Managerial Accounting Chapter 3

Job #4260 consisted of 1,000 units at a total cost of $200,000. The cost transferred to Cost of Goods Sold for sale of 600 units is

$120000 (200000/1000 = x / 600 =>>> x = 1200000)

Which of the following are used to calculate Cost of goods available for sale on the schedule of cost of goods sold?

Beginning finished goods inventory Cost of goods manufactured

When the allocation method is used to close out the underapplied or overapplied balance remaining in manufacturing overhead, which accounts are affected?

Finished goods cost of goods sold work in process

Which account is credited when manufacturing overhead is applied?

Manufacturing overhead

True or false: Manufacturing overhead costs consist of all manufacturing costs other than direct materials and direct labor

True

True or false: Raw materials inventory represents the cost of materials not yet used in production

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

To calculate total manufacturing costs, add direct materials, direct labor and:

applied manufacturing overhead

Actual manufacturing overhead costs are recorded in the manufacturing overhead account

as they are incurred

Raw materials is a(n) ___ account

asset

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

balance sheet; income statement

Overhead is underapplied if

actual overhead is more than applied overhead

Overapplied or underapplied overhead is the difference between

actual total overhead and total overhead applied

A journal entry debiting salaries expense and crediting salaries and wages payable could record

administrative salaries

Regarding closing out over or underapplied overhead,

closing to cost of goods sold is simpler, and allocating is more accurate

Finished goods

consist of completed, unsold goods

The amount transferred from Work in Process to Finished Goods is:

cost of goods manufactured

The ___ side of the manufacturing overhead account is always used to record manufacturing overhead applied to production and the ____ side is always used to record the actual manufacturing cost incurred

credit; debit

The journal entry to record general selling and administrative costs

debit an expense account credit cash or a liability

The journal entry to record depreciation on office equipment

debit depreciation expense credit accumulated depreciation

the journal entry to record depreciation on factory equipment

debit manufacturing overhead credit accumulated depreciation

A journal entry that debits manufacturing overhead and credits accumulated depreciation records

depreciation on factory equipment

A journal entry that debits manufacturing overhead and credits accounts payable could not record the incurrence of

direct labor costs

Gross margin minus selling and administrative expenses equals

net operating income

Applied manufacturing overhead will most likely ___ actual manufacturing overhead

not equal

A credit balance in the Manufacturing overhead account means overhead was ____

overapplied

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

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

A journal entry that debits raw materials and credits accounts payable is recording the

purchase of materials

Any purchased materials that will go into the finished product are first recorded in the ___ ____ inventory account

raw materials

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

recognition of accrued property taxes

A journal entry that debits manufacturing overhead and credits accounts payable could be made to record:

rent expense on factory equipment factory utilities expense

A journal entry that debits advertising expense and credits cash would record the incurrence of a

selling cost

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

Calculate total manufacturing costs Direct materials 40000 Direct labor 100000 Manufacturing overhead applied 120000 Beginning work in process inventory 30000 Ending work in process inventory 12000

total manufacturing costs = 40000 + 100000 + 120000 = $260000

What costs are charged directly to the income statement?

Administrative costs Selling costs

True or false: When materials are purchased they are recorded in the raw materials inventory account

True

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

always on the debit side

Unadjusted cost of goods sold is calculated by subtracting

ending finished goods inventory from goods available for sale

The difference between overhead applied to work in process and actual overhead is:

overapplied or underapplied overhead

A debit balance in manufacturing overhead means overhead was

underapplied

Which of the following are used to calculate Cost of Goods Available for Sale on the schedule of costs of goods sold?

Cost of goods manufactured Beginning finished goods inventory

A company incurred $10,000 in direct labor costs and $8,000 in indirect labor costs. The journal entry to record the transaction:

debits Work in process $10,000 and Manufacturing overhead $8,000 and credits Salaries and wages payable $18,000

Given: Cost of goods manufactured of $234,000; Beginning finished goods inventory of $18,000; Ending finished goods inventory of $24,000; Calculate unadjusted cost of goods sold

$228,000 unadjusted cost of goods sold = 18000 + 234000 -24000 = 228000

Given: Cost of goods manufactured $410,000 beginning finished goods inventory of $110,000 ending finished goods inventory of $125,000 Calculate unadjusted cost of goods sold

$395,000 unadjusted cost of goods sold = 110000 + 410000 - 125000 = 395000

Unadjusted cost of goods sold

= beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory

What accounts are debited when goods are sold on account?

Cost of goods sold and Accounts receivable

What two accounts are involved when underapplied or overapplied overhead is closed out using the simpler method?

Cost of goods sold and Manufacturing overhead

The period ends

Manufacturing overhead is closed

Overhead is applied to Work in Process

Manufacturing overhead is credited

Actual overhead is incurred

Manufacturing overhead is debited

Which of the following would not be charged to the Manufacturing overhead account? Depreciation on factory equipment Supervisor's salary Nonmanufacturing costs Factory rent

Nonmanufacturing costs

To calculate a predetermined manufacturing overhead rate

estimated manufacturing overhead / estimated allocation base

a journal entry that debits manufacturing overhead and credits prepaid insurance records the

expiration of prepaid factory insurance

What costs are classified as manufacturing overhead?

factory maintenance wages factory rent factory utilities

A journal entry that debits manufacturing overhead and credits accounts payable could be made to record

factory utilities expense rent expense on factory equipment

Completed units that have not been sold are found in ___ ___ inventory

finished goods

When a job is completed, which account is debited?

finished goods

When jobs are sold their costs are transferred out of

finished goods

Sales minus cost of goods sold equals

gross margin

Net operating income is equal to

gross margin - selling and administrative expenses

Selling and administrative costs first appear on the

income statement

Labor costs charged to Manufacturing Overhead represent:

indirect labor costs

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

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

work in process

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 $______________.

$51,000 the costs of goods manufactured is the cost of jobs completed during the period -> jobs 23A and 45B

Given the following, calculate the cost of goods available for sale: Cost of goods manufactured of $410,000 Beginning Finished good inventory of $110,000 Ending Finished goods inventory of $125,000

$520,000 (Goods available for sale = Cost of goods manufactured + beginning finished goods inventory = $410,000 + $110,000 = $520,000)

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

True or false: Actual overhead costs appear in the Work in Process account but not on the job cost sheet

False

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

debit manufacturing overhead $20000 and credit accumulated depreciation $20000

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 (450000 + 30000 = 480000)

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 complete 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?

$65000 (add all manufacturing costs, add beginning work in process, and subtract ending work in process)

given 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

25000 underapplied 500000/200000 = 2.5 2.5 * 260000 = $650,000 applied actual overhead = 625,000 thus the difference is 25000 and it is underapplied

To calculate cost of goods manufactured

add beginning work in process to total manufacturing costs, then deduct ending work in process

To calculate total manufacturing costs

add direct materials, direct labor and applied manufacturing overhead

To calculate direct materials on the schedule of costs of goods manufactured:

add purchases to beginning raw materials inventory and subtract ending raw materials inventory and indirect materials used

The journal entry to record $1,000 in expired prepaid insurance on factory equipment is

debit manufacturing overhead 1000 credit prepaid insurance 1000

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 credit raw materials $70,000

The journal entry to record expired prepaid factory insurance

debits manufacturing overhead and credits prepaid insurance