ACCT 203 Chapter 3 Smartbook

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, because the costs are transferred at the same time as the goods.

The journal entry to record the purchase of materials debits

raw materials

Net operating income is calculated by subtracting ______ from ______.

selling and administrative expenses ; gross margin

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

A company reports Gross margin of $100,000, Cost of goods sold of $70,000, and Selling and administrative expenses of $45,000. Net operating income (loss) is ______.

$55,000

Given: 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.

110,000+410,000-125,000=395,000 (beg finished goods + costs of goods manufactured - ending finished goods = unadjusted cost of goods sold)

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 ______.

2000,000/1000 = 200 x 600 = 120,000

The journal entry to record the purchase of materials credits ____. 1. accounts payable 2. MOH 3. Raw materials 4. Work in process

Accounts payable (MOH is debited in the journal entry to record the issue of indirect materials, raw materials is debited in the journal entry to record the purchase of materials, work in process is debited in the journal entry to record the issue of direct materials)

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

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

Always on credit side.

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.

Cost of direct materials = Beg Inv + Purchases - Indirect materials - End Inv (27,000 + 100,000 - 28,000 -25,000 = 74,000)

When only a portion of the units involved in a job are sold, the

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

The journal entry to record the purchase of material credits _______.

accounts payable

The journal entry to record the purchase of materials credits ______.

accounts payable

Overhead is underapplied if ______.

actual overhead is more than applied overhead

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

always on the debit side.

Actual manufacturing overhead costs are recorded in the Manufacturing Overhead account

as they are incurred

The simpler method of closing out the balance of Manufacturing overhead is ______.

closing it out to cost of good sold.

Overhead is overapplied if: a. actual overhead is more than applied overhead b. adjusted cost of goods sold is more than unadjusted cost of goods sold c. cost of goods manufactured is less than cost of goods sold d. actual overhead is less than applied overhead

d

Actual manufacturing overhead is ______ to the Manufacturing overhead account.

debited. applied overhead is credited to the account.

Unadjusted cost of goods sold is calculated by subtracting ______.

ending finished goods inventory from goods available for sale.

When labor costs are incurred, _________ labor costs are added directly to the Work in Process account. 1. factory maintenance wages 2. factory utilities 3. factory rent 4. assembly worker wages 5. marketing costs

factory maintenance wages, factory utilities, factory rent. ( assembly worker wages are direct labor and marketing costs are non-manufacturing cost. )

When a job is completed, its costs are transferred into

finished goods

Selling and administrative costs first appear on the

income statement

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

Which account is credited when manufacturing overhead is applied? 1. Accounts payable 2. manufacturing overhead 3. work in process 4. Costs of good sold

manufacturing overhead ( accounts payable is not affected by overhead application. work in process is debited. cost of good sold is not directly affected. )

Any purchased materials that will go into the finished product are first recorded in _______ ________ inventory account.

raw materials

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

raw materials