Smartbook Chapter 3

unit product cost is used to calculate the amount transferred from finished goods to cost of goods sold

When only a portion of the units involved in a job are sold, the ______.

as they are incurred

Actual manufacturing overhead costs are recorded in the Manufacturing Overhead account ______.

credits Manufacturing overhead $5,000 Underapplied overhead results in a $5,000 debit balance in the overhead account. To dispose of it, Manufacturing overhead is credited for $5,000.

Actual manufacturing overhead was $50,000, while overhead applied to jobs was $45,000. The entry to dispose of underapplied or overapplied overhead ______.

consists of completed, unsold goods

Finished goods __________.

Manufacturing overhead $8,000 and credit Accounts payable $8,000

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 ______.

$120,000: $200,000 ÷ 1,000 × 600 = $120,000

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 ______.

allocating it among Work in process, Finished goods, and Cost of goods sold.

The more accurate method of closing out the balance in Manufacturing overhead is:

Manufactured (or produced)

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.

sold

The schedule of cost of goods _________ summarizes the portions of those costs that remain in ending Finished Goods inventory and that are transferred out of Finished Goods into Cost of Goods Sold.

True: the costs are transferred at the same time as the goods

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.

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

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

Manufacturing overhead and credits Property taxes payable

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

an expense account and credits Cash or a liability

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

closing it out to Cost of goods sold

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

ending raw materials inventory and Indirect materials used

To calculate direct materials on the schedule of cost of goods manufactured, add purchases to beginning raw materials inventory and subtract ______.

True: Because it is likely that either or both of the estimates will be different than actual, the actual overhead will not equal the applied overhead.

True or false: Underapplied or overapplied overhead occurs because overhead is applied to jobs using a predetermined rate based on estimates of costs and activity levels.

difference between overhead applied to work in process and actual overhead Difference between the overhead cost applied to work in process and the actual overhead costs of a period.

Underapplied or overapplied overhead is the ______.

The method of applying overhead to jobs using a predetermined overhead rate assumes that actual overhead costs will be proportional to the actual amount of the allocation base incurred during the period

What is the cause of underapplied or overapplied overhead?

-Accounts payable is not affected by overhead application - Cost of goods sold is not directly affected by application of overhead - Work in process is debited when overhead is applied - Manufacturing overhead is credited

When manufacturing overhead is applied:

Debit; crediting would be appropriate is overhead were underapplied

When overhead is overapplied, a ______ must be made to the Manufacturing Overhead account to close it out.

Credit; debiting would be appropriate if overhead were overapplied

When overhead is underapplied, a _____ must be made to the Manufacturing overhead account to close it out.

- Factory supervisors' salaries are debited to Manufacturing Overhead. - Maintenance salaries are debited to Manufacturing Overhead. - Assembly workers' wages are debited to Work in Process.

Where would the following salaries be recorded? - Factory supervisors' salaries - Maintenance salaries - Assembly workers

Manufacturing overhead

Which account is credited when manufacturing overhead is applied?

- 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.

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

Nonmanufacturing costs

Which of the following would not be charged to the Manufacturing overhead account? - Nonmanufacturing costs - Depreciation on factory equipment - Factory rent - Supervisor's salary

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

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

Work in process

Costs of partially completed units are accounted for in ______ .

Credit, Debit

Manufacturing overhead applied to production is always recorded on the _____ side of the manufacturing overhead account and the _____ side is always used to record the actual manufacturing.

manufacturing costs other than direct labor and direct materials

Manufacturing overhead consists of all ______.

- factory maintenance wages - factory utilities - factory rent

Manufacturing overhead costs include ______.

- the factory supervisor's salary - factory insurance

Manufacturing overhead costs include ______.

Work in process

Manufacturing overhead is applied with a debit to ______.

selling and administrative expenses; gross margin

Net operating income is calculated by subtracting ______ from ______.

finished goods

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

raw materials

The journal entry to record the purchase of materials debits ______.

Raw material(s)

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

Work in process $40,000, debit Manufacturing overhead $30,000 and credit Raw materials $70,000

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 ______.

Overapplied If there is a credit balance in the Manufacturing Overhead account of Y dollars, then the overhead is overapplied by Y dollars

A credit balance in manufacturing overhead means overhead was _____ .

overapplied

A credit balance in the Manufacturing Overhead account of Y dollars means that the overhead is ______ by of Y dollars. Fill the blank with (overapplied or underapplied)

Overapplied overhead

A credit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost applied to Work in Process is greater than the amount of overhead cost actually incurred during a period

Underapplied If there is a debit balance in the Manufacturing Overhead account of X dollars, then the overhead is underapplied by X dollars

A debit balance in manufacturing overhead means overhead was _______.

