Accounting Exam #1

Similarities between job-order costing and process costing include the _____. way in which unit costs are calculated manufacturing accounts used flow of costs through the manufacturing accounts basic purpose to assign and compute product costs

manufacturing accounts used flow of costs through the manufacturing accounts basic purpose to assign and compute product costs

The two most commonly used methods for determining unit product costs are _____ - _____ costing and _____ costing.

Job - Order Process

Cost of Goods Manufactured (COGM)

Total Manufacturing Costs (RM+DL+MOH) + Beginning WIP Inventory- Ending WIP Inventory

T/F Process costing is used when a company produces a continuous flow of units that are homogeneous

True

T/F The flow of costs through manufacturing accounts is basically the same for job-order costing and process costing.

True

Overhead is overapplied if ______. adjusted cost of goods sold is more than unadjusted cost of goods sold 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

actual overhead is less than applied overhead

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

as they are incurred

finished goods costs

consists of completed units of product that have not yet been sold to customers

work in process

consists of units of product that are only partially complete and will require further work before they are ready for sale to the customer

The allocation base is a _____ _____ that causes overhead

cost driver

Whether a cost is direct or indirect depends on the _____ _____

cost object EX: -> a cost that would be indirect for a unit of product may be direct for processing department

cost of goods available for sale

cost of goods manufactured + beginning finished goods inventory

Process costing accumulates costs by _____

department, operation, or process

A journal entry that debits Manufacturing overhead and credits Accounts payable would not be used to record _____. direct labor costs miscellaneous factory overhead costs factory utilities costs rent on factory equipment

direct labor costs

The allocation base in the PHR must ____ the overhead cost to improve job cost accuracy

drive

Unadjusted cost of goods sold is calculated by subtracting: beginning finished goods inventory from cost of goods. manufactured ending finished goods inventory from goods available for sale. ending finished goods inventory from cost of goods manufactured. beginning finished goods inventory from goods available for sale.

ending finished goods inventory from goods available for sale.

raw materials

includes any materials that go into the final product

The two common methods for determining unit product costs are ______ costing.

job-order and process

The difference between overhead applied to work in process and actual overhead is ______. cost of goods manufactured ending work in process inventory overapplied or underapplied overhead adjusted cost of goods sold

overapplied or underapplied overhead

Selling and administrative costs incurred are treated as ______. assets product costs period expenses liabilities

period expenses

Many companies use a single predetermined _____ _____ _____ to allocate all manufacturing overhead costs to jobs based on the usage of direct-labor hours

plant-wide overhead rate

Each department has a separate Work in Process account when using _____ costing.

process

Work is performed on products, and materials, labor, or overhead costs are added to products in a(n) _____ department

processing

Product Costs include _____, ______, and _____

raw materials work in process finished gods costs

A journal entry that debits Manufacturing overhead and credits Accounts payable could be made to record Blank______. the purchase of indirect materials rent expense on factory equipment rent on the administrative office factory utilities expense

rent expense on factory equipment factory utilities expense

Period Costs include _____ and _____ ______

selling and administrative costs

Any remaining balance in the Manufacturing Overhead account, such as PearCo's $30,000 of overapplied overhead, is disposed of in one of two ways:

1 - It can be closed to Cost of Goods Sold. 2 - It can be closed proportionally to Work in Process, Finished Goods, and Cost of Goods Sold.

The journal entry to record selling and administrative salaries debits ______. ~ a liability account and credits manufacturing overhead ~ an expense account and credits Cash or a liability ~ a liability account and credits an expense account ~ manufacturing overhead and credits cash or a liability

an expense account and credits Cash or a liability

When is the predetermined overhead rate (POHR) used to apply overhead to jobs determined?

