Chapter 3 - Job-order Costing Cost Flows and External Reporting

The journal entry to record the purchase of materials debits:

raw materials

A debit balance in Manufacturing overhead means overhead was _____.

underapplied

The schedule of cost of goods SOLD also contains three elements of product costs___, ____, AND ____and it summarizes the portions of those costs that remain in ending Finished Goods inventory and that are transferred out of Finished Goods

-direct materials, direct labor, and manufacturing overhead-

The formula for a predetermined overhead rate is:

Estimated manufacturing overhead cost divided by estimated allocation base

The journal entry to record $10,000 in manufacturing overhead applied to Job #40 debits:

Work in Process $10,000 and credits Manufacturing overhead $10,000

Match each event in the process of accounting for manufacturing overhead with the appropriate entry: First group: 1. Actual overhead is incurred 2. A job is completed 3. The period ends Second group: a. Manufacturing overhead is closed b. Manufacturing overhead is debited c. Manufacturing overhead is credited

Actual overhead is incurred-Manufacturing overhead is debited A job is completed - Manufacturing overhead is credited The period ends - Manufacturing overhead is closed also from another question: Overhead is applied to Work in Process - Manufacturing overhead is credited

The schedule of cost of goods MANUFATURED contains three elements of product costs ____, ____, AND ____ and it summarizes the portions of those costs that remain in ending Work in Process inventory and that are transferred out of Work in Process into Finished Goods.

direct materials, direct labor, and manufacturing overhead

Raw materials inventory was $27000 at the beginning of the year and $25000 at the end of the year. During the year, $100000 in raw materials were purchased, including $28000 of indirect materials that were put into manufacturing overhear during the period. Calculate the cost of direct materials used during the period.

$74000 cost of DM - Beg inv + purchases * indirect materials - end inv (27000+100000-28000-25000=74000)

Which of the following best describes the journal entry to record the withdrawal of raw materials from the storeroom for use as direct and indirect materials in production? Debit Work in Process and credit Raw Materials. Debit Work in Process, debit Manufacturing Overhead, and credit Direct Materials. Debit Work in Process, debit Manufacturing Overhead, and credit Raw Materials. Debit Manufacturing Overhead and credit Raw Materials.

Debit Work in Process, debit Manufacturing Overhead, and credit Raw Materials

When the allocation method is used to close out the underapplied or overapplied balance remaining in Manufacturing Overhead, which accounts are affected?

Works in Progress Finished Goods Cost of Goods Sold

What accounts are debited when goods are sold on account?

Cost of goods sold and Accounts receivable.

Zimmer, Inc. started the month of January with beginning finished goods inventory of $20,000. The cost of goods manufactured during the month was $120,000 and the ending finished goods inventory was $50,000. What is the unadjusted cost of goods sold for January? $90,000 $120,000 $140,000 $150,000

$90,000 Calculated 20000+120000-50000 = 90000 (unadjusted cogs = beg finished goods inv + cog manufactured - end finished goods inv)

When companies incur selling and administrative costs, those costs ________. should be treated as product costs do not flow through the three inventory accounts should flow through the Manufacturing Overhead account should flow through the Work in Process account

do not flow through the three inventory accounts

Fillia, Inc. worked on three jobs this period: Job 14C, which cost $15,000; Job 23A, which cost $28,000, and Job 45B, which cost $23,000. At the end of the period, only Job 14C was still in process (unfinished). The cost of goods manufactured this period is $______________.

$51,000 The cost of goods manufactured is the cost of jobs completed during the period - Jobs 23A and 45B Include completed jobs only, unfinished jobs remain in Work in Process.

Luver Corporation's Gross margin is $100,000, Cost of goods sold equals $70,000, and selling and administrative expenses total $45,000. Net operating income is:

$55,000 Net operating income = $100000-45000=55000

To calculate the adjusted cost of goods sold:

add underapplied overhead to or subtract overapplied from unadjusted cost of goods sold. Keyword-unadjusted

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

Finished goods

Which of the following best describes the journal entry to record the use of direct and indirect labor in production? Debit Work in Process and credit Salaries and Wages Payable. Debit Work in Process, debit Manufacturing Overhead, and credit Direct Labor. Debit Work in Process, debit Manufacturing Overhead, and credit Salaries and Wages Payable. Debit Manufacturing Overhead and credit Salaries and Wages Payable.

Debit Work in Process, debit Manufacturing Overhead, and credit Salaries and Wages Payable.

Which of the following occurs when finished jobs are shipped to customers? Debit to Cost of Goods Sold. Debit to Finished Goods. Debit to Work in Process. Credit to Raw Materials.

