ACG 2071 CH3
When products are completed, their costs are transferred from
Work in Process Inventory to Finished Goods Inventory. The costs of the goods transferred from Work in Process to Finished Goods are referred to as the cost of goods manufactured.
total manufacturing overhead applied to production
actual DL X predetermined moh rate
figure out if overapplied or underapplied
actual total moh -moh applied
ending balance work in process
beg balance + raw materials used in production + DL + applied MOH - job cost to manufacture
cost of goods available for sale
beginning finished inventory + cost of goods manufactured
How do we "close" under applied MOH?
under allocated => COGS understated [We need to increase COGS] debit cogs credit moh
What two things are accomplished through this journal entry?
1.COGS is adjusted 2.The MOH account is zeroed out
Period Costs (or selling and administrative expenses)
do not flow through inventories on the balance sheet. Instead, they are recorded as expenses on the income statement in the period incurred.
Product costs
flow through three inventory accounts on the balance sheet and then ultimately end up in cost of goods sold on the income statement.
net operating income
gross margin - selling and administrative expenses and salaries
How do we "close"over applied MOH?
over allocated => COGS overstated [We need to decrease COGS] debit moh credit cogs
total MOH added to work in process
raw materials used in prod + direct labor + moh applied
gross margin
sales - adjusted cogs
Step 3: Finished Goods Inventory (calculate the Cost of Goods Sold)
Beginning Finished Goods Inventory + Cost of Goods Manufactured = Cost of Goods Available for Sale - Ending Finished Goods Inventory = Cost of Goods Sold
Step 1: Raw Materials Inventory (calculate the DM used)
Beginning Raw Materials Inventory + Purchases of Direct Material = Raw Materials Available for Use - Ending Raw Materials Inventory = Direct Materials Used
Step 2: WorkinProcess Inventory (calculate the Cost of Goods Manufactured)
Beginning Work in Process Inventory + Direct Material Used + Direct Labor Used + Manufacturing Overhead = Total Manufacturing Costs - Ending Work-in-Process Inventory = Cost of Goods Manufactured
Assuming that the company closes it's under applied or over applied overhead to Cost of Goods Sold, what is the adjusted cost of goods sold for the year?
Cogs - overapplied overhead
When goods are sold, their costs are transferred from
Finished Goods Inventory to Cost of Goods Sold on the income statement. At this point, the manufacturing costs related to goods are finally recorded as an expense on the income statement.
underapplied overhead
If actual > applied, not enough MOH was allocated to the jobs COGS is understated
overapplied overhead
If applied > actual, too much MOH was allocated to the jobs COGS is overstated
What do we do if the amount of over/under applied MOH is fairly large and we still have a lot of either unfinished or unsold inventory left?
Prorate adjustment to: WIP Inventory, FG Inventory, and COGS based on the % of product cost sin each account at year end.
Raw Materials Inventory
Purchases of raw materials are recorded on the balance sheet in the Raw Materials Inventory account. When raw materials are used in production as direct materials, their costs are transferred directly into Work in Process Inventory.
Cost of Goods Manufactured
The costs of the goods transferred from Work in Process to Finished Goods are referred to as the... Then, when goods are sold, their costs are transferred from Finished Goods Inventory to Cost of Goods Soldon the income statement.
journal entry to record cost of goods sold
debit cost of goods sold credit finished goods
journal entry for transfer of completed jobs
debit finished goods credit work in process
Record the Purchase of Raw Materials on account:
debit raw materials inventory credit accounts payable
What is the journal entry to record raw materials used in production?
debit work in process credit raw materials
Record the use of Direct Labor in Production:
debit work in process inventory credit wages payable
Record the use of Direct Materials in Production:
debit work in process inventory credit raw materials inventory
journal entry to record labor costs incurred
debit work in process(DL), MOH(indirect labor), selling and administrative cots credit wages payable (add all them tog)
In order to transform direct materials into finished goods
direct labor costs are incurred and accumulated inWork in Process. Manufacturing overhead costs are also needed and are allocated to Work in Process.
actual total MOH
indirect labor + (depreciation, insurance, utilities, etc)