before the period begins

Job - Order Costing

costing system that traces and applies manufacturing costs to jobs

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

manufactured

A credit balance in the Manufacturing Overhead account of Y dollars means that the overhead is _____ by of Y dollars

overapplied

A journal entry that debits Manufacturing overhead and credits Accounts payable could be made to record ______. rent on the administrative office the purchase of indirect materials rent expense on factory equipment factory utilities expense

rent expense on factory equipment factory utilities expense

Net operating income is calculated by subtracting ______ from ______. selling and administrative expenses; gross margin cost of goods sold; gross margin selling and administrative expenses; sales cost of goods sold; sales

selling and administrative expenses; gross margin

Indirect Costs

~ costs that can NOT be easily and conveniently traced to a unit of product or other cost object

Direct Costs

~ costs that can be easily and conveniently traced to a unit of product or other cost object

A journal entry debiting Salaries expense and crediting Salaries and wages payable could be recording ______. maintenance salaries factory supervisors' salaries assembly workers' wages administrative salaries

administrative salaries

The journal entry to record material cost in the second department includes a _____ (debit/credit) to Work in Process-Department #2.

debit

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

Manufacturing overhead consists of all ______. manufacturing costs indirect costs costs other than direct labor and direct materials manufacturing costs other than direct labor and direct materials

manufacturing costs other than direct labor and direct materials

Examples of Indirect Costs

manufacturing overhead

The schedule of cost of goods _____ summarizes the portions of those costs that remain in ending Finished Goods inventory and that are transferred out of Finished Goods into Cost of Goods Sold.

sold

When only a portion of the units involved in a job are sold, the ______. cost is held in the finished goods account until all units in the job are sold unit product cost is used to calculate the amount transferred from finished goods to cost of goods sold entire cost of the job is transferred from finished goods to cost of goods sold unsold units are transferred to another job

unit product cost is used to calculate the amount transferred from finished goods to cost of goods sold

Product Costs

~ includes all the costs involved in making or acquiring a product ~ "attach" to a unit of product as it is purchased or manufactured and they stay attached to each unit of product as long as the unit remains in inventory awaiting sale

Manufacturing overhead costs include Blank______. ~ direct materials ~ the factory supervisor's salary ~ the CEO's salary ~ office equipment depreciation ~ factory insurance

~ the factory supervisor's salary ~ factory insurance

what are the imperfections of using a plant-wide overhead rate?

1 - It is often overly-simplistic and incorrect to assume that direct-labor hours is a company's only manufacturing overhead cost driver. 2 - If more than one overhead cost driver can be identified, job cost accuracy is improved by using multiple predetermined overhead rates.

When calculating the cost of direct materials on the schedule of cost of goods manufactured, the cost of indirect materials is ______. added to raw materials used in production subtracted from raw materials used in production subtracted from beginning Raw materials inventory added to beginning Raw materials inventory

subtracted from raw materials used in production

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 $80,000 $200,000 $600,000

$120,000

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. $228,000 $240,000 $258,000 $252,000

$228,000

Luver Corporation's Gross margin is $100,000, Cost of goods sold equals $70,000, and Selling and administrative expenses total $45,000. Net operating income is ______. $55,000 $25,000 $(15,000) $30,000

$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. $130,000 $70,000 $74,000 $102,000

$74,000

Which of the following costs are charged directly to the income statement? Administrative costs Direct materials Manufacturing overhead Selling costs Direct labor

Administrative costs Selling costs

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

Always the credit side

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

Always the debit side

Product Cost movement

Balance Sheet (inventory) ---> Sale ---> Income Statement (COGS)

What methods can be used to dispose of underapplied or overapplied manufacturing overhead? Close it to Work in process. Close it to Cost of goods sold. Allocate it to Raw materials, Work in process, and Finished goods. Closed proportionally to Work in process, Finished goods, and Cost of goods sold. Close it to Finished goods.

Close it to Cost of goods sold. Closed proportionally to Work in process, Finished goods, and Cost of goods sold.

