventory from the sum of all manufacturing costs
summing the costs of all jobs in process
In the equation Y = a + bX, a is the
the total fixed cost (the vertical intercept of the line)
Fixed costs remain constant in ____ over the ____ range of activity.
total, relevant
Process cost system is used when a company manufactures a large volume of unique products.
False
Variable costs vary ______ within the relevant range of activity.
In total
Salaries of factory supervisors and factory maintenance personnel are examples of ______ labor costs.
Indirect
The journal entry to record depreciation on factory equipment debits ______.
Manufacturing overhead and credits Accumulated depreciation
Costs assigned to units of product in absorption costing include ______ manufacturing costs.
both variable and fixed manufacturing
Labor costs that can be easily and conveniently traced to specific products are ______ costs.
Direct Labor
When a job is completed, its costs are transferred into ______.
Finished Goods
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 both direct and indirect materials into production debits ______.
Work in process and Manufacturing overhead
Discretionary fixed costs include: (select all that apply) a. advertising b. management training programs c. insurance expense d. factory depreciation
a and b
An activity base: (select all that apply) a. measures whatever causes costs to vary b. is a measure of whatever causes fixed costs to occur c. is sometimes called a cost driver d. is part of the organization where major operations are planned and carries out
a and c
In a process cost system, costs are assigned only to a) work in process, finished goods, and cost of goods sold b) one work in process account c) work in process accounts d) work in process and finished goods inventory
a) work in process, finished goods, and cost of goods sold
Which of the following are most likely fixed costs? (select all that apply) a. Administrative salaries b. Factory insurance c. Factory rent d. Electricity to operate factory machines
a, b, and c
Selling costs include: (select all that apply) a. advertising b. sales salaries c. administrative salaries d. sales commissions
a, b, and d
Fixed costs: (select all that apply) a. generally include rent and supervisor salaries b. per unit become progressively larger as the level of activity increases c. should not be expressed on a per unit basis when making decisions d. remain constant in total regardless of changes in activity
a, c, and d
Manufacturing costs include: (select all that apply) a. direct labor b. administrative costs c. manufacturing overhead d. selling costs e. direct materials
a, c, and e
Costs that are shared by multiple cost objects in a company are known as ____ costs. a. common b. marginal c. sunk d. opportunity
a. common
Work in Process consists of ______.
actual direct materials cost applied manufacturing overhead actual direct labor cost
When preparing financial statements in a job-order costing system, finished goods flow first to the ? and then to the ?
balance sheet, income statement
When is the predetermined overhead rate calculated? As soon as actual overhead is known After the period is over Before the period begins Throughout the year
before the period begins
finished goods inventory
-consists of completed units that have not yet been sold
work in process
-consists of units that are only partially complete
Steps to calculate cost of goods manufactured?
-includes all manufacturing costs of goods finished during the period Cost of goods manufactured=Total manufacturing cost charged to jobs + Beginning work in process inventory - End work in process inventory
Job-Order vs. Process Costing
-the key difference is whether the company's products or services are different or similar -process costing is used by companies that make standardized or similar products or services; these manufacturers or services distribute costs evenly across the total number of units produced during a period -job order costing systems are used in companies that offer customized or unique products or services; these capture the unique cost of each individual item produced
Common activity bases include ______. 1. scrapped units 2. units sold 3. direct labor hours 4. machine hours
3. 2. 4
Which of the following would not be a good allocation base for manufacturing overhead?
Accounting hours
Physical Units
Actual units to be accounted for during period, irrespective of any work performed.
What side of the Manufacturing overhead account is actual manufacturing overhead entered on?
Always the debit side
Why do companies use a predetermined overhead rate rather than an actual overhead rate?
An actual overhead rate is not known until the end of the period.
Sharp uses job-order costing and applies manufacturing overhead to jobs based on direct labor costs. What is the amount of cost of goods manufactured for the year?
Cost of goods manufactured is represented by the debit to Finished Goods and the credit to Work in Process (entry f) = $522,000 cost of goods manufactured
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
cost objects include
Customers, Organizational Subunits and anything for which cost data is desired.
Added in determining cash receipts from customers
Decrease in accounts rec
A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements, ______.
$300 is reported as a expense and $900 is reported as an asset
Which of the following companies would be most likely to use operations costing? A custom home builder A dog food manufacturer An automobile manufacturer A law firm
An automobile manufacturer
Any item for which cost data is desired is called a(n)
Cost Object
The relative proportion of each type of cost in an organization is known as the company's ________ ________
Cost Structure
The accounts debited when goods are sold on account are ______.
Cost of goods sold and Accounts receivable
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
Which of the following occurs when finished jobs are shipped to customers? Debit to Cost of Goods Sold. Debit to Finished Goods. Debit to Work in Process. Credit to Raw Materials.
Debit to Cost of Goods Sold.
Differential costs, opportunity costs and sunk costs are all cost classifications used in ______.
Decision Making
Cash outflow - financing activity
Declaration and payment of a cash dividend
Within the relevant range of activity, ______ costs remain constant in total.
Fixed
When closing overapplied manufacturing overhead to Cost of Goods Sold, which of the following would be true?
Gross margin will increase.
Which of the following would be an argument for using the gross cost of plant and equipment as part of operating assets in return on investment computations?
It eliminates the age of equipment as a factor in ROI computations.
Constitute a subsidiary ledger for Work in Process Inventory
Job cost sheets
primarily concerned with internal users
Managerial Accounting
The journal entry to record $20,000 in depreciation on factory equipment is debit ______.
Manufacturing Overhead $20,000 and credit Accumulated Depreciation $20,000
Cost behavior patterns such as salaried employees are often called ______ _______ costs.
Step variable
Which of the following would NOT be part of direct labor cost? Supervisor salaries Attorney salaries Plumber wages Assembly-workers wages
Supervisor salaries
Which of the following would not be considered a job in a service firm that uses job-order costing?
The tax department in an accounting firm
Units transferred out
Total units accounted for minus units in ending work in process
True or false: A cost may be direct or indirect, depending on the cost object.
True
Overhead is overapplied if ______. actual overhead is more than applied overhead actual overhead is less than applied overhead cost of goods manufactured is less than cost of goods sold adjusted cost of goods sold is more than unadjusted cost of goods sold
actual overhead is less than applied overhead
Overhead is underapplied if ______.
actual overhead is more than applied overhead
Overhead is underapplied if ______. actual overhead is more than applied overhead actual overhead is less than applied overhead cost of goods manufactured is less than cost of goods sold adjusted cost of goods sold is less than unadjusted cost of goods sold
actual overhead is more than applied overhead
The most common method for disposing of the balance in Manufacturing Overhead is ______. allocating it between Work in Process and Finished Goods inventory adjusting Finished Goods inventory adjusting Cost of Goods Sold allocating it between Cost of Goods Sold and inventory accounts
adjusting Cost of Goods Sold
the cost of goods manufactured report includes ______ manufacturing overhead costs. actual applied
applied
Applied manufacturing overhead costs are credited to the Manufacturing Overhead account ______. as they are incurred when the jobs are sold at the end of the period as the costs are applied to jobs
as the costs are applied to jobs
Raw Materials is a(n) ? account
asset
Overhead application is the process of ______
assigning manufacturing overhead cost to jobs
Bar codes can be used to ______.
automatically record and post direct labor costs to jobs
If the amount of underapplied overhead is immaterial, companies will debit underapplied overhead to a) Work in process inventory b) Cost of goods sold c) manufacturing overhead d) finished goods inventory
b) cost of goods sold
Which one of the following transactions causes the Manufacturing Overhead account to be debited in a job order cost accounting system? a) completed products during the period b) used indirect materials c) purchased raw materials on account d) incurred direct labor
b) used indirect materials
Common activity bases include: (select all that apply) a. scrapped units b. direct labor hours c. units sold d. machine hours
b, c, and d
How individual costs react to changes in activity level is referred to as cost ___.
behavior
The type and quantity of each type of direct material needed to complete a unit of product is listed on the ______.
bill of materials
Manufacturing overhead costs ______.
consist of many different items are indirect costs
When calculating a predetermined overhead rate, the ideal allocation base should be a(n) __ __
cost driver
the entry when direct labor is assigned to jobs is a debit to a) Factory Labor and a credit to Work in Process Inventory. b) Manufacturing Overhead and a credit to Factory Labor. c) Factory Labor and a credit to Manufacturing Overhead. d) Work in Process Inventory and a credit to Factory Labor.
d) Work in process inventory and a credit to factory labor
In process cost accounting, the first step in preparing a production cost report is to a) prepare a cost reconciliation schedule b) compute unit production costs c) compute equivalent units of production d) compute the physical unit flow
d) compute the physical unit flow
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
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
LO3-1 Compute a predetermined overhead rate.
estimated total overhead costs / total amt of allocation base
estimated total overhead
fixed overhead & variable overhead
Cash inflow - financing activity
issuance of preferred stock for cash
Under the indirect method, how is an increase in accounts receivable handled?
it is deducted from net income
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
Job order costing requires a good record-keeping system that uses __documents that trace direct costs to specific jobs.
source
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
Cost of goods manufactured is the ______.