Underapplied overhead

A debit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost applied to Work in Process is less than the amount of overhead cost actually incurred during a period.

administrative salaries.

A journal entry debiting Salaries expense and crediting Salaries and wages payable could record:

direct labor costs

A journal entry that debits Manufacturing overhead and credits Accounts payable would be used to record miscellaneous factory overhead costs, rent on factory equipment, factory utilities costs and would NOT be used to record ________ .

Purchase of materials

A journal entry that debits Raw Materials and credits Accounts Payable is recording the ______.

issuance of materials.

A journal entry that debits Work in process and Manufacturing overhead and credits Raw materials records the:

dispose of underapplied or overapplied overhead

A journal entry that includes Manufacturing overhead and Cost of goods sold is recorded to ______.

Debited

Actual manufacturing overhead is ______ to the Manufacturing overhead account.

- overhead spending may not be under control - many actual overhead costs are fixed

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

Total manufacturing costs added to production = direct materials used in production + direct labor + manufacturing overhead applied to work in process

Calculating total manufacturing costs added to production

Raw materials used in production = beginning raw materials inventory + purchases of raw materials - ending raw materials inventory

Calculating: Direct materials

includes the manufacturing costs of goods finished during the period

Cost of goods manufactured ______.

- office equipment depreciation - CEO's salary

Nonmanufacturing costs include:

actual overhead is less than applied overhead. Explained: if a company applies more $ in overhead cost to work in process while incurring less $ in actual overhead cost, the overhead would be overapplied

Overhead is overapplied if:

actual overhead is more than applied overhead. Explained: overhead is underapplied if the applied cost is less than the actual cost

Overhead is underapplied if ______.

$74,000: Reason: Cost of direct materials used in production = Beginning Inventory + Purchases - Indirect Materials - Ending Inventory ($27,000 + $100,000 - $28,000 - $25,000 = $74,000)

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: ($27,000 + $100,000 - $28,000 - $25,000 = $74,000) Raw materials used in production= Beginning raw materials inventory + purchases of raw materials - indirect materials - ending raw materials inventory

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.

16,000: Cost of direct materials used in production = Beginning Inventory + Purchases - Indirect Materials - Ending Inventory ($5,000 + $27,000 - $12,000 - $4,000 = $16,000)

Raw materials inventory was $5,000 at the beginning of the year and $12,000 at the end of the year. During the year, a total of $27,000 in raw materials were purchased, including $4,000 of indirect materials that were put into manufacturing overhead during the period. Calculate the cost of direct materials used during the period.

ending finished goods inventory from goods available for sale.: Equation : Unadjusted cost of goods sold = beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory Equation explained : Beginning finished goods inventory + the cost of goods manufactured = the cost of goods available for sale. The cost of goods available for sale - the ending finished goods inventory = the unadjusted cost of good sold

Unadjusted cost of goods sold is calculated by subtracting:

Cost of goods sold or allocating it to Work in process, Finished goods, and Cost of goods sold Explained: There are two ways: 1. It can be closed to COGS 2. It can be closed proportionally to Work in Process , Finished Goods, and COGS

Underapplied or overapplied manufacturing overhead can be disposed of by closing it to ______.

Always the debit side

What side of the Manufacturing overhead account is actual manufacturing overhead entered on?

Finished goods

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

only direct

When labor costs are incurred, _________ labor costs are added directly to the Work in Process account. Multiple choice question. only indirect

Income statement

Selling and administrative costs first appear on the ______.

actual overhead costs are incurred

The Manufacturing Overhead account is debited when ______.

cost of goods manufactured

The amount transferred from Work in Process to Finished Goods is ______.

Manufactured, (can also be: completed, produced, or finished)

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

sum of all amounts transferred between the Work in process account and the Finished goods account during that period

The cost of goods manufactured for a period is the ______.

Manufacturing overhead $1,000 and credits Property taxes payable $1,000

George Corporation recognized $1,000 of accrued property taxes on its manufacturing facility. The journal entry to record this debits ______.

$110,000 + $410,000 - $125,000 = $395,000

Given: 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.

indirect

Labor costs charged to Manufacturing Overhead represent ______ labor costs.

$55,000: $100,000 - $45,000 = $55,000

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 ______.