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Principles of Accounting - Managerial > Chapter 3 - Cost Flows and External Reporting > Flashcards

Chapter 3 - Cost Flows and External Reporting Flashcards

1
Q

What is a measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects?

A

Allocation base

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2
Q

What is a rate used to charge manufacturing overhead cost to jobs that is established in advance for each period?

A

Predetermined overhead rate

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3
Q

What is the formula to find the predetermined overhead rate?

A

Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base

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4
Q

What is the process of assigning overhead costs to specific jobs?

A

Overhead application

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5
Q

What is the formula to find the overhead application?

A

Predetermined overhead rate × hours worked

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6
Q

What is a costing system in which overhead costs are applied to a job by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job?

A

Normal costing

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7
Q

What include any materials that go into the final product?

A

Raw materials

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8
Q

What consists of units of production that are only partially complete and will require further work before they are ready for sale to customers?

A

Work in process

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9
Q

What consist of completed units of product that have not been sold to customers?

A

Finished goods

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10
Q

What includes the manufacturing costs associated with the goods that were finished during the period?

A

Cost of goods manufactured

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11
Q

Which side of the t-account is the actual side?

A

The left side

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12
Q

Which side of the t-account is the applied side?

A

The right side

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13
Q

Which t-account would the following item go under: Materials Purchased

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

A. Raw material

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14
Q

Which t-account would the following item go under: Raw Materials

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

A. Raw material

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15
Q

Which t-account would the following item go under: Direct Materials

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

B. Work-in-process

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16
Q

Which t-account would the following item go under: Direct Labor

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

B. Work-in-process

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17
Q

Which t-account would the following item go under: Overhead Applied (debit)

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

B. Work-in-process

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18
Q

Which t-account would the following item go under: Overhead Applied (credit)

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

C. Manufacturing overhead

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19
Q

Which t-account would the following item go under: Indirect Material

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

C. Manufacturing overhead

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20
Q

Which t-account would the following item go under: Indirect Labor

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

C. Manufacturing overhead

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21
Q

Which t-account would the following item go under: Utilities Expense

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

C. Manufacturing overhead

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22
Q

Which t-account would the following item go under: Rent in factory equipment

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

C. Manufacturing overhead

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23
Q

Which t-account would the following item go under: Miscellaneous factory overhead costs

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

C. Manufacturing overhead

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24
Q

Which t-account would the following item go under: Taxes & Insurance

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

C. Manufacturing overhead

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25
Q

Which t-account would the following item go under: Depreciation

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

C. Manufacturing overhead

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26
Q

Which t-account would the following item go under: Cost of goods manufactured (debit)

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

D. Finished goods

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27
Q

Which t-account would the following item go under: Cost of goods manufactured (credit)

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

B. Work-in-process

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28
Q

Which t-account would the following item go under: Cost of goods sold (debit)

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

E. Cost of goods sold

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29
Q

Which t-account would the following item go under: Cost of goods sold (credit)

A. Raw material
B. Work-in-process
C. Manufacturing overhead
D. Finished goods
E. Cost of goods sold
F. Sales
A

D. Finished goods

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30
Q

True or False:

If actual and applied manufacturing overhead are not equal, a year-end adjustment is required

A

True

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31
Q

Make a journal entry:

On April 1, Ruger Corporation had $7,000 in raw materials on hand. During the month, the company purchased on account an additional $60,000 in raw materials.

A

D: Raw Materials 60,000
C: Accounts Payable 60,000

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32
Q

Make a journal entry:

During April, materials requisition forms were prepared to authorize withdrawing $52,000 in raw materials from the storeroom for use in production. These raw materials included $50,000 of direct and $2,000 of indirect materials.

A

D: Work in Process 50,000
D: Manufacturing Overhead 2,000
C: Raw Materials 52,000

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33
Q

Make a journal entry:

In April, the employee time tickets included $60,000 recorded for direct labor and $15,000 for indirect labor.

A

D: Work in Process 60,000
D: Manufacturing Overhead 15,000
C: Salaries and Wages Payable 75,000

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34
Q

Make a journal entry:

Assume the Ruger Corporation incurred the following general factory costs during April:

  1. Utilities (heat, water, and power) 21,000
  2. Rent in factory equipment 16,000
  3. Miscellaneous factory overhead costs 3,000
A

D: Manufacturing Overhead 40,000
C: Accounts Payable 40,000

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35
Q

Make a journal entry for overhead applied:

Assume that Ruger Corporation’s predetermined overhead rate is $6 per machine-hour. Also assume that during April, 10,000 machine-hours were worked on Job A and 5,000 machine-hours were worked on Job B (a total of 15,000 machine-hours).