sum of all jobs transferred from Work in process to Finished goods
Costs that have already been incurred and can not be changed by decisions made in the current period or in future periods are called _____ costs
sunk
What type of cost is never relevant and should be disregarded when making decisions?
sunk
Overhead costs are debited to Work in Process when ______. the job is started the job is sold the actual costs are incurred they are applied to jobs
they are applied to jobs
A direct labor__ __ is a document used to record how long workers spend on each job and task.
time ticket
An hour-by-hour summary of an employee's activities throughout the day is found on the
time ticket
In the formula Y = a + bX, X represents the estimated ______.
total amount of the allocation base
Which of the following is correct? The break-even point occurs on the CVP graph where:
total contribution margin equals total fixed expenses.
predetermined overhead rate
total estimated overhead costs/dollars (machine hours/ direct labor) / estimated total activity/allocation base
Direct labor is also called ___ labor
touch
True or false: The Manufacturing Overhead account is a temporary account used to accumulate actual and applied overhead costs.
true
In the equation Y = a + bX, b denotes the
variable cost per unit of activity
In the formula Y = a + bX, b represents the estimated ______.
variable manufacturing overhead cost per unit
Job-order costing would most likely be used in a(n) ______.
construction company
Sales revenue minus variable expenses equals ______ ______
contribution margin
Select all that apply Materials requisition forms are used to ______. control the flow of materials from inventory into production specify the cost of materials to be ordered summarize the cost of a job record the cost of raw materials in the accounting system
control the flow of materials from inventory into production record the cost of raw materials in the accounting system
Select all that apply Materials requisition forms are used to ______. specify the cost of materials to be ordered summarize the cost of a job control the flow of materials from inventory into production record the cost of raw materials in the accounting system
control the flow of materials from inventory into production record the cost of raw materials in the accounting system
Significant noncash activity
conversion of bonds payable into common stock
An allocation base should be ______.
cost driver
includes the manufacturing costs associated with the goods that were finished during the period
cost of goods manufactured
Manufacturing costs include ___, ___, and ___.
direct materials, direct labor, and manufacturing overhead
Categories of manufacturing costs include ______.
direct materials, direct labor, manufacturing overhead
Selling and administrative costs are ______ costs.
direct or indirect
A cost can be easily and conveniently traced to a specific cost object is a(n) ____ cost of that cost object, whereas costs that cannot be easily and conveniently traced to that specific cost object are ____ cost.
direct, indirect
Fixed costs that can be cut-back or eliminated without significant damage to a company's long-term goals are ____ fixed cost and ____ fixed cost can not be easily changed or eliminated.
discretionary, committed
consists of completed units of product that have been sold to customers
finished goods
As the level of activity moves outside of the relevant range, ______ costs increase or decrease in discrete steps rather than an linear fashion.
fixed
In a least-squares regression line, the vertical intercept (a) of the line represents the total ____ cost.
fixed
A fixed cost remains fixed ______ within the relevant range of activity.
in total
A manufacturing cost that cannot be easily traced to a specific cost object is a(n) _____ cost
indirect
Salaries of factory supervisors and factory maintenance personnel are examples of ___ labor costs
indirect
Salaries of factory supervisors and factory maintenance personnel are examples of ____ labor costs.
indirect
Labor costs charged to Manufacturing Overhead represent ______.
indirect labor costs
The journal entry to record a cash payment of $400 for insurance on administrative office equipment debits ______ and credits cash.
insurance expense
A journal entry that debits Work in process and Manufacturing overhead and credits Raw materials records the ______.
issuance of materials
The document that records the materials, labor, and manufacturing overhead costs charged to a job is the ______.
job cost sheet
appropriate when products have distignuishing and unique traits
job order
Companies that make many different products each period use ______________ costing
job-order
A SERVICE firm that would most likely use job-order costing is a ______. Multiple choice question.
law practice
In the equation Y = a + bX, the X is the
level of activity
Deducted in determining cash receipts from customers
loss on sale of plant asset
Typical cost drivers include ______
machine-hours, flight-hours, computer time
The cost of goods __ is the sum of all amounts transferred from Work in process to Finished goods during a period.
manufactured
The cost of goods _____ is the sum of all amounts transferred from Work in Process to Finished Goods during a period.
manufactured
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
Labor charges that cannot be easily traced to a job are considered ______.
manufacturing overhead indirect labor
any materials that go into the final product
raw materials
If manufacturing overhead is underapplied, then:
the amount of manufacturing overhead cost applied to Work in Process is less than the actual manufacturing overhead cost incurred.
When actual manufacturing overhead costs are incurred, ______. work in process inventory is debited the manufacturing overhead cost is debited work in process inventory is credited the manufacturing overhead cost is credited
the manufacturing overhead cost is debited
Overhead costs are debited to Work in Process when ______. the actual costs are incurred the job is sold they are applied to jobs the job is started
they are applied to jobs
Period costs are always expensed on the income statement in the period in which ______.
they are incurred
A company's calculated predetermined overhead rate is $90 per direct labor hour. If a job requires 4 direct labor hours, ______. the total cost of labor and overhead for the job is $360 $360 is assigned to the job to cover indirect costs the total cost of labor for the job is $360
$360 is assigned to the job to cover indirect costs
Baka Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $240,900 and 5,900 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $242,800 and actual direct labor-hours were 5,000.
$38,650 underapplied
Given: 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. $535,000 $395,000 $520,000 $425,000
$395,000
Compute the amount of raw materials used during November if $36,500 of raw materials were purchased during the month and if the inventories were as follows: Inventories Balance November 1 Balance November 30 Raw materials$9,600 $5,300 Work in process$7,300 $8,800 Finished goods$11,300 $13,300
$40,800 Explanation Raw materials used in production = Beginning raw materials inventory + Purchases of raw materials - Ending raw materials inventory Raw materials used in production = $9,600 + $36,500 - $5,300 = $40,800
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
Underapplied or Overapplied overhead
-the difference between the manufacturing overhead cost applied to jobs and the actual manufacturing overhead costs of a period 1. Underapplied=exists when the amount of overhead applied to production is less than the actual manufacturing overhead costs 2. Overapplied=exists when the amount of overhead applied to production is greater than the actual manufacturing overhead costs
Select all that apply Which 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 Make a direct adjustment to Cost of Goods Sold Close it out to Work in process Allocate it to Raw Materials, Work in Process, and Finished Goods Make a direct adjustment to Finished Goods
Allocate it to Work in Process, Finished Goods, and Cost of Goods Sold Make a direct adjustment to Cost of Goods Sold
Which of the following occurs when a job has been completed and transferred to the finished goods warehouse? Debit to Cost of Goods Manufactured. Debit to Cost of Goods Sold. Credit to Finished Goods. Credit to Work in Process
Credit to Work in Process
Deducted in determining cash payments to suppliers
Decrease in inventory
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)
A company purchased a 12 month insurance policy on October 1 at a cost of $1200. On the December 31 annual financial statements...
$300 is reported as an expense and $900 is reported as an asset
Cost of goods manufactured is the ______. value of all jobs in Finished Goods at the end of a period average value of the Work in Process account value of all jobs transferred from Work in Process to Finished Goods value of all jobs transferred from Finished Goods to Cost of Goods Sold
value of all jobs transferred from Work in Process to Finished Goods
Cost of goods manufactured is the ______. value of all jobs transferred from Work in Process to Finished Goods value of all jobs in Finished Goods at the end of a period average value of the Work in Process account value of all jobs transferred from Finished Goods to Cost of Goods Sold
value of all jobs transferred from Work in Process to Finished Goods
Cost of goods sold for a merchandising company, direct materials and commissions are all examples of _______ costs
variable
Mixed costs are also commonly known as semi-____ costs.
variable
When using the high-low method, the slop of the line equals the ____ cost per unit of activity.
variable
Within the relevant range, ___ costs remain constant on a per unit basis
variable
The major difference between job order and process costing is ______. whether the products produced are hand made or machine made whether the products produced are similar or different job order costing is used for products and process costing is used for services
whether the products produced are similar or different
Costs of partially completed units are accounted for in ______.
work in process
Costs of partially completed units are accounted for in ______. cost of goods manufactured finished goods work in process raw materials
work in process
When a job is completed, its costs are transferred out of ______. Cost of Goods Sold Finished Goods Work in Process Manufacturing Overhead
work in process
consists of units of production that are only partially complete and will require further work before they are ready for sale to customers
work in process
The journal entry to record depreciation on office equipment debits ______.
Depreciation expense and credits Accumulated depreciation
Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are ______ materials.
Direct
Which of the following costs are found on the balance sheet of a manufacturer?
Direct Labor Raw Materials Manufacturing Overhead
A laptop computer manufacturer would consider the computer's processor chip to be a(n) ______ cost.
Direct Material
materials that can be physically and directly related to the product
Direct Materials
A cost that can be easily and conveniently traced to a specific cost object is a(n) ______ cost of that cost object, whereas costs that cannot be easily and conveniently traced to that specific cost object are ________ costs.
Direct, Indirect
the function of coordinating activities to ensure a smooth running operation
Directing
Fixed costs that can be cut-back or eliminated without significant damage to a company's long-term goals are _____ fixed cost and _____ fixed costs can not be easily changed or eliminated.
