ACCT 212 Chapter 3: Job Order Costing: Cost Flows and External Reporting

For each of the five transactions described below, use the dropdown boxes to indicate which account should be debited and which account be credited. 1) Direct materials are issued into production for a specific job 2) Salary of the Production Supervisor is payable 3) Lubricating oil, waste cotton, and solder are used in the factory 4) The wages of direct laborers who worked on a particular job are payable 5) Manufacturing overhead is applied to jobs using a predetermined overhead rate

1) Debit: Work in Process; Credit: Raw Materials 2) Debit: Manufacturing Overhead; Credit Salaries and Wages Payable 3) Debit: Manufacturing Overhead; Credit: Raw Materials 4) Debit: Work in Process; Credit: Salaries and Wages Payable 5) Debit: Work in Process; Credit: Manufacturing Overhead

The predetermined overhead rate is $50 per machine-hour, underapplied overhead is $5,000, and the actual amount of machine-hours is 2,000. What is the actual amount of total manufacturing overhead incurred during the period? a) $105,000 b) $95,000 c) $150,000 d) $110,000

A

Which of the following statements is true? (You may select more than one answer.) a) Direct labor costs are debited to Work in Process and indirect labor costs are debited to Manufacturing Overhead b) Raw material purchases are immediately debited to the Raw Materials account and recorded as an expense on the income statement c) Administrative expenses are debited to the Manufacturing Overhead clearing account d) Assume a company sells finished goods to a customer for $200 on credit. To record this transaction, the company would debit Accounts Receivable for $200 and credit Finished Goods Inventory for $200

A

Which of the following statements is true with respect to the Manufacturing Overhead clearing account? (You may select more than one answer.) a) Actual manufacturing overhead costs are debited to Manufacturing Overhead b) Applied manufacturing overhead costs are credited to Manufacturing Overhead c) If the Manufacturing Overhead account has a debit balance at the end of an accounting period, it means that the actual overhead costs incurred throughout the period were less than the overhead applied to Work in Process during the period d) The overhead cost applied to Work in Process during a period will usually equal the actual overhead cost incurred during the period

A and B

Overapplied overhead

A credit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost applied to Work in Process is greater than the amount of overhead cost actually incurred during a period

Underapplied overhead

A debit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost applied to Work in Process is less than the amount of overhead cost actually incurred during a period

Schedule of Cost of Goods Sold

A schedule that contains three elements of product costs—direct materials, direct labor, and manufacturing overhead—and that 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.

Schedule of Cost of Goods Manufactured

A schedule that contains three elements of product costs—direct materials, direct labor, and manufacturing overhead—and that summarizes the portions of those costs that remain in ending Work in Process inventory and that are transferred out of Work in Process into Finished Goods.

Raw Materials

Any materials that go into the final product.

Which of the following statements is false with respect to the schedule of cost of goods manufactured? (You may select more than one answer.) a) The beginning raw materials inventory plus raw materials purchases minus ending raw materials inventory equals the raw materials used in production b) Direct labor costs and actual manufacturing overhead costs are included in the schedule of cost of goods manufactured c) The cost of goods manufactured represents the amount that will be debited to Cost of Goods Sold during an accounting period d) If the finished goods inventory increases during an accounting period, it will decrease the cost of goods manufactured

B, C, and D

The estimated total manufacturing overhead cost is $200,000. The estimated total amount of the allocation base is 40,000 direct labor-hours. The actual total manufacturing overhead cost for the period is $220,000 and the actual direct labor-hours worked on all jobs during the period is 41,000 hours. The total underapplied (overapplied) overhead for the period is: a) $20,000 underapplied b) $20,000 overapplied c) $15,000 underapplied d) $15,000 overapplied

C

Cost of Goods Manufactured

The manufacturing costs associated with units of product that were finished during the period.

Work in Process

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

Finished Goods

Units of product that have been completed but not yet sold to customers.

Zimmer, Incorporated 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? a) $90,000 b) $120,000 c) $140,000 d) $150,000

a) $90,000

The following information is available for the current year ending December 31: Manufacturing overhead applied: $150,000 Actual amount of manufacturing overhead costs: $120,000 What is the balance of the Manufacturing Overhead account and is overhead underapplied or overapplied at the end of the year? a) Credit of $30,000, overapplied b) Credit of $30,000, underapplied c) Debit of $30,000, overapplied d) Debit of $30,000, underapplied

a) Credit of $30,000, overapplied

Which of the following occurs when finished jobs are shipped to customers? a) Debit to Cost of Goods Sold b) Debit to Finished Goods c) Debit to Work in Process d) Credit to Raw Materials

a) Debit to Cost of Goods Sold

The following information is available for the current year ending December 31: Manufacturing overhead applied: $150,000 Actual amount of manufacturing overhead costs: 120,000 Amount of overhead applied during the year that is in: Work in Process: $37,500 25% Finished Goods: 52,500 35% Cost of Goods Sold: 60,000 40% Total overhead applied: $150,000 100% If the Manufacturing Overhead account is closed to Cost of Goods Sold, the related entry will ______. a) decrease the cost of goods sold by $30,000 b) increase the cost of goods sold by $30,000 c) decrease the cost of goods sold by $150,000 d) increase the cost of goods sold by $150,000 If the Manufacturing Overhead account is closed proportionally to Work in Process, Finished Goods, and Cost of Goods Sold, the related entry will include a _______. a) debit to Cost of Goods Sold for $12,000 b) credit to Cost of Goods Sold for $12,000 c) credit to Cost of Goods Sold for $30,000 d) debit to Work in Process for $7,500

a) decrease the cost of goods sold by $30,000 b) credit to Cost of Goods Sold for $12,000

When companies incur selling and administrative costs, those costs _______. a) should be treated as product costs b) do not flow through the three inventory accounts c) should flow through the Manufacturing Overhead account d) should flow through the Work in Process account

b) do not flow through the three inventory accounts

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 added to production that would appear in the Schedule of Cost of Goods Manufactured for October? a) $90,000 b) $130,000 c) $135,000 d) $175,000

c) $135,000

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

Which of the following statements about manufacturing overhead costs is not correct? a) All manufacturing costs other than direct materials and direct labor are classified as manufacturing overhead costs b) All manufacturing costs other than direct materials and direct labor are entered directly into Manufacturing Overhead account c) Depreciation on factory equipment is recorded with a debit to Depreciation Expense d) Manufacturing overhead costs are recorded with a debit to Manufacturing Overhead account as they are incurred

c) Depreciation on factory equipment is recorded with a debit to Depreciation Expense

All of the following are product costs except _______. a) manufacturing overhead costs b) raw materials c) sales commissions d) direct labor

c) sales commissions

Which of the following occurs when manufacturing overhead is applied to Work in Process? a) Debit to Cost of Goods Sold b) Debit to Manufacturing Overhead c) Credit to Work in Process d) Credit to Manufacturing Overhead

d) Credit to Manufacturing Overhead

Which of the following occurs when a job has been completed and transferred to the finished goods warehouse? a) Debit to Cost of Goods Manufactured b) Debit to Cost of Goods Sold c) Credit to Finished Goods d) Credit to Work in Process

d) Credit to Work in Process