Cost of Goods Sold (COGS)

Cost of Goods Available for Sale - ending finished goods inventory

Examples of Direct Costs

Direct materials and Direct Labor

Behavior of Fixed Cost (within relevant range) ***Per Unit***

Fixed costs per unit DECREASES as the activity level RISES and INCREASES as the activity level FALLS

Applying Manufacturing Overhead Costs to Work In Process

If actual and applied manufacturing overhead are not equal, a year - end adjustment is required

Period Costs movements

Income Statement (expense)

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 Blank______. Manufacturing overhead $8,000 and credit Accounts payable $8,000 Accounts payable $8,000 and credit Manufacturing overhead $8,000 Work in process $8,000 and credit Accounts payable $8,000 Accounts payable $8,000 and credit Work in process $8,000

Manufacturing overhead $8,000 and credit Accounts payable $8,000

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

Nonmanufacturing costs

Cost Classifications for Preparing Financial Statements

Product and Period Costs

Which of the following is a key difference between process and job-order costing? Under process costing, it makes no sense to try to identify materials, labor and overhead costs with a particular customer order. Job-order costing systems compute unit costs by department, and process costing systems compute unit costs by job. Job-order costing is used for indistinguishable products, and process costing is used for different jobs that have unique production requirements. Process costing accumulates costs by order, and job-order costing accumulates costs by department.

Under process costing, it makes no sense to try to identify materials, labor and overhead costs with a particular customer order.

Behavior of Variable Cost (within relevant range) ***Per Unit***

Variable costs per unit remains constant

A product requires processing in two departments, A and B. Products start in Dept. A. Costs transferred out of Dept. A will be transferred to _____. Finished Goods Inventory - Dept. B Work in Process - Dept. B Cost of Goods Sold Manufacturing Overhead

Work in Process - Dept. B

When using process costing, each processing department has a separate _____ ______ _____ account

Work in process

cost driver

a factor that causes overhead costs

The cost of goods manufactured for a period is the ______. sum of all jobs in Finished goods account at the end of the period average value of the Work in process account sum of all amounts transferred between the Work in process account and the Finished goods account during that period value of all jobs transferred from Finished goods to Cost of goods sold

sum of all amounts transferred between the Work in process account and the Finished goods account during that period

Industries/products more suitable for process costing than job-order costing include: sunscreen. paper towels. flour. shipbuilding.

sunscreen. paper towels. flour.

A debit balance in Manufacturing overhead means overhead was _____

underapplied

A processing department is an organization unit ____ __.

where work is performed on a product, and materials, labor or overhead are added

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

work in process

Which of the statements regarding closing out over or underapplied overhead is correct? Allocating is simpler, and closing to Cost of goods sold is more accurate. Both methods are equally simple. Both methods are equally accurate. Closing to Cost of goods sold is simpler, and allocating is more accurate.

Closing to Cost of goods sold is simpler, and allocating is more accurate.

Transfers from Work in Process - Department A to Work in Process Department - B

The transferred-in costs from Department A are added to manufacturing costs incurred in Department B

Behavior of Variable Cost (within relevant range) ***In Total***

Total Variable Cost INCREASE and DECREASE in proportion to changes in the ACTIVITY level

Behavior of Fixed Cost (within relevant range) ***In Total***

Total fixed cost is NOT affected by changes in the activity level within the relevant range

T/F Job - Order Costing System often use allocation bases that do NOT reflect how jobs actually use overhead resources

True

T/F The transfer of costs from one inventory account to the next parallels the physical transfer of goods from one inventory to the next.

True

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 ______. Work in process $8,000 and credit Accounts payable $8,000 Manufacturing overhead $8,000 and credit Accounts payable $8,000 Accounts payable $8,000 and credit Manufacturing overhead $8,000 Accounts payable $8,000 and credit Work in process $8,000

Manufacturing overhead $8,000 and credit Accounts payable $8,000

The journal entry to record accrued property taxes for a factory building debits ______. Work in process and credits Manufacturing overhead Work in process and credits Property taxes payable Manufacturing overhead and credits Property taxes payable Manufacturing overhead and credits Accounts payable

Manufacturing overhead and credits Property taxes payable

Overhead is underapplied if ______. adjusted cost of goods sold is less than unadjusted cost of goods sold 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

actual overhead is more than applied overhead

When labor costs are incurred, Blank______ labor costs are added directly to the Work in Process account. ~ only indirect ~ only direct ~ both direct and indirect

only direct