Discretionary, Committed
Which of the following would not be included in operating assets in return on investment calculations?
Factory building rented to (and occupied by) another company.
Other names for manufacturing overhead include ______.
Factory burden factory overhead indirect manufacturing costs
In computing equivalent units using the weighted average method, the beginning work in process is part of the equivalent units of production formula.
False
Period costs flow from Finished Goods to Cost of Goods Sold.
False
The cost of beginning work in process plus the total manufacturing costs for the current period is the cost of goods manufactured.
False
True or false: A predetermined overhead rate of $50 per direct labor hour means that the total cost of direct labor and indirect cost equals $50 per hour.
False
True or false: All of a company's depreciation, property taxes and insurance premiums are considered manufacturing overhead.
False
True or false: At the end of the accounting period, a balance in the Manufacturing Overhead account always means that overhead was underapplied. True False
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
True or false: Job-order costing can only be used in manufacturing firms.
False
True or false: The cost of each individual unit is tracked to products under both job order and process costing.
False
T/F: All of a company's depreciation, property taxes and insurance premiums are considered manufacturing overhead
False (only indirect costs assoc. with operating the factory are included in manufacturing overhead)
primarily concerned with external users
Financial Accounting
How are cash dividends paid to stockholders classified on the statement of cash flows?
Financing activities
Completed units that have not yet been sold are found in ? inventory
Finished Goods
When jobs are sold their costs are transferred out of ______.
Finished Goods
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 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
Which of the following statements is not correct concerning multiple overhead rate systems?
In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on machine-hours rather than on direct labor-hours.
Which of the following is not a COST CLASSIFICATION associated with decision making? Differential costs Indirect costs Sunk costs Opportunity costs
Indirect costs
Direct materials and direct labor are both ______ costs.
Manufacturing
Factory burden is a synonym for _______ ______
Manufacturing Overhead
Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as ______.
Manufacturing Overhead
Factory materials, such as cleaning supplies, that are not components of finished products are classified as ______.
Manufacturing Overhead
indirect costs of manufacturing a product
Manufacturing Overhead
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
A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of ______.
Manufacturing Overhead, Indirect Materials
Which account is credited when manufacturing overhead is applied?
Manufacturing overhead
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
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
Faughn Corporation has provided the following data concerning manufacturing overhead for July: Actual manufacturing overhead incurred$69,000 Manufacturing overhead applied to Work in Process$79,000 The company's Cost of Goods Sold was $243,000 prior to closing out its Manufacturing Overhead account. The company closes out its Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?
Manufacturing overhead was overapplied by $10,000; Cost of Goods Sold after closing out the Manufacturing Overhead account is $233,000 Explanation Actual manufacturing overhead incurred$69,000 Manufacturing overhead applied to Work in Process 79,000 Underapplied (overapplied) manufacturing overhead$(10,000) Adjusted cost of goods sold = Unadjusted cost of goods sold + Underapplied manufacturing overhead - Overapplied manufacturing overhead = $243,000 + $0 - $10,000 = $233,000
The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is recognized is known as the ______ principle
Matching
What document specifies the type and quantity of direct materials used on a specific job? Direct labor time ticket Materials requisition form Bill of materials form Job cost sheet
Materials requisition form
What document specifies the type and quantity of direct materials used on a specific job? Job cost sheet Direct labor time ticket Materials requisition form Bill of materials form
Materials requisition form
Which of the following would most likely NOT be classified as a direct material? Nails and screws Laptop keyboard Drywall Automobile engine
Nails and screws
During the introductory phase of a company's life cycle, which financial statement would users expect to see?
Negative cash from operations, negative cash from investing, positive cash from financing
Which of the following budgets are prepared before the sales budget?
Neither budgeted income statement nor direct labor budget
The costs of direct materials are classified as: (Conversion Cost, Manufacturing Costs, Prime Costs)
No, Yes, Yes
Which of the following would not be charged to the Manufacturing overhead account?
Nonmanufacturing costs
Which activities are reported on the statement of cash flows?
Operating, Investing, Financing
costs that are noninventorable
Period Costs
the function of setting goals and objectives
Planning
Used to apply manufacturing overhead to jobs
Predetermined overhead rate
What is the formula for applying overhead to a specific job? Estimated manufacturing overhead / estimated total cost driver usage Actual manufacturing overhead rate × actual cost driver usage for the specific job Predetermined overhead rate × the actual cost driver usage for the specific job Estimated manufacturing overhead / cost driver usage for the specific job
Predetermined overhead rate × the actual cost driver usage for the specific job
The final step in preparing a production cost report is to
Prepare a cost reconciliation schedule
Direct materials, direct labor, and manufacturing overhead are all ______ costs.
Product
On a traditional income statement, cost of goods sold reports the _______ costs attached to merchandise sold during the period, while selling and administrative expenses report all ______ costs that have been expensed as incurred.
Product, Period
Cash outflow - investing activity
Purchase of Land for cash
The materials that go into the final product are called ______ materials.
Raw
The journal entry to record issuing materials to be used in production credits ______.
Raw materials
Select all that apply Which of the following statements are true? Direct labor costs flow through the Raw materials inventory account. 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. Raw materials inventory only includes the cost of direct materials.
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.
The assumption that cost behavior is strictly linear is reasonably valid within the ______ ______of activity
Relevant range
Cash inflow - investing activity
Sale of equipment for cash
Which of the following is not a manufacturing cost category?
Selling & administrative costs
Which of the following is not a manufacturing cost category? Selling & administrative costs Direct labor Manufacturing overhead Direct materials
Selling & administrative costs
Cost reconciliation schedule
Shows that the total costs accounted for equal the total costs to be accounted for
Walker Company applies manufacturing overhead based on direct labor hours. Information concerning manufacturing overhead and labor for the year as follows: Actual manufacturing overhead: $163,800 Estimated manufacturing overhead: $158, 600 Direct labor incurred: 2,500 hours @ $22 = $55,000 Est. Labor: 2,600 hours @ $21 = $54,600 What is the underapplied at year end? $11,300
Solve: $158,600 / 2,600 = $61 $61 x 2,500 hours = $152, 500 Now, $163,800 - $152, 500 = 11,300
The general model for calculating a quantity variance is:
Standard price × (Actual quantity of inputs used − Standard quantity allowed for output).
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
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.
Equivalent units of production are used to determine the cost per unit of completed products.
True
Managerial Accounting internal reports are prepared more frequently than are classified financial statements.
True
Manufacturing OH consists of costs that are indirectly associated with the manufacturing of the finished product
True
Solvency is the ability of a company to survive over the long term.
True
T/F: A cost may be direct or indirect, depending on the cost object
True
T/F: presenting fixed costs on an average per unit basis makes them look like they are variable costs
True
The primary purpose of the statement of cash flows is to provide info about a company's cash receipts and cash payments during an accounting period.
True
The transfer of costs from one inventory account to the next parallels the physical transfer of goods from one inventory to the next.
True
True or false: Presenting fixed costs on an average per unit basis makes them look like they are variable costs.
True
True or false: The finished product of one company can become raw materials for another company.
True
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
Total units accounted for
Units transferred out during the period plus units ending work in process
all business processes associated with providing a product or a service
Value Chain
Which type of cost changes in total, in direct proportion to changes in activity level?
Variable
Which of the following statements concerning direct and indirect costs is NOT true?
Whether a particular cost is classified as direct or indirect does not depend on the cost object
The journal entry to record applying overhead during the production process is:
Work In Process XXX Manufacturing Overhead XXX
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
Using the high-low method, the fixed cost is calculated: (select all that apply) a. after the variable cost per unit is calculated b. before the variable cost is calculated c. by adding the total cost to the variable cost d. using either the high or low level of activity
a and b
Which of the following statements are true? a. A mixed cost has a minimum cost of having a service available and ready for use. b. When mixed costs are represented by a straight-line, the steeper the slope, the higher the variable cost per unit. c. The fixed portion of a mixed cost represents the cost incurred for the actual consumption of a service. d. The equation for a straight-line makes it easy to calculate the total mixed cost for any activity level outside the relevant range.
a and b
A dress manufacturer would consider the cost of relatively inexpensive items like thread to the part of: (select all that apply) a. indirect materials b. direct materials c. manufacturing overhead d. administrative costs
a and c
Which of the following statements are true? (select all that apply) a. Sales commissions are period costs. b. The wages of assembly-line workers are period costs. c. Period costs are included as part of the cost of goods. d. Period costs are expensed in the same period in which they are incurred.
a and d
Cost-plus pricing occurs when ______.
a markup percentage is added to the cost of a job
A cost driver is ______. the rate that is used to apply manufacturing overhead to products and services the total estimated manufacturing overhead cost a measure that explains or influences the amount of manufacturing overhead cost incurred another name for predetermined overhead rate
a measure that explains or influences the amount of manufacturing overhead cost incurred
A cost driver is ______. the rate that is used to apply manufacturing overhead to products and services the total estimated manufacturing overhead cost another name for predetermined overhead rate a measure that explains or influences the amount of manufacturing overhead cost incurred
a measure that explains or influences the amount of manufacturing overhead cost incurred
The total costs accounted for in a production cost report are equal to the a) cost of units completed and transferred out plus the cost of ending work in process b) cost of units started into production c) cost of units completed and put into production d) cost of beginning work in process plus the cost of units completed and transferred out
a) cost of units completed and transferred out plus the cost of ending work in process.
