MGMT 201 Exam 1, Chapter 3
If a company incurs $2,000 of factory rent, $1,000 of factory utilities, and $5,000 of miscellaneous factory costs, the journal entry to record these transactions would be to debit ______.
Manufacturing overhead $8,000 and credit Accounts payable $8,000
Overapplied or underapplied overhead is the difference between ______.
actual total overhead and total overhead applied
A journal entry debiting Salaries expense and crediting Salaries and wages payable could record ______.
administrative salaries
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
Fantastic Furniture makes custom order couches. The material used to make a couch is a(n) ______ cost of the customer placing the order.
direct
A journal entry that debits Manufacturing overhead and credits Accounts payable would not be used to record ______.
direct labor costs
Components of prime costs
direct material costs direct labor costs
Unadjusted cost of goods sold is calculated by subtracting ______.
ending finished goods inventory from goods available for sale
A journal entry that debits Manufacturing overhead and credits Prepaid insurance records the ______.
expiration of prepaid factory insurance
Manufacturing overhead costs include ______.
factory utilities factory maintenance wages factory rent
A journal entry debiting Cost of goods sold and crediting Finished goods is made when ______.
goods are sold
Which of the following is not a COST CLASSIFICATION associated with decision making? Indirect costs Differential costs sunk costs opportunity costs
indirect costs
Another name for product costs
inventoriable costs
Manufacturing overhead consists of all ______.
manufacturing costs other than direct labor and direct materials
The difference between overhead applied to work in process and actual overhead is ______.
overapplied or underapplied overhead
Actual overhead costs may not be proportional to the actual amount of the allocation base used because ______.
overhead spending may not be under control many actual overhead costs are fixed
Cost objects include ______.
products, customers, departments, plants, office locations
A journal entry that debits Manufacturing overhead and credits Property taxes payable records the ______.
recognition of accrued property taxes
Matching Principle
recognize expenses in the same period as the revenues they help to generate
The journal entry to record labor costs credits ______.
salaries and wages payable
Net operating income is calculated by subtracting ______ from ______.
selling and administrative expenses; gross margin
Which account is credited when manufacturing overhead is applied?
Manufacturing overhead
To calculate direct materials on the schedule of cost of goods manufactured, add purchases to beginning raw materials inventory and subtract ______.
ending raw materials inventory and Indirect materials used
A journal entry that debits Work in process and Manufacturing overhead and credits Raw materials records the ______.
issuance of materials
Applied manufacturing overhead will most likely ______ actual manufacturing overhead.
not equal
A credit balance in the Manufacturing Overhead account means overhead was
overapplied
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 because they are already included
Cost of goods manufactured is the ______.
sum of all jobs transferred from Work in process to Finished goods
The value of work in process is equal to ______.
the cost of all unfinished jobs
True or false: A cost may be direct or indirect, depending on the cost object.
true
A debit balance in Manufacturing overhead means overhead was
underapplied
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
The journal entry to record $20,000 in depreciation on factory equipment is debit ______.
Manufacturing Overhead $20,000 and credit Accumulated Depreciation $20,000
George Corporation recognized $1,000 of accrued property taxes on its manufacturing facility. The journal entry to record this debits ______.
Manufacturing overhead $1,000 and credits Property taxes payable $1,000
Estimated manufacturing overhead $500,000 Estimated direct labor hours 200,000 Actual manufacturing overhead $625,000 Actual direct labor hours 260,000 The company applies overhead using direct labor hours as the cost driver. Calculate the amount that overhead was overapplied or underapplied. ($500,000 ÷ 200,000) = $2.50 × 260,000 = $650,000 applied. Actual overhead = $625,000, so overhead is $25,000 overapplied
$25,000 overapplied
Given the following, calculate the cost of goods available for sale. Cost of goods manufactured of $234,000 Beginning Finished goods inventory of $18,000 Ending Finished goods inventory of $24,000
$252,000
What side of the Manufacturing overhead account is actual manufacturing overhead entered on?
Always debit
The journal entry to record expired prepaid insurance on factory equipment is debit ____ and credit __
Debit Manufacturing Overhead and credit Prepaid Insurance
The journal entry to record labor costs
Debit: WIP, Manufacturing Overhead Credit: Salaries and wages payable
The journal entry to record depreciation on office equipment debits ______.
