Chapter 3 - Job-Order Costing: Cost Flows and External Reporting

The cost of a completed job consists of:

actual direct materials cost of the job, actual direct labor cost of the job, and the manufacturing overhead cost applied to the job

How do you adjust unadjusted cost of goods sold?

add underapplied overhead or subtract overapplied overhead

raw materials

any materials that go into the final product

equation for unadjusted cost of goods sold

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

equation for cost of goods manufactured

beginning work in process inventory + total manufacturing costs added to production - ending work in process inventory

finished goods

consist 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

cost of goods manufactured

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

Do period costs flow through inventories on the balance sheet?

no

calculation for gross margin

sales - cost of goods sold

What is recorded on the debit side of the Manufacturing Overhead account?

the actual manufacturing overhead costs, such as indirect materials, that are incurred during the period

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

the cost of goods manufactured

The sum of amounts transferred between Work in Process and Finished goods accounts represents:

the cost of goods manufactured

Selling and administrative costs (period expenses) are charged to:

the income statement

What is recorded on the credit side of the Manufacturing Overhead account?

the manufacturing overhead applied to work in process

(T/F) Actual overhead costs do not appear on the job cost sheet nor do they appear in the Work in Process account.

true

As jobs are sold, their costs are transferred from Finished Goods to:

Cost of Goods Sold

Depreciation on office equipment is debited to _ and credited to _

Depreciation Expense, Accumulated Depreciation

When jobs are complete, their costs are transferred from Work in Process to ...

Finished Goods inventory

Depreciation on factory equipment is debited to _ and credited to _

Manufacturing Overhead, Accumulated Depreciation

three inventory accounts on the balance sheet through which product costs flow

Raw Materials Inventory, Work in Process Inventory, Finished Goods Inventory

When Manufacturing Overhead is credited, _ is debited.

Work in Process

When raw materials are used in production as direct materials, their costs are transferred to:

Work in Process inventory

schedule of cost of goods sold

contains three elements of product costs - direct materials, direct labor, and manufacturing overhead - and summarizes the portions of these costs that remain in ending Finished Goods inventory and are transferrd out of Finished Goods into Cost of Goods Sold

schedule of cost of goods manufactured

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

equation for total manufacturing costs added to production

direct materials used in production + direct labor + manufacturing overhead applied to work in process

(T/F) Actual overhead costs are charged to jobs.

false

(T/F) Nonmanufacturing costs go into the Manufacturing Overhead account.

false

flow of a company's product costs

flow through three inventory accounts on the balance sheet and then on to the cost of goods sold in the income statement

calculation for net operating income

gross margin - selling and administrative expenses