Under the indirect method, which of the following is deducted from net income in the operating section? a) Gain on sale of land b) Amortization expense c) Decrease in inventory d) increase in wages payable
a) gain on sale of land
Conversion costs are the sum of a) labor costs and overhead costs b) fixed and variable overhead costs c) direct labor and indirect labor costs d) direct material costs and overhead costs
a) labor costs and overhead costs
Cost accounting involves the measuring, recording, and reporting of ___________ a) product costs b) manufacturing processes c) future costs d) manufacturing decisions
a) product costs
Job cost sheets constitute the subsidiary ledger for a) Work in process inventory b) cost of goods sold c) fnished goods inventory d) manufacturing overhead
a) work in process inventory
When a company assigns factory labor costs to jobs, the direct labor is debited to .. a) Work in process inventory b) direct labor c) manufacturing overhead d) factory labor
a) work in process inventory
Direct labor and overhead costs incurred to change raw materials into finished products are known as ____ costs. a. conversion b. period c. opportunity d. prime
a. conversion
A laptop computer manufacturer would consider the computer's processor ship to be a(n) ____ cost. a. direct material b. direct labor c. indirect material d. manufacturing overhead
a. direct material
Within the relevant range of activity, ____ costs remain constant in total. a. fixed b. neither fixed nor variable c. both fixed and variable d. variable
a. fixed
Manufacturing overhead costs include: a. indirect materials, factory supervisors' salaries, and factory depreciation b. direct materials, administrative taxes and insurance, and sales commissions c. direct materials, sales commissions, and factory assembly workers' wages d. administrative taxes and insurance, sales commissions, and factory assembly workers' wages
a. indirect materials, factory supervisors' salaries, and factory depreciation
The slope (b) of the regression line represents the ____ cost per unit of activity. a. variable b. total c. fixed
a. variable
All manufacturing costs are assigned to units of product and all nonmanufacturing costs are treated as period cost under costing
absorption
As jobs are worked on the Work in Process account accumulates ______. actual direct materials and applied direct labor and overhead costs actual direct materials, direct labor, and overhead costs actual direct materials and direct labor costs and applied overhead costs estimated direct materials and direct labor and applied overhead costs
actual direct materials and direct labor costs and applied overhead costs
The work in process account accumulates ______. actual direct materials, actual direct labor, and applied overhead costs actual direct material, applied direct labor, and applied overhead costs applied direct material, applied direct labor, and actual overhead costs actual direct materials, actual direct labor, and actual overhead costs
actual direct materials, actual direct labor, and applied overhead costs
The Manufacturing Overhead account is debited when ______
actual overhead costs are incurred
The Manufacturing Overhead account is debited when ______.
actual overhead costs are incurred
Overhead is overapplied if ______.
actual overhead is less 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
Select all that apply At the end of the reporting period, any differences between actual and applied manufacturing overhead may be ______. reported on the income statement as a gain or loss ignored if the amount is insignificant adjusted directly to Cost of Goods Sold (COGS) adjusted to Work in Process, Finished Goods, and COGS
adjusted directly to Cost of Goods Sold (COGS) adjusted to Work in Process, Finished Goods, and COGS
A measure such as direct labor-hours or machine hours used to assign overhead costs to products and services is called a cost driver or a(n)
allocation base
The first step in assigning manufacturing overhead is to determine the __ __ or cost driver
allocation base
Select all that apply A direct labor time ticket includes the ______. materials used on each job worked amount of time spent on each job job numbers of jobs worked on
amount of time spent on each job job numbers of jobs worked on
Karvel Corporation uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. For the month of August, Karvel estimated total manufacturing overhead costs at $300,000 and total machine-hours at 75,000 hours. Actual results for the period were manufacturing overhead costs of $290,000 and 75,000 machine-hours. As a result, Karvel would have:
applied more overhead to Work in Process than the actual amount of overhead cost for the year.
Select all that apply Labor costs ______. are always recorded directly into Work in Process are determined from the job cost sheets are recorded in basically the same way as material costs may be direct or indirect
are recorded in basically the same way as material costs may be direct or indirect
Select all that apply Labor costs ______. are determined from the job cost sheets are always recorded directly into Work in Process are recorded in basically the same way as material costs may be direct or indirect
are recorded in basically the same way as material costs may be direct or indirect
The basic formula for process costing is ______. average unit cost = total manufacturing cost/total units produced total cost = actual direct materials + actual direct labor + applied overhead average unit cost = total units produced/total manufacturing costs
average unit cost = total manufacturing cost/total units produced
Product costs: (select all that apply) a. include all costs involved in making and selling a product b. are also called inventoriable costs c. "attach" to units of product as they are purchased for resales or produced d. are always expensed in the same period in which the related products are produced
b and c
Which of the following statements are true? (select all that apply) a. all costs in a merchandising company are period costs. b. Product costs are also called inventorial costs. c. Period costs are expensed when incurred. d. Inventoriable costs are expensed in the period in which they are incurred.
b and c
Which statements regarding the high-low method are true? (select all that apply) a. When applying this method, use the points with the highest and lowest level of cost. b. The high-low method should be used if a scattergraph plot indicates a linear relationship between cost and activity. c. It only uses two data points d. it is superior to least-squares regression.
b and c
Which of the following statements are true? (select all that apply) a. Factory cleaning and maintenance and period costs. b. Direct labor and indirect labor are product costs c. Sales commissions and shipping costs are product costs. d. Advertising and sales commissions are period costs.
b and d
Fortner Company has no beginning work in process; 9,000 units are transferred out and 3,000 units in ending work in process are one-third finished as to conversion costs and fully complete as to materials costs. If total materials cost is $60,000, the unit materials cost is a) $6.00 b) $5.00 c) $6.67 rounded d) none of these choices are correct
b) 5.00 Solve: $60,000 / 12,000 units = 5.00
When using account analysis, an account is classified as either fixed or variable based on: a. engineering estimates of production methods b. scattergraphs c. the analyst's prior knowledge of how the cost behaves d. the equation Y = a + bX
c. the analyst's prior knowledge of how the cost behaves
The difference between direct labor and indirect labor is that direct labor ______.
can be easily traced to jobs, while indirect labor cannot
The simpler method of closing out the balance of Manufacturing overhead is ______.
closing it out to Cost of goods sold
Fixed costs that cannot easily be changed and often lock a company into a multi-year decision are ____ fixed costs.
committed
Fixed costs that cannot easily be changed and often lock a company into a multi-year decision are called ________ fixed costs.
committed
A type of indirect cost incurred to benefit more than one cost object is a ___ cost
common
A type of indirect cost incurred to benefit more than one cost object is a(n) ______ cost.
common
Finished goods ______.
consists of completed, unsold goods
Finished goods ______. consists of goods that require additional processing before being sold is the same as cost of goods manufactured consists of completed, unsold goods consists of goods that have been sold to customers during the period
consists of completed, unsold goods
Job-order costing would most likely be used in a(n) ______. construction company dairy farm that produces raw milk soda bottling factory oil refinery
construction company
measures, records, and reports product costs
cost accounting
Manufacturing cost accounts are fully integrated into the general ledger
cost accounting system
Any item for which cost data is desired is called a(n) ____ ____.
cost object
The amount transferred from Work in Process to Finished Goods is ______.
cost of goods manufactured
The total cost transferred out of Work in Process inventory into Finished Goods inventory is ______. gross profit net operating income cost of goods sold cost of goods manufactured
cost of goods manufactured
Which one of the following causes the work in process account to increase in a job order cost accounting system? a) incurred direct labor b) incurred and paid indirect labor c) completed products during a period d) requisitioned direct materials from the storeroom
d) requisitioned direct materials from the storeroom
Contribution margin is: a. sales revenue minus cost of goods sold b. all revenues minus all costs c. sales revenues minus fixed costs d. sales revenue minus variable costs
d. sales revenue minus variable costs
Select all that apply Categories of manufacturing costs include ______. selling expenses direct labor direct materials manufacturing overhead administrative expenses
direct labor direct materials manufacturing overhead
A journal entry that debits Manufacturing overhead and credits Accounts payable would not be used to record ______
direct labor costs
A journal entry that debits Manufacturing overhead and credits Accounts payable would not be used to record ______.
direct labor costs
Widely used allocation bases in manufacturing include ______.
direct labor hours units of product machine hours direct labor cost
common activity bases include (3)
direct labor hours units sold machine hours
A laptop computer manufacturer would consider the computer's processor chip to be a ___ cost
direct material
Major inputs such as lumber and fixtures that can be easily traced to a specific job are called __ __
direct materials
Prime costs include ______.