Debit to Cost of Goods Sold.

The journal entry to record accrued property taxes for a factory building debits:

Manufacturing overhead and credits Property taxes payable

Actual manufacturing overhead was $50000, while overhead applied to jobs was $45000. The entry to dispose of underapplied or overapplied overhead would:

credit Manufacturing overhead $5000 Underapplied overhead results in a $5000 debit balance in the overhead account. To dispose of it, Manufacturing overhead should be credited for $5000.

The following information is available for the current year ending December 31: Manufacturing overhead applied $ 150,000 Actual amount of manufacturing overhead costs 120,000 Amount of overhead applied during the year that is in: Work in Process $ 37,500 25 % Finished Goods 52,500 35 % Cost of Goods Sold 60,000 40 % Total overhead applied $ 150,000 100 % If the Manufacturing Overhead account is closed proportionally to Work in Process, Finished Goods, and Cost of Goods Sold, the related entry will include a ________. debit to Cost of Goods Sold for $12,000 credit to Cost of Goods Sold for $12,000 credit to Cost of Goods Sold for $30,000 debit to Work in Process for $7,500

credit to Cost of Goods Sold for $12,000 Calculate 30000 overapplied times the % of the categories to determine which option is accurate. $30000*25% = 7500 Work in Process, $30000*35%=10500 Finished Goods, $30000*40%=12000 COGS. The correct option is $12,000 cost of goods sold should be credited

The ____ (debit/credit) side of the manufacturing overhead account is always used to record manufacturing overhead applied to production and the ____ (debit/credit) side is always used to record the actual manufacturing costs incurred.

credit debit

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

manufactured

The journal entry to record the issuance of direct materials into production debits:

work in process

The journal entry to record general selling and administrative costs debits:

an expense account and credit Cash or a Liability Selling & Administrative costs are period costs and not applied to MOH.

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

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

A journal entry that debits Manufacturing Overhead and credits Accounts payable could be made to record:

factory utilities expense rent expense on factory equipment

Given the following, calculate the cost of goods available for sale. Cost of goods manufactured of $234,000 Beginning Finished Goods Inventory $18,000 Ending Finished Goods Inventory $24,000

$252,000 (234000+18000=252000) Goods available for sale = Cost of Goods Manufactured + Beginning finished goods inventory

Meep Industries has unadjusted cost of goods sold of $300000. Overhead was overapplied by $20000. Adjusted cost of goods sold is:

$280,000 (300000-20000=280000)

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.

$74,000 Cost of direct materials = Beginning Inventory + Purchases - Indirect Materials - Ending Inventory (27000+100000-28000-25000=74000)

Which of the following statements are true? Raw materials inventory only includes the cost of direct materials Raw materials inventory represents the cost of materials not yet used in production. Direct labor costs flow through the Raw materials inventory account When materials are purchased they are recorded in the Raw materials inventory account.

Raw materials inventory represents the cost of materials not yet used in production. When materials are purchased they are recorded in the Raw materials inventory account.

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

raw materials

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

recognition of accrued property taxes

Completed units that have not yet been sold are found in ____ _____ Inventory.

finished goods

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:

$120,000 (200,000/1,000x600=$120,000) 200000/1000=200 per unit, 600 units sold so 600*200=120000

Labor costs charged to Manufacturing Overhead represent:

indirect labor costs

Milton Corporation sold goods costing $50,000 or $75,000. Journal entries to be made could include entries debiting:

Cost of Goods sold for $50,000 and Accounts Receivable for $75,000

Which of the following are used to calculate Cost of goods available for sale on the schedule of cost of goods sold?

Cost of goods manufactured Beginning finished goods inventory

Gemini had Sales of $50000, Cost of goods sold of $20,000, and Selling and Administrative Expenses of $25,000. Gross margin is:

$30,000 Gross margin = $50,000-20000=30000 Gross margin = sales - cogs

For the month of October, Janus Corporation used $30,000 worth of direct materials in production and incurred direct labor costs of $60,000. Actual manufacturing overhead costs were $40,000, whereas $45,000 was the manufacturing overhead applied to work in process. What is the amount of total manufacturing costs that would appear in the Schedule of Cost of Goods Manufactured for October? $90,000 $130,000 $135,000 $175,000

$135,000 Calculated 30,000+60000+45000 - 135,000 use applied not actual MOH

Given: Cost of goods manufactured of $234,000; beginning finished goods inventory of $18,000; and ending finished goods inventory of $24,000, calculate unadjusted cost of goods sold.

