MGMT 201 Exam 1, Chapter 3

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

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

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

Fantastic Furniture makes custom order couches. The material used to make a couch is a(n) ______ cost of the customer placing the order.

direct

A journal entry that debits Manufacturing overhead and credits Accounts payable would not be used to record ______.

direct labor costs

Components of prime costs

direct material costs direct labor costs

Unadjusted cost of goods sold is calculated by subtracting ______.

ending finished goods inventory from goods available for sale

A journal entry that debits Manufacturing overhead and credits Prepaid insurance records the ______.

expiration of prepaid factory insurance

Manufacturing overhead costs include ______.

factory utilities factory maintenance wages factory rent

A journal entry debiting Cost of goods sold and crediting Finished goods is made when ______.

goods are sold

Which of the following is not a COST CLASSIFICATION associated with decision making? Indirect costs Differential costs sunk costs opportunity costs

indirect costs

Another name for product costs

inventoriable costs

Manufacturing overhead consists of all ______.

manufacturing costs other than direct labor and direct materials

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

overapplied or underapplied overhead

Actual overhead costs may not be proportional to the actual amount of the allocation base used because ______.

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

Cost objects include ______.

products, customers, departments, plants, office locations

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

recognition of accrued property taxes

Matching Principle

recognize expenses in the same period as the revenues they help to generate

The journal entry to record labor costs credits ______.

salaries and wages payable

Net operating income is calculated by subtracting ______ from ______.

selling and administrative expenses; gross margin

Which account is credited when manufacturing overhead is applied?

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

A journal entry that debits Work in process and Manufacturing overhead and credits Raw materials records the ______.

issuance of materials

Applied manufacturing overhead will most likely ______ actual manufacturing overhead.

not equal

A credit balance in the Manufacturing Overhead account means overhead was

overapplied

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 because they are already included

Cost of goods manufactured is the ______.

sum of all jobs transferred from Work in process to Finished goods

The value of work in process is equal to ______.

the cost of all unfinished jobs

True or false: A cost may be direct or indirect, depending on the cost object.

true

A debit balance in Manufacturing overhead means overhead was

underapplied

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

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

Manufacturing Overhead $20,000 and credit Accumulated Depreciation $20,000

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

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

$25,000 overapplied

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

$252,000

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

Always debit

The journal entry to record expired prepaid insurance on factory equipment is debit ____ and credit __

Debit Manufacturing Overhead and credit Prepaid Insurance

The journal entry to record labor costs

Debit: WIP, Manufacturing Overhead Credit: Salaries and wages payable

The journal entry to record depreciation on office equipment debits ______.

Depreciation expense and credits Accumulated depreciation

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

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

When a job is completed, its costs are transferred into ______.

Finished goods

Selling and administrative costs first appear on the ______.

Income Statement

Labor costs charged to Manufacturing Overhead represent ______ labor costs.

Indirect

When labor costs are incurred, _________ labor costs are added directly to the Work in Process account.

Only direct

True or false: Applied overhead costs appear both in the Work in Process account and on the job cost sheet.

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. Costs transfer with goods

The journal entry to record a completed job credits ______.

WIP

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

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

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 debits ______.

Work in process $40,000, debit Manufacturing overhead $30,000 and credit Raw materials $70,000

The journal entry to record selling and administrative salaries debits ______.

an expense account and credits Cash or a liability

Manufacturing Overhead Costs

another term for indirect manufacturing costs

A journal entry that debits Work in process and credits Manufacturing overhead is recording the ______.

application of manufacturing overhead costs

Job cost sheets and in the work in process account contain ______ manufacturing overhead.

applied

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

A journal entry that debits Finished goods and credits Work in process records the ______.

completion of a job

Gross margin is calculated by subtracting ______ from ______.

cost of goods sold; sales

what happens to manufacturing overhead when overhead is applied to WIP

credit it

When overhead is underapplied, a _____ must be made to the Manufacturing overhead account to close it out.

debit

What happens to manufacturing overhead when actual overhead is incurred

debit it

The accounts debited/credited when goods are sold on account are ______.

debit: COGS Credit: Finished goods, sales

Actual manufacturing overhead is ______ to the Manufacturing overhead account.

debited

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

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

$186,000

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

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

When a job is sold, costs are transferred into ______.

COGS

The accounts debited when goods are sold on account are ______.

COGS and AR

Any item for which cost data is desired is called a(n)

Cost object

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

If overapplied overhead is closed out to Cost of goods sold, the Cost of goods sold account will be ______.

decreased

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

Always the credit side

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

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.

$395,000

The Manufacturing Overhead account is debited when ______.

actual overhead costs are incurred

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 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