direct materials and direct labor
Select all that apply When materials are requisitioned into production, ______. direct materials are recorded on the job cost sheet indirect materials are recorded in Work in Process direct materials are recorded in Work in Process indirect materials are recorded as a separate line item on the job cost sheet
direct materials are recorded on the job cost sheet direct materials are recorded in Work in Process
total manufacturing costs is calculated by
direct materials+direct labor+total MOH applied
Manufacturing costs can be divided into 3 categories:
direct materials, direct labor, and manufacturing overhead
The contribution approach to constructing income statements ______. distinguishes between fixed and variable costs aids in decision making distinguishes between product and period costs is used primarily for external reporting
distinguishes between fixed and variable costs aids in decision making
When companies incur selling and administrative costs, those costs ________. should be treated as product costs do not flow through inventories on the balance sheet should flow through the Manufacturing Overhead account should flow through the Work in Process account
do not flow through inventories on the balance sheet
to calculate direct materials on the schedule of cost of goods manufactured, add purchases to beginning raw materials inventory and subtract ______. only beginning raw materials inventory ending raw materials inventory and indirect materials used only ending raw materials inventory beginning raw materials inventory and indirect materials used
ending raw materials inventory and indirect materials used
To calculate a predetermined overhead rate, divide estimated total manufacturing overhead by the ______.
estimated total cost driver
The formula for a predetermined overhead rate is ______. estimated total manufacturing overhead cost / estimated total cost driver estimated total cost driver / estimated total manufacturing overhead cost actual total manufacturing overhead cost / actual total cost driver actual total cost driver / actual total manufacturing overhead cost
estimated total manufacturing overhead cost / estimated total cost driver
Ideally an allocation base should ______. be a cost associated with producing the firm's goods should not be a cost driver explain or influence the amount of overhead incurred be calculated using a predetermined overhead rate
explain or influence the amount of overhead incurred
Manufacturing overhead costs include ______.
factory insurance the factory supervisor's salary
Indirect labor costs include ______.
factory security guard wages, assembly-line supervisor salary
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
T/F: the term quality costs refers to the cost of the quality of material used to make a product
false
True or false: Removing expenses that do not differ between alternatives could alter a decision.
false
True or false: The root cause of inaccurately assigning costs to jobs is generally due to poor tracking of direct labor costs.
false
True or false: Variable costs remain fixed in total within the relevant range of activity.
false
Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is favorable, the variable overhead efficiency variance will be:
favorable
Completed units that have not yet been sold are found in ______ _____ inventory.
finished goods
When a job is completed, its costs are transferred into ______. Cost of Goods Sold Finished Goods Sales Revenue Work in Process
finished goods
___ costs remain constant in total
fixed
A budget that is based on the actual activity of a period is known as a:
flexible budget
A predetermined overhead rate of $20 per direct labor hours means that ______. for each direct labor hour, $20 is added to cover indirect costs the total cost of direct and indirect labor is $20 per hour employees who directly work on the job are paid $20 per hour
for each direct labor hour, $20 is added to cover indirect costs
The purpose of statistical process control is to identify processes that are ___ or ___ of control
in or out
A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of both __ and __.
indirect materials and manufacturing overhead (the cost of relatively insignificant direct materials are treated as indirect materials bc it is not worth the time and cost to directly trace them to products)
Manufacturing overhead costs include ______.
indirect materials, factory supervisors' salaries, and factory depreciation
Costs that result from identifying defects before products are shipped to customers and include the cost of scrap and rework are ___ costs
internal failure
Cost structure ______.
is the relative proportion of each type of cost in an organization
Select all that apply Process costing ______. is used for mass production uses job cost sheets accumulates costs by customer is used for homogeneous products
is used for mass production is used for homogeneous products
The costs incurred for each unique product, project, or service are recorded on a document called a(n) __ __ sheet
job cost
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 manufacturing overhead consists of all ______. costs other than direct labor and direct materials manufacturing costs other than direct labor and direct materials indirect costs manufacturing costs
manufacturing costs other than direct labor and direct materials
Actual manufacturing overhead consists of all ______. indirect costs manufacturing costs other than direct labor and direct materials costs other than direct labor and direct materials manufacturing costs
manufacturing costs other than direct labor and direct materials
Manufacturing overhead consists of all ______.
manufacturing costs other than direct labor and direct materials
Factory labor charges that cannot be easily traced to a job are treated as ______
manufacturing overhead
Factory labor charges that cannot be easily traced to a job are treated as ______.
manufacturing overhead
in a job-order costing system, indirect labor cost is usually recorded as a debit to:
manufacturing overhead
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
The balance of work in process inventory may be calculated by ______. summing the sales value of all jobs in process subtracting the cost of goods sold from the sum of all manufacturing costs summing the costs of all jobs in process subtracting the cost of finished goods inventory from the sum of all manufacturing costs
summing the costs of all jobs in process
what type of cost is NEVER relevant and should be disregarded when making decisions?
sunk
Nonmanufacturing costs increase ______. various asset and liability accounts the Manufacturing Overhead account the Selling, General & Administrative expense accounts the Cost of Goods sold account
the Selling, General & Administrative expense accounts
The value of work in process is equal to ______.
the cost of all unfinished jobs
Manufacturing overhead costs include ______.
the factory supervisor's salary factory insurance
In a job-order costing system costs flow first to ______. the income statement and then to the inventory accounts the inventory accounts and then to the Finished Goods account cost of goods manufactured and then to the inventory accounts the inventory accounts and then to cost of goods sold
the inventory accounts and then to cost of goods sold
When actual manufacturing overhead costs are incurred, ______. work in process inventory is credited the manufacturing overhead cost is credited the manufacturing overhead cost is debited work in process inventory is debited
the manufacturing overhead cost is debited
Period costs are always expensed on the income statement in the period in which: a. they are incurred b. the related goods are sold c. the cash for the expense changes hands
they are incurred
Indicates the number of hours worked by employees and the account to charge it to
time ticket
The document used to record the time workers spend on each job and task is called a ______.
time ticket
committed fixed costs include
top management salaries real estate taxes
An income statement focusing on product and period costs has been prepared using a ___ format, while a ___ format income statement makes a distinction between fixed and variable costs
traditional, contribution
An income statement focusing on product and period costs has been prepared using a(n) ______ format, while a(n) _____format income statement makes a distinction between fixed and variable costs.
traditional, contribution
A debit balance in Manufacturing overhead means overhead was _____.
underapplied
If there is a debit balance in Manufacturing Overhead after overhead has been applied to all jobs it means overhead was
underapplied
when acutal manufacutring overhead costs are greater than overhead applied to products
underapplied overhead
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
Process costing
used when: 1) a company produces many units of a single product 2) one unit of product is indistinguishable from other units of product 3) the identical nature of each unit of product enables assigning the same average cost per unit ex: companies that would use this- -Charmin toilet tissue (paper manufacturing); Kraft macaroni (food manufacturing); Coca-cola (mixing and bottling beverages); Exxon petroleum products
The journal entry to record the purchase of materials credits ______.
accounts payable
Manufacturing costs include ______.
direct materials, direct labor, manufacturing overhead
For the month of October, Janus Corporation used $30,000 worth of direct materials in production and incurred direct labor costs of $60,000. Actual manufacturing overhead costs were $40,000, whereas $45,000 was the manufacturing overhead applied to work in process. What is the amount of total manufacturing costs that would appear in the Schedule of Cost of Goods Manufactured for October? $90,000 $130,000 $135,000 $175,000
$135,000
True or false: Labor costs that can be specifically traced to a product are indirect labor costs.
False
What is true about period costs (2 things)?
-Sales commissions are period costs -Period costs are expensed in the same period in which they are incurred
Cost of Goods Sold- The Direct Method
-Simpler and quicker when the necessary data are available -Must know *unit product cost* and *# of units sold*
bill of materials
-a document that lists the type and quantity of each type of direct material needed to complete a unit of product
materials requisition form
-a document that specifies the type and quantity of materials to be drawn from the storeroom -identifies the job that will be charged for the cost of the materials -used to control the flow of materials into production -used to make entries in accounting records
Raw materials
-any materials included in a finished product -when materials are purchased they are recorded in the Raw Materials inventory account -Raw Materials used in production are transferred to Work in Process
a normal costing system applies overhead by..
-applies overhead by job by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job
A journal entry debiting Salaries expense and crediting Salaries and wages payable could record ______.
administrative salaries
Selling costs include
advertising sales commissions sales salaries
discretionary fixed costs include
advertising management training programs
Manufacturing overhead includes:
all manufacturing costs except direct labor and direct materials.
when are actual manufacturing overhead costs recorded in the Manufacturing overhead account?
-as they are incurred
Cost of Goods Sold
-consists of the costs of the products sold to customers -BI+Purchases-EI=Cost of goods sold
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 process used to assign overhead costs to products is called overhead
allocation
A blend of process and job order costing is called__ costing
operations
A potential benefit that is forfeited or lost when one decision is chosen over another is called a(n)
opportunity cost
Non- manufacturing costs include ___ and ___.
sales commissions (selling costs) and company president's salary
Contribution margin is ______.
sales revenue minus variable costs
The contribution approach to constructing income statements does what (2 things)?