$228,000 (= beg inv + MOH - end inv) $18,000+234000-24000=228000

When preparing financial statements in a job-order costing system, finished goods flow first to the ____ _____ and then to the ____ _____

balance sheet income statement

The amount transferred from Work in Process to Finished Goods is:

cost of goods manufactured

For each of the five transactions described below, indicate whether the account should be debited or credited. 1. Direct materials are issued into production for a specific job. 2. Salary of the Production Supervisor is payable. 3. Lubricating oil, waste cotton, and solder are used in the factory. 4. The wages of direct laborers who worked on a particular job are payable. 5. Manufacturing overhead is applied to jobs using a predetermined overhead rate.

1. DEBIT -Work in Process 2. CREDIT - Raw Materials 2. DEBIT -Manufacturing Overhead CREDIT -Salaries and Wages Payable 3. DEBIT-Manufacturing Overhead CREDIT-Raw Materials 4. DEBIT - Work in Process CREDIT-Salaries and Wages Payable 5. DEBIT-Work in Process CREDIT- Manufacturing Overhead

If a company incur $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 methods can be used to dispose of underapplied or overapplied manufacturing overhead?

Closing out to Cost of Goods Sold Allocating it among the Work in Process, Finished Goods, and Cost of Goods Sold.

Which of the statements regarding closing out over or underapplied overhead is correct?

Closing to Cost of goods sold is simpler, and allocating is more accurate.

The following information is available for the current year ending December 31: Manufacturing overhead applied $ 150,000 Actual amount of manufacturing overhead costs 120,000 What is the balance of the Manufacturing Overhead account and is overhead underapplied or overapplied at the end of the year? Credit of $30,000,overapplied. Credit of $30,000, underapplied. Debit of $30,000, overapplied. Debit of $30,000, underapplied.

Credit of $30,000,overapplied.

Which of the following occurs when manufacturing overhead is applied to Work in Process? Debit to Cost of Goods Sold. Debit to Manufacturing Overhead. Credit to Work in Process Credit to Manufacturing Overhead.

Credit to Manufacturing Overhead.

Which of the following occurs when a job has been completed and transferred to the finished goods warehouse? Debit to Cost of Goods Manufactured. Debit to Cost of Goods Sold. Credit to Finished Goods. Credit to Work in Process.

Credit to Work in Process.

Which of the following costs would be classified as manufacturing overhead? Factory rent Factory utilities Marketing costs Assembly Wages Factory maintenance wages

Factory rent Factory utilities Factory maintenance wages Marketing costs would be applied to selling & admin cost and assembly wages would be DL.

T or F: Period costs flow from Finished Goods to COGS.

False (Period costs do not enter the product cost flow)

The journal entry to record the more accurate allocation of overapplied or underapplied overhead includes entries to: Finished Goods Work in process Raw Materials Manufacturing overhead Cost of Goods Sold

Finished Goods Work in process Manufacturing overhead Cost of Goods Sold

Himber, Inc. Just completed a job that cost $14,000 in direct materials, $12,000 in direct labor, and $8000 in applied manufacturing overhead. The journal entry to record completion of the job would debit:

Finished goods $34,000 and credit Work if process $34,000

Is actual manufacturing overhead debited or credited to the manufacturing overhead account? a. credited b. debited

debited

The following information is available for the current year ending December 31: Manufacturing overhead applied $ 150,000 Actual amount of manufacturing overhead costs 120,000 Amount of overhead applied during the year that is in: Work in Process $ 37,500 25 % Finished Goods 52,500 35 % Cost of Goods Sold 60,000 40 % Total overhead applied $ 150,000 100 % If the Manufacturing Overhead account is closed to Cost of Goods Sold, the related entry will ________. decrease the cost of goods sold by $30,000 increase the cost of goods sold by $30,000 decrease the cost of goods sold by $150,000 increase the cost of goods sold by $150,000

decrease the cost of goods sold by $30,000

The journal entry to record depreciation on office equipment debits:

depreciation expense and credits Accumulated depreciation

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

depreciation on factory equipment

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?

manufacturing overhead In short, all actual manufacturing overhead costs are debited to the Manufacturing Overhead account as they are incurred.

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 no be under control

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

All of the following are product costs except ________. manufacturing overhead costs raw materials sales commissions direct labor

sales commissions

A journal entry that debits Advertising expense and credits Cash would record the incurrence as a:

selling cost The amounts are recorded directly into expense accounts—they have no effect on product costs. The same will be true of any other selling and administrative expenses incurred during April, including sales commissions, depreciation on sales equipment, rent on office facilities, insurance on office facilities, and related costs.