Depreciation expense and credits Accumulated depreciation
True or false: Actual overhead costs appear in the Work in Process account but not on the job cost sheet.
False
True or false: Job B was not completed by April 30. If an April balance sheet is prepared, the costs accumulated for Job B will NOT appear on it.
False
When a job is completed, its costs are transferred into ______.
Finished goods
Selling and administrative costs first appear on the ______.
Income Statement
Labor costs charged to Manufacturing Overhead represent ______ labor costs.
Indirect
When labor costs are incurred, _________ labor costs are added directly to the Work in Process account.
Only direct
True or false: Applied overhead costs appear both in the Work in Process account and on the job cost sheet.
True
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. Costs transfer with goods
The journal entry to record a completed job credits ______.
WIP
A company incurred $10,000 in direct labor costs and $8,000 in indirect labor costs. The journal entry to record this transaction debits ______.
Work in process $10,000 and Manufacturing overhead $8,000 and credits Salaries and wages payable $18,000
A company requisitioned $40,000 in direct materials and $30,000 in indirect materials from the storeroom to be used in production. The journal entry to record this transaction debits ______.
Work in process $40,000, debit Manufacturing overhead $30,000 and credit Raw materials $70,000
The journal entry to record selling and administrative salaries debits ______.
an expense account and credits Cash or a liability
Manufacturing Overhead Costs
another term for indirect manufacturing costs
A journal entry that debits Work in process and credits Manufacturing overhead is recording the ______.
application of manufacturing overhead costs
Job cost sheets and in the work in process account contain ______ manufacturing overhead.
applied
To calculate total manufacturing costs, add direct materials, direct labor and ______.
applied manufacturing overhead
Actual manufacturing overhead costs are recorded in the Manufacturing Overhead account ______.
as they are incurred
A journal entry that debits Finished goods and credits Work in process records the ______.
completion of a job
Gross margin is calculated by subtracting ______ from ______.
cost of goods sold; sales
what happens to manufacturing overhead when overhead is applied to WIP
credit it
When overhead is underapplied, a _____ must be made to the Manufacturing overhead account to close it out.
debit
What happens to manufacturing overhead when actual overhead is incurred
debit it
The accounts debited/credited when goods are sold on account are ______.
debit: COGS Credit: Finished goods, sales
Actual manufacturing overhead is ______ to the Manufacturing overhead account.
debited
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
Given the following, calculate total manufacturing costs: Direct materials cost: $62,000 Direct labor cost: $78,000 Manufacturing overhead applied: $46,000 Actual manufacturing overhead: $51,000 Beginning Work in process inventory: $32,000 Ending Work in process inventory: $35,000
$186,000
Given the following, compute the cost of goods manufactured. Direct material cost: $40,000 Direct labor cost: $100,000 Applied overhead: $120,000 Beginning work in process inventory: $30,000 Ending work in process inventory: $12,000
$278,000
A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements, ______.
$300 is reported as a expense and $900 is reported as an asset
When a job is sold, costs are transferred into ______.
COGS
The accounts debited when goods are sold on account are ______.
COGS and AR
Any item for which cost data is desired is called a(n)
Cost object
Underapplied or overapplied manufacturing overhead can be disposed of by closing it to ______.
Cost of goods sold or allocating it to Work in process, Finished goods, and Cost of goods sold
If overapplied overhead is closed out to Cost of goods sold, the Cost of goods sold account will be ______.
decreased
What side of the Manufacturing overhead account is applied manufacturing overhead entered on?
Always the credit side
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
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.
$395,000
The Manufacturing Overhead account is debited when ______.
actual overhead costs are incurred
Actual manufacturing overhead was $50,000, while overhead applied to jobs was $45,000. Work in process contained 10% of applied overhead, Finished goods contained 40%, and Cost of goods sold contained 50%. The entry to dispose of underapplied or overapplied overhead using the allocation method ______.
debits Work in process $500 Overhead is underapplied by $5,000. To dispose of the underapplied overhead, overhead is credited and the other accounts including Work in process, Finished goods, and Cost of goods sold are debited by $500 (10%), $2,000 (40%), and $2,500 (50%), respectively