-distinguishes between fixed + variable costs -aids in decision making
Quality cost information reports:
-give managers an idea of where to focus quality control efforts -show managers if quality control costs are poorly distributed -help identify the financial cost of defects
The Need for a Predetermined Overhead Rate
-makes it possible to estimate total job costs sooner -actual overhead for the period is not known until the end of the period -seasonal factors in overhead costs can produce fluctuations in the overhead rate ex: costs of heating a factory in Illinois will be highest in the winter months
What is true about period costs?
-period costs do not flow through the inventory accounts -period costs are expensed when incurred
job cost sheet
-records the material, labor, and manufacturing overhead costs charged to that job
the average manufacturing overhead cost per unit tends to..
-vary from one period to the next
Which of the following costs would a computer manufacturer include in manufacturing OH
Depreciation on testing equipment
The difference in revenues between two alternatives is called ______.
Differential Revenue
Costs that can be easily and conveniently traced to a specific product are called ______ costs.
Direct
Fantastic Furniture makes custom order couches. The material used to make a couch is a(n) ______ cost of the customer placing the order.
Direct
Inventoriable costs is another term for ____ costs.
product
Actual manufacturing overhead is ______ to the Manufacturing overhead account.
debited
The components of prime costs are direct ______ costs and direct _____ costs
Material, Labor
time ticket
-an hour-by-hour summary of the employee's activities throughout the day -companies rely on computerized systems to maintain the time tickets includes: -the nature of indirect tasks worked -the amount of time spent on each job -the number of jobs worked on
-
-
A cost that contains both variable and fixed cost elements is a(n) ______ cost.
Mixed
Manufacturing overhead ______.
- consists of many different types of costs - contains fixed costs i- s an indirect cost
Added in determining cash payments to suppliers
decrease in accounts payable
Manufacturing overhead consists of ______.
many different kinds of indirect costs
Rediger Inc., a manufacturing Corporation, has provided the following data for the month of June. The balance in the Work in Process inventory account was $22,000 at the beginning of the month and $17,000 at the end of the month. During the month, the Corporation incurred direct materials cost of $55,000 and direct labor cost of $28,000. The actual manufacturing overhead cost incurred was $53,000. The manufacturing overhead cost applied to Work in Process was $51,000. The cost of goods manufactured for June was:
$139,000
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. $30,000 $20,000 $16,000 $24,000
$16,000
Acheson Corporation, which applies manufacturing overhead on the basis of machine-hours, has provided the following data for its most recent year of operations. Estimated manufacturing overhead$157,200 Estimated machine-hours 4,530 Actual manufacturing overhead$156,300 Actual machine-hours 4,640 The estimates of the manufacturing overhead and of machine-hours were made at the beginning of the year for the purpose of computing the company's predetermined overhead rate for the year. The applied manufacturing overhead for the year is closest to: (Round your intermediate calculations to 2 decimal places.)
$161,008 Explanation Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $157,200 ÷ 4,530 machine-hours = $34.70 per machine-hour Manufacturing overhead applied = Predetermined overhead rate × Actual amount of the allocation base = $34.70 per machine-hour × 4,640 machine-hours = $161,008
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
Calculate total current manufacturing costs given the following: 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 $183,000 $186,000 $191,000
$186,000
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. $258,000 $240,000 $252,000 $228,000
$228,000
Luebke Inc. has provided the following data for the month of November. The balance in the Finished Goods inventory account at the beginning of the month was $65,000 and at the end of the month was $31,300. The cost of goods manufactured for the month was $218,500. The actual manufacturing overhead cost incurred was $58,900 and the manufacturing overhead cost applied to Work in Process was $63,200. The company closes out any underapplied or overapplied manufacturing overhead to cost of goods sold. The adjusted cost of goods sold that would appear on the income statement for November is:
$247,900 Explanation Manufacturing overhead underapplied (overapplied) = Actual manufacturing overhead incurred - Manufacturing overhead applied = $58,900 - $63,200 = $4,300 overapplied Adjusted cost of goods sold = Beginning finished goods inventory + Cost of goods manufactured - Ending finished goods inventory - Manufacturing overhead overapplied = $65,000 + $218,500 - $31,300 - $4,300 = $247,900
Given the following, calculate total current 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 $302,000 $260,000 $242,000 $278,000
$260,000
Given the following, calculate total current 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 $302,000 $278,000 $242,000 $260,000
$260,000
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 $278,000 $302,000 $242,000 $260,000
$278,000
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.
Gemini had Sales of $50,000, Unadjusted Cost of goods sold of $23,000, Overapplied Manufacturing Overhead of $3,000, and Selling and administrative expenses of $25,000. Calculate gross profit. $5,000 $24,000 $27,000 $30,000
$30,000
Baka Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $240,300 and 4,780 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $242,000 and actual direct labor-hours were 4,670. The predetermined overhead rate for the year was closest to:
$50.27 Explanation Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total direct labor-hours = $240,300 ÷ 4,780 direct labor-hours = $50.27 per direct labor-hour
The following accounts are from last year's books at Sharp Manufacturing: Sharp uses job-order costing and applies manufacturing overhead to jobs based on direct labor costs. What is the manufacturing overapplied or underapplied for the year?
$7,000 overapplied Explanation The manufacturing overhead is overapplied by $7,000 because the manufacturing overhead applied of $215,000 exceeds the manufacturing overhead incurred by $7,000.
At the beginning of December, Altro Corporation had $26,000 of raw materials on hand. During the month, the Corporation purchased an additional $76,000 of raw materials. During December, $72,000 of raw materials were requisitioned from the storeroom for use in production. The credits entered in the Raw Materials account during the month of December total:
$72,000
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
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. $130,000 $70,000 $102,000 $74,000
$74,000
Balance sheet vs. Income statement
*Balance sheet:* -Raw materials inventory -Work in Process inventory -Finished Goods inventory *Income statement:* -Cost of Goods Sold -Selling and Administrative Expenses
Multiple Predetermined Overhead Rates
*plantwide overhead rate*: single predetermined overhead rate for an entire factory -common in smaller companies *multiple predetermined overhead rate*: each production department may have its own predetermined overhead rate -such a system, while more complex, is more accurate because it can reflect differences across departments in how overhead costs are incurred -used in larger companies
Materials requisition forms are used for ______.
- Making journal entries in accounting records - Controlling the flow of materials into production
Cost behavior ______. A. categorizes costs as fixed, mixed and variable B. is a detailed analysis technique used to determine whether costs are fixed or variable C. refers to how a cost will change as activity level changes D. is the relative proportion of each type of cost in an organization
- categorizes costs as fixed, mixed, and variable -refers to how a cost will change as activity level changes
A job cost sheet contains ______.
- materials costs charged to the job - manufacturing overhead costs charged to the job - labor costs charged to the job
what methods can be used to dispose of underapplied or overapplied manufacturing overhead?
-Closing it out to cost of goods sold -Allocating it among work in process, finished goods, and cost of goods sold
The total cost of a job includes ______.
-Direct Materials Cost -Direct Labor Cost -Applied Manufacturing Overhead
Job-Order costing example
-Direct costs 1) Direct materials: traced directly to each job as the work is performed 2) Direct labor: traced directly to each job as the work is performed 3) Manufacturing overhead: includes indirect materials and indirect labor that are allocated to all jobs rather than directly traced to each job
What are recorded on job cost sheets?
-Direct materials -Direct labor -MOH applied
What costs are assigned to units of product in absorbtion costing?
-Fixed manufacturing costs -Variable manufacturing costs
What are charged to the overhead account?
-Indirect materials
why have direct labor costs decreased relative to overhead as a component of product costs?
-Production processes have become more automated -Products have grown more sophisticated and complex
Within the relevant range, fixed costs
-remain constant in total regardless of changes in activity -generally include rent and supervisor salaries -should not be expressed on a per unit basis when making decisions
Which of the following costs are charged directly to the income statement?
Administrative costs Selling costs
Allocation of MOH
-used to assign manufacturing overhead to products; such as direct labor hours, direct labor dollars, or machine hours -*cost driver*: a factor, such as machine-hours, beds occupied, computer time, or flight hours that causes overhead costs -we use an allocation base because 1) it is impossible or difficult to trace overhead costs to particular jobs ( it is an indirect cost) 2) Manufacturing overhead consists of many different items ranging from the grease used in machines to the production manager's salary 3) Many types of manufacturing overhead costs are fixed even though output fluctuates during the period
Job-order costing
-used when: 1) many different products are produced each period 2) products are manufactured to order 3) the unique nature of each order requires tracing or allocating costs to each job, and maintaining cost records for each job -is a widely used costing method -may be used in any type of organization ex of companies: -Boeing (aircraft manufacturing) -Bechtell International (large scale construction) -Walt Disney Studios (movie production) -ex: Levi jeans makes different types of jeans for both men and women; an order of 1,000 jeans mens blue style A312 is called a *job*
What is true about mixed costs?
