ACG2071 - Chapter 3

If a company incurs $2000 of factory rent, $1000 of factory utilities, and $5000 of miscellaneous factory costs, the journal entry to record these transactions would be to debit ______.

Manufacturing overhead $8000, and credit Accounts payable $8000.

What two accounts are involved when underapplied or overapplied overhead is closed out using the simpler method?

Cost of Goods Sold and Manufacturing Overhead

The _______ side of the manufacturing overhead account is always used to record manufacturing overhead applied to production.

Credit

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.

Sales minus Cost of Goods Sold equals _______.

Gross Margin

Raw Materials is a ______ account.

Inventory

Labor costs charged to Manufacturing Overhead represent ______.

Indirect Labor costs

The journal entry to record expired prepaid factory insurance debits ________.

Manufacturing Overhead and credits Prepaid Insurance.

Overhead is overapplied if ______.

Actual overhead is less than applied overhead.

To calculate the adjusted cost of goods sold ______.

Add underapplied overhead to (or subtract overapplied overhead from) Unadjusted Cost of Goods Sold.

What methods can be used to dispose of underapplied or overapplied manufacturing overhead?

- Close it Cost of Goods Sold - Allocate it to Work in Process, Finished Goods, and Cost of Goods Sold

Cost of Goods Manufactured

- Includes the manufacturing costs of goods finished during the period. = Beginning Work in Process Inventory + Total Manufacturing Costs added to production - Ending Work in Process Inventory

The journal entry to record the more accurate allocation of overapplied or underapplied overhead includes entries to _______.

- Manufacturing Overhead - Cost of Goods Sold - Finished Goods Inventory - Work in Process Inventory

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

- Many actual overhead costs are fixed. - Overhead spending may not be under control.

A journal entry that debits Manufacturing overhead and credits Accounts Payable could be made to record ______.

- Rent expense on factory equipment. - Factory utilities expense.

These costs are charged directly to the income statement:

- Selling Costs - Administrative Costs

Manufacturing overhead costs include (things like) ____________

- The factory supervisor's salary - Factory insurance

Unadjusted Cost of Goods Sold

= Beginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory

Cost of Goods Available for Sale

= Beginning Finished Goods inventory + Cost of Goods Manufactured

Cost of Direct Materials Used

= Beginning Inventory + Purchases - Indirect Materials - Ending Inventory

Total manufacturing costs added to production

= Direct Materials used in production + Direct Labor + MOH applied to Work In Process

Applied manufacturing overhead is entered on what side of the Manufacturing overhead account?

Always the credit side.

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

An expense account and credits Cash or a liability.

When preparing financial statement in a job-order costing system, finished goods flow first to the __________ and then to the ________.

Balance Sheet ; Income Statement

The ________ side of of the manufacturing overhead account is always used to record the actual manufacturing costs incurred.

Debit

The journal entry to record depreciation on office equipment debits _______

Depreciation Expense and credits Accumulated depreciation. (Office equipment is not related to production and does not get added to MOH)

A journal entry that debits Manufacturing Overhead and credits Accumulated depreciation records _______.

Depreciation on Factory Equipment.

A journal entry that debits Manufacturing Overhead and credits Prepaid insurance records the:

Expiration of Prepaid Factory Insurance (Remember that Prepaid accounts are Assets, and Credits decrease their balance. This means the money is being spent.)

True or False: Period costs flow from Finished Goods to Cost of Goods Sold.

False (Period costs are not included on Balance Sheet accounts such as Raw Materials, Work in Process, or Finished Goods)

Completed units that have not yet been sold are found in ____________ __________ inventory.

Finished Goods

When goods are sold on account, what accounts are credits?

Finished Goods and Sales.

A credit balance in the Manufacturing Overhead account means that overhead was ________.

Overapplied

The difference between overhead applied to Work in process and actual overhead is _______.

Overapplied or underapplied overhead.

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

Raw Materials

The journal entry to record issuing materials to be used in production credits _______.

Raw materials

A journal entry that debits Manufacturing Overhead and credits Property taxes payable would record the:

Recognition of accrued property taxes.

The journal entry to record labor costs credits _______.

Salaries and wages payable. (It will debit MOH for Indirect Labor, and debit Work in Process for Direct Labor)

A journal entry that debits Advertising expense and credits Cash would record the incurrence of a _________.

Selling cost

The value of Work in Process is equal to _______.

The cost of all unfinished jobs.

Process of Accounting for Manufacturing Overhead

When Actual Overhead is incurred, MOH is debited. When Overhead is applied to WIP, MOH is credited. When the period ends, MOH is closed.

Units of product that are only partially complete are contain in the ______ inventory.

Work In Process

When a job is completed, the job costs are transferred OUT OF ____________.

Work In Process

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

accounts payable.

Overapplies or underapplied overhead is the difference between ________.

actual total overhead and total overhead applied.

A journal entry that debits Work in Process and credits Manufacturing Overhead is recording the ______.

application of Manufacturing Overhead costs.

Which of the following appears on job cost sheets and in the work in process account? a) Actual Manufacturing Overhead b) Budgeted Manufacturing Overhead c) Applied Manufacturing Overhead

c) Applied Manufacturing Overhead

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

closing it out to Cost of Goods Sold.

Underapplied or Overapplied overhead is the ________.

difference between overhead applied to work in process and actual overhead.

The cost of jobs still unfinished at the end of a period are included in _______.

ending Work in Process Inventory

A predetermined overhead rate is calculated by dividing the _________ total manufacturing overhead by the _________ total amount of the allocation base.

estimated ; estimated

The cost of goods _____ is the sum of all the amounts transferred from Work in process to Finished goods during a period.

manufactured

The schedule of cost of goods ________ summarizes the costs that remain in Work in Process inventory and that have been transferred from Work in Process to Finished Goods inventory.

manufactured

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

A debit balance in Manufacturing overhead means overhead was ______.

underapplied

Gross margin minus selling and administrative expenses equals ______.

Net Operating Income.