ACCT 2101 Chapter 2

Labor costs:

1. May be direct or indirect 2. Are recorded in basically the same way as material costs

Which of the following statements are true?

1. Raw materials used in production are transferred to work in progress as direct materials 2. When materials are purchased they are recorded in the raw materials inventory account.

When actual manufacturing overhead costs are incurred:

1. The manufacturing overhead cost is debited 2. A balance sheet account is credited

Process costing:

1. is used for homogeneous products 2. is used for mass production

Materials requisition forms are used for

1. recording the cost of raw materials in the accounting system 2. controlling the flow of materials from inventory into production

GAAP requires

1. that manufacturing costs be treated as assets until sold 2. all manufacturing costs be charged to products

What methods can be used to dispose of underpaid or overspilled manufacturing overhead?

1.Allocate it to work in progress, finished goods, and cost of goods sold 2. make a direct adjustment to cost of goods sold

The basic formula for process costing is

Average unit cost = total manufacturing cost/ total units produced.

When goods are sold to customers:

costs are transferred from finished goods to cost of goods sold

Actual manufacturing overhead costs are accumulated on the ___ side of the manufacturing overhead account and applied costs are shown on the ___ side.

debit, credit

Major material inputs that can be easily traced to a specific job are __ __.

direct materials

The formula for a predetermined overhead rate is:

estimated total manufacturing overhead cost/ estimated total cost driver

Ideally an allocation base should:

explain or influence the amount of overhead incurred

The cost of each individual unit is tracked to products under both job order and process costing.

false

What is the most common method for disposing of the balance in Manufacturing overhead?

making a direct adjustment to Cost of Goods sold

What document specifies the type and quantity of direct materials used on a specific job?

materials requisition form

An allocation base is a(n)

measure of activity used to assign overhead costs to products and services

Gross profit minus selling and administrative expenses equals:

net operating income

Non manufacturing costs incurred during a period are treated as

period expenses

__ __ consists of any materials that will be included as part of a finished products.

raw materials

In a job-order costing system costs flow first to:

the inventory accountants and then to cost of goods sold

Costs are transferred out of finished goods inventory:

when goods are sold

The major difference between job order and process costing is:

whether the products produced are similar or different

Predetermined overhead rates:

are based on some secondary allocation measure

Gemini had sales of $50,000, Unadjusted cost of goods sold of $23,000, overapplied manufacturing overhead of $3,000 and selling and administrative expenses of $25,000. Gross profit is

Because manufacturing overhead is overapplied, it reduces cost of goods sold to $20,000 ($23,000-$3,000). Thus the gross profit is $50,000 - $20,000 or $30,000.

When is predetermined overhead rate calculated?

Before the period begins

The cost of each individual unit is tracked to products under both job order and process costing.

False

Carlisle, Inc. had sales revenue of $500,000, unadjusted cost of goods sold of $395,000, underpaid manufacturing overhead of $5,000 and selling and administrative expenses of $50,000. Calculate gross profit.

Gross profit = $500,000 - ($395,000 + $5,000) = $100,000

Given the following, calculate total current manufacturing costs: Direct materials: $40,000; Direct labor: $10,000; Manufacturing overhead applied: $120,000; BWIP: $30,000; EWIP: $12,000

Total manufacturing costs = $40,000 + $100,000 + $120,000 = $260,000

The work in progress account accumulates:

actual direct materials, actual direct labor, and applied overhead costs

To calculate total current manufacturing costs on the Cost of Goods Manufactured report:

add direct materials, direct labor, and applied manufacturing overhead

Actual manufacturing overhead consists of:

all manufacturing costs other than direct labor and direct materials