-when mixed costs are represented by a straight-line, the steeper the slope, the higher the variable cost per unit -a mixed cost has a minimum cost of having a service available and ready for use
Job-Order Costing-The Flow of Costs
1) *Raw materials*: include any materials that go into the final product 2) *Work in process*: consists of units of production that are only partially complete and will require further work before they are ready for sale to customers 3) *Finished goods*: consist of completed units of product that have not been sold to customers 4) *Cost of goods manufactured*: include the manufacturing costs associated with the goods that were finished during the period
Steps in requisitioning and issuing materials in order
1) a production order is issued 2) the production department prepares a material requisition form 3) the materials requisition form is presented to the storeroom clerk 4) the storeroom clerk issues materials
4 Step process POHR
1) estimate the total amount of the allocation base that will be required for the next period's estimated level of production (denominator) 2) estimate the total fixed manufacturing overhead cost for the coming period and the variable manufacturing overhead cost per unit of the allocation base 3) use the cost formula to estimate the total manufacturing overhead cost (numerator) for the coming period: Y=a + bX Y=The estimated total manufacturing overhead cost a=The estimated total fixed manufacturing overhead cost b=The estimated variable manufacturing overhead cost per unit of the allocation base X=The estimated total amount of the allocation base 4) compute the predetermined overhead rate
What do we do with underapplied or overapplied overhead balances?
1) it can be closed out to Cost of Good Sold 2) it can be allocated b/w Work in Process, Finished Goods, and Cost of Goods Sold in proportion to the overhead applied during the current period that is in the ending balances of these accounts -Overapplied overhead is deducted from Cost of Goods Sold -Underapplied overhead is added to Cost of Goods Sold -We always assume that underapplied or overapplied overhead is closed out of Cost of Goods Sold
Step-variable costs ______. may include total salaried employee expense can be adjusted quickly as conditions change are generally treated as fixed costs
1, 2
Which of the following are differences between the traditional and contribution format to income statements? Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier. The traditional income statement is for internal use, while the contribution format income statement is for external use. Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior.
1, 3
Which of the following statements are true? 1. A direct cost can be easily and conveniently traced to a specific cost object. 2. An individual cost is either direct or indirect, regardless of the cost object. 3. A regional sales manager's salary is a direct cost of the regional office in which the sales manager works. 4. A direct cost is sometimes referred to as a common cost.
1, 3
Discretionary fixed costs include ______. 1. advertising 2. factory depreciation 3. management training programs 4. insurance expense
1, 3,
Within the relevant range, fixed costs ______. generally include rent and supervisor salaries per unit become progressively larger as the level of activity increases should not be expressed on a per unit basis when making decisions remain constant in total regardless of changes in activity
1, 3, 4
An activity base ______. 1. is sometimes called a cost driver 2. is a measure of whatever causes fixed costs to occur 3. is part of the organization where major operations are planned and carried out 4. measures whatever causes costs to vary
1, 4,
Which of the following statements are true? 1. Sales commissions are period costs. 2. The wages of assembly-line workers are period costs. 3. Period costs are expensed in the same period in which they are incurred. 4. Period costs are included as part of the cost of goods.
1. 3.
Which of the following is not a manufacturing cost
Advertising cost
Mickley Company's predetermined overhead rate is $19.00 per direct labor-hour and its direct labor wage rate is $14.00 per hour. The following information pertains to Job A-500: Direct materials $210 Direct labor $70 Required: 1. What is the total manufacturing cost assigned to Job A-500?
19 x
Within the relevant range of activity ______. 1. variable costs do not change in total, only per unit 2. costs and activity can be approximated by a straight line 3. fixed costs remain constant in total
2, 3
Which of the following statements are true? 1. Inventoriable costs are expensed in the period in which they are incurred. 2. Period costs are expensed when incurred. 3. All costs in a merchandising company are period costs. 4. Period costs do not flow through the inventory accounts.
2. Period costs are expensed when incurred. 4. Period costs do not flow through the inventory accounts.
Opportunity costs ______. are uncommon in decision making are part of traditional accounting records are benefits that are given up when selecting one alternative over another should be considered in decision making
3, 4
Which of the following statements are true? The fixed portion of a mixed cost represents the cost incurred for the actual consumption of a service. The equation for a straight-line makes it easy to calculate the total mixed cost for any activity level outside the relevant range. A mixed cost has a minimum cost of having a service available and ready for use. When mixed costs are represented by a straight-line, the steeper the slope, the higher the variable cost per unit.
3, 4
Tyare Corporation had the following inventory balances at the beginning and end of May: May 1 May 30 Raw materials $32,500 $44,000 Finished Goods $82,000 $80,000 Work in Process $20,500 $17,578 During May, $65,500 in raw materials (all direct materials) were drawn from inventory and used in production. The company's predetermined overhead rate was $12 per direct labor-hour, and it paid its direct labor workers $15 per hour. A total of 440 hours of direct labor time had been expended on the jobs in the beginning Work in Process inventory account. The ending Work in Process inventory account contained $7,750 of direct materials cost. The Corporation incurred $44,100 of actual manufacturing overhead cost during the month and applied $43,800 in manufacturing overhead cost. The actual direct labor-hours worked during May totaled:
3,650 hours Explanation Overhead applied = Predetermined overhead rate × Amount of the allocation base incurred Amount of the allocation base incurred = Overhead applied ÷ Predetermined overhead rate Amount of the allocation base incurred = $43,800 ÷ $12 per direct labor-hour = 3,650 direct labor-hours
What is the most common approach to product costing throughout the world?
Absorption costing
Process Costing formula
Average Unit Cost=Total Manufacturing Cost/Total Units Produced -Many products are produced in a continuous manufacturing process in which raw materials are put through a standardized production process so that each unit of the final product comes out identical to the next.; because each unit is the same, companies that make these products do not need to track the cost of each unit individually; instead, process costing breaks the production process down into its basic steps, or processes, and then averages the total cost of the process over the number of units produced
Which of the following are most likely fixed costs? Electricity to operate factory machines Factory insurance Factory rent Administrative salaries
B, C, D
Calculate cost of goods available for sale
Beginning finished goods inventory+Goods available for sale
what if the manufacturing overhead is overapplied?
COGS overstated net income understated to correct: decrease COGS by crediting COGS & debiting MOH
what if manufacturing overhead is underapplied?
COGS understated net income overstated to correct: increase COGS by debiting COGS & crediting MOH
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.
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.
Costs that are shared by multiple cost objects in a company are known as ______ costs.
Common
the function of keeping activities in accordance to plans
Controlling
Direct labor and overhead costs incurred to change raw materials into finished products are known as ______ costs
Conversion
Unit production cost
Cost expressed in terms of equivalent units of production
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
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 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
The accounts involved in closing underapplied or overapplied overhead using the simpler method are ______.
Cost of goods sold and Manufacturing overhead
Which of the following occurs when manufacturing overhead is applied to Work in Process? Debit to Cost of Goods Sold. Debit to Manufacturing Overhead. Credit to Work in Process. Credit to Manufacturing Overhead.
Credit to Manufacturing Overhead.
Harry Carey Hats shows the following data: Work in process, physical units April 1: 7,000 Completed and transferred out units: 72,000 Work in process, physical units, April 30: 8,000 Materials are added at the beginning of the process. Conversion costs are added evenly throughout the process. The incomplete units are 30% completed as to conversion costs. What is the total number of equivalent units for conversion costs during April using the weighted-average method? a) 83,000 b) 74,400 c) 21,600 d) 24,000
b) 74,400 Solve: .30% x 8,000 = 2,400 72,000 + 2,400 = 74,400.
True or false: Presenting fixed costs on an average per unit basis makes them look like they are variable costs. a. False b. True
b. True
The variable cost per unit using the high-low method is calculated as: a. y= a + bX b. change in cost divided by change in units (activity) c. total cost minus total fixed cost d. change in units (activity) divided by change in costs
b. change in cost divided by change in units (activity)
The high-low method: (select all that apply) a. generally provides an accurate estimate of true cost behavior during the normal periods b. is based on periods where the activity tends to be unusual c. is difficult to apply and requires a statistical software package d. uses only two data points
b. is based on periods where the activity tends to be unusual c. uses only two data points
A method that uses all the available data points to divide a mixed cost into its fixed and variable components is called: a. the contribution approach b. least-squares regression c. high-low d. the engineering approach
b. least-squares regression
Factory materials, such as cleaning supplies, that are not components of finished products are classified as: a. administrative costs b. manufacturing overhead c. direct materials d. period costs
b. manufacturing overhead
Predetermined overhead rates are ______. based on some secondary allocation measure generally calculated for each month of the year calculated using estimated costs and actual cost driver usage used to assign both direct and indirect manufacturing costs to jobs
based on some secondary allocation measure
Predetermined overhead rates are ______. used to assign both direct and indirect manufacturing costs to jobs based on some secondary allocation measure generally calculated for each month of the year calculated using estimated costs and actual cost driver usage
based on some secondary allocation measure
How individual cost react to changes in activity level is referred to as cost ____.
behavior
Manufacturing overhead is underapplied if a) the predetermined rate equals the actual rate b) actual overhead equals applied overhead c) actual overhead is greater than applied overhead d) acutal overhead is less than applied
c) actual overhead is greater than applied
The cost reconciliation schedule shows that the total a) costs accounted for equal the units accounted for b) units to be accounted for equal the total units accounted for c) costs accounted for equal the total costs to be accounted for d) units to be accounted for equal the total costs accounted for
c) costs accounted for equal the total costs to be accounted for.
Which of the following best describes the journal entry to record the withdrawal of raw materials from the storeroom for use as direct and indirect materials in production? a. Debit Work in Process and credit Raw Materials. b. Debit Work in Process, debit Manufacturing Overhead, and credit Direct Materials. c. Debit Work in Process, debit Manufacturing Overhead, and credit Raw Materials. d. Debit Manufacturing Overhead and credit Raw Materials.
c. Debit Work in Process, debit Manufacturing Overhead, and credit Raw Materials.
Which of the following best describes the journal entry to record the use of direct and indirect labor in production? a. Debit Work in Process and credit Salaries and Wages Payable. b. Debit Work in Process, debit Manufacturing Overhead, and credit Direct Labor. c. Debit Work in Process, debit Manufacturing Overhead, and credit Salaries and Wages Payable. d. Debit Manufacturing Overhead and credit Salaries and Wages Payable.
c. Debit Work in Process, debit Manufacturing Overhead, and credit Salaries and Wages Payable.
When using the high-low method, if the high or low levels of cost do not match the high or low levels of activity: a. choose the period with the highest and lowerst level of cost and their associated activities. b. skip that period and move to the next highest or lowest level where cost and activity match. c. choose the period with the highest and lowest level of activity and their associated costs.
c. choose the periods with the highest and lowest level of activity and their associated costs.
Direct materials and direct labor are both: a. selling and administrative costs b. period costs c. manufacturing costs d. nonmanufacturing costs
c. manufacturing costs
During June, Buttrey Corporation incurred $77,000 of direct labor costs and $17,000 of indirect labor costs. The journal entry to record the accrual of these wages would include a:
debit to Work in Process of $77,000.
Actual manufacturing overhead costs are accumulated on the ______ side of the Manufacturing Overhead account and applied costs are shown on the ______ side. credit, debit debit, credit
debit, credit
If the Manufacturing Overhead account has a ______ balance at the end of the period that indicates that overhead was underapplied and Cost of Goods Sold must be ______.
debit, increased
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.
which is NOT an example of a typical external failure cost? debugging system errors defective product liability warranty repairs product recalls
debugging system errors (this is an internal failure cost)
Under the indirect method, which of the following is added to net income in operating activities? a) Depreciation expense b) increase in accounts receivable c) decrease in accounts payable d) gain on sale of equipment
depreciation expense
which of the following are NOT internal failure costs?
depreciation of test equipment product recalls
A journal entry that debits Depreciation expense and credits Accumulated depreciation records ______.
depreciation on office equipment
The first step in assigning manufacturing overhead costs using a predetermined overhead rate is to ______. calculate the predetermined overhead rate determine the cost driver assign manufacturing overhead
determine the cost driver
Underapplied or overapplied overhead is the ______. sum of overhead applied to jobs and actual overhead same as actual overhead difference between overhead applied to jobs and actual overhead total overhead applied to work in process
difference between overhead applied to jobs and actual overhead
Underapplied or overapplied overhead is the ______.
difference between overhead applied to work in process and actual overhead
The difference in costs between two alternatives is called a(n) ______ cost.
differential
a change in revenue between 2 alternatives is known as ___ revenue or incremental revenue
differential
Cost that can easily and conveniently traced to a specific product are called ____ costs. a. indirect b. direct c. period
direct
Fantastic Furniture makes custom order couches. The material used to make a couch is a ___ cost of the customer placing an order
direct
Labor costs that are easily traced to a job are called ______ laor costs
direct
Materials that become an important component of the finished product and their cost can be easily and conveniently traced to the finished product are ____ materials.
direct
The journal entry that debits Work in Process and Manufacturing overhead and credits Salaries and Wages Payable is recording ______.
direct and indirect labor costs
In automobile manufacturing plant, the assembly-line workers are considered to be ____ ____.
direct labor
Labor costs that can be easily and conveniently traced to specific products are ___ costs
direct labor
Luthan Company uses a predetermined overhead rate of $22.90 per direct labor-hour. This predetermined rate was based on a cost formula that estimated $274,800 of total manufacturing overhead for an estimated activity level of 12,000 direct labor-hours. The company incurred actual total manufacturing overhead costs of $267,000 and 11,800 total direct labor-hours during the period. Required: Determine the amount of manufacturing overhead that would have been applied to all jobs during the period.
manufacturing overhead applied = predetermined overhead rate x actual activity = $22.90 x 11800 DLH
Materials used in a factory that are not an integral part of the final product, such as cleaning supplies, should be classified as:
manufacturing overhead.
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
Companies that use job-order costing make ______.
many different products
The cost of producing one more unit is the ______ cost.
marginal
the cost of producing one more unit is the ___ cost
marginal
The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is known as the ___ principle
matching
Direct materials costs are recorded on the job cost sheet when the ______.
materials are issued to the job
The type and quantity of materials to be drawn from the storeroom and the job that will be charged for the materials is specified on the ______
materials requisition form
The type and quantity of materials to be drawn from the storeroom and the job that will be charged for the materials is specified on the ______.
materials requisition form
source document which authroizes the issuance of raw materials into production
materials requisition slip
An allocation base is a(n) ______.
measure of activity used to assign overhead costs to products and services
An allocation base is a(n) ______. measure of activity used to assign overhead costs to products and services activity that causes overhead costs to change measure used to assign all manufacturing costs to products and services
measure of activity used to assign overhead costs to products and services
A cost than contains both variable and fixed costs elements is called a(n) ______ cost
mixed
Gross margin minus selling and administrative expenses equals ______.
net operating income
Gross profit minus selling and administrative expenses equals ______. net operating assets cost of goods sold net operating income cost of goods manufactured
net operating income
Gross profit minus selling and administrative expenses equals ______. net operating income cost of goods sold net operating assets cost of goods manufactured
net operating income
If a company increases its selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit, the break-even point in units will:
not change
Applied manufacturing overhead will most likely ______ actual manufacturing overhead.
not equal
Ending Work in Process Inventory represents the cost of goods ______. not yet completed not yet sold to be started on next period
not yet completed
When labor costs are incurred, _________ are added directly to the Work in Process account.
only direct labor costs
cost objects include
organizational subunits customers anything for which cost data is desired
A credit balance in the Manufacturing Overhead account means overhead was
overapplied
A credit balance in the Manufacturing Overhead account means overhead was _____.
overapplied
If there is a credit balance in the Manufacturing Overhead account after overhead have been applied to all jobs it means overhead was__
overapplied
Nonmanufacturing costs incurred during a period are treated as ______. liabilities assets product costs period expenses
period expenses
Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 31,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $534,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. Harris's actual manufacturing overhead for the year was $687,513 and its actual total direct labor was 31,500 hours.
predetermined overhead = total estimated overhead costs (machine hours, direct labor) / estimated allocation base predetermined overhead = $534000 + (31000 DLH x $3) predetermined overhead = $20.23/ DLH
The formula for applying overhead to a specific job is ______.
predetermined overhead rate × amount of allocation base incurred by job
A normal costing system applies overhead by job by multiplying a(n) ______ ______ rate by the _______ amount of the allocation base incurred by the job.
predetermined overhead, actual
costs incurred in an attempt to lower the number of products manufactured with defects are ___ costs
prevention
Appropriate when products are very similar and produced in large quantity
process cost system
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
Direct materials, direct labor, and manufacturing overhead are all ___ costs
product
A journal entry that debits Raw Materials and credits Accounts Payable is recording the ______.
purchase of materials
Small groups of employees that meet regularly to discuss ways to improve quality are referred to as
quality circles
the materials that go into the final product are called ___ materials
raw
All materials that will be used in future production are first recorded in the __ __ Inventory account.
raw materials
Any purchased materials that will go into the finished product are first recorded in the ? inventory
raw materials
Any purchased materials that will go into the finished product are first recorded in the ______ _____ inventory account.
raw materials
prior to being recorded on the income statement, manufacturers' product costs flow through (3):
raw materials work in progress finished goods
When materials are purchased they are first recorded in the ______ account. Raw Materials Inventory Work in Process Inventory Finished Goods Inventory Manufacturing Overhead
raw materials inventory
When preparing a direct materials budget, the required purchases of raw materials in units equals:
raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials.
A journal entry that debits Manufacturing overhead and credits Property taxes payable records the ______.
recognition of accrued property taxes
The level of activity within which variable and fixed cost assumptions are valid is known as the ____ ____.
relevant range
the level of activity within which variable and fixed cost assumptions are valid is known as the ____
relevant range
Variable costs ______.
remain constant per unit and vary in total.
Total manufacturing overhead costs tend to:
remain fairly constant
A journal entry that debits Manufacturing overhead and credits Accounts payable could be made to record ______.
rent expense on factory equipment factory utilities expense
Income statement
sales LESS COGS EQUALS gross profit LESS selling cost LESS administrative cost EQUALS net income
All of the following are product costs except ________. manufacturing overhead costs raw materials sales commissions direct labor
sales commissions
contribution margin is
sales revenue minus variable costs
High-low or least squares regression analysis should only be done if a(n) ____ plot depicts linear cost behavior.
scattergraph
Net operating income is calculated by subtracting ______ from ______.
selling and administrative expenses; gross margin
A journal entry that debits Advertising expense and credits Cash would record the incurrence of a ______.
selling cost