A

D: Work in Process 90,000
C: Manufacturing Overhead 90,000

$6 per machine-hour × 15,000 machine-hours = $90,000

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36
Q

Make a journal entry:

Ruger Corporation incurred $30,000 in selling and administrative salary costs during April.

A

D: Sales Expense 30,000
C: Sales and Wages Payable 30,000

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37
Q

Make a journal entry:

Depreciation on office equipment in April was 7,000

A

D: Depreciation Expense 7,000
C: Accumulation Depreciation 7,000

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38
Q

Make a journal entry:

Advertising was $42,000 and other selling and administrative expenses in April totaled $8,000.

A

D: Advertising Expense 42,000
D: Other Selling and Administrative Expenses 8,000
C: Accounts Payable 50,000

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39
Q

Make a journal entry:

Job A, which cost $158,000, was completed during April and Job B was incomplete at the end of the month

A

D: Finished Goods 158,000
C: Work in Process 158,000

40
Q

Make a journal entry for sales:

For Ruger Corporation, we will assume 750 of the 1,000 gold medallions in Job A were shipped to customers by the end of the month for total sales revenue of $225,000. Because 1,000 units were produced and the total cost of the job from the job cost sheet was $158,000, the unit product cost was $158.

A

D: Accounts Payable 225,000
C: Sales 225,000

41
Q

Make a journal entry for cost of goods sold:

For Ruger Corporation, we will assume 750 of the 1,000 gold medallions in Job A were shipped to customers by the end of the month for total sales revenue of $225,000. Because 1,000 units were produced and the total cost of the job from the job cost sheet was $158,000, the unit product cost was $158.

A

D: Cost of Goods Sold 118,500
C: Finished Goods 118,500

FG X Unit Product Cost
118,500 = 750 x 158

42
Q

When are nonmanufacturing costs expensed?

A

In the period in which they are incurred

43
Q

If the jobs aren’t completed by the end of the month what t-account would they be located on?

A

The work in process t-account

44
Q

Is it underapplied or overapplied when debit is greater than credit?

A

Underapplied

45
Q

Is it underapplied or overapplied when debit is less than credit?

A

Overapplied

46
Q

What is the formula to find overhead applied during the period?

A

POHR × Actual Direct Labor Hours

47
Q

PearCo’s actual overhead for the year was $650,000 with a total of 170,000 direct labor hours worked on jobs. They also had a predetermined overhead rate of $4.00 per direct labor hour. What is the applied overhead amount?

A

AO = POHR × Actual Direct Labor Hours

AO = $4.00 per DLH × 170,000 DLH
AO = $680,000
48
Q

Is it underapplied or overapplied when the actual manufacturing overhead cost is less than the overhead applied?

A

Overapplied

49
Q

Is it underapplied or overapplied when the actual manufacturing overhead cost is greater than the overhead applied?

A

Underapplied

50
Q

What is the formula to find the underapplied/overapplied amount?

A

Manufacturing overhead cost - overhead applied

51
Q

PearCo’s actual overhead for the year was $650,000 and they had an applied overhead of $680,000. Was the manufacturing overhead cost underapplied or overapplied and by how much?

A

Overapplied by 30,000

650,000 - 680,000 = -30,000

52
Q

Tiger, Inc. had actual manufacturing overhead costs of $1,210,000 and a predetermined overhead rate of $4.00 per machine hour. Tiger, Inc. worked 290,000 machine hours during the period. Tiger’s manufacturing overhead is:

A. $50,000 overapplied
B. $50,000 underapplied
C. $60,000 overapplied
D. $60,000 underapplied

A

B. $50,000 underapplied

OA =$4.00 per hour × 290,000 hours = $1,160,000
Underapplied Overhead = $1,210,000 – $1,160,000 = $50,000

53
Q

What are the 2 ways that you can dispose of an overapplied overhead?

A
  1. It can be closed to Cost of Goods Sold.

2. It can be closed proportionally to Work in Process, Finished Goods, and Cost of Goods Sold.

54
Q

How do you close out PearCo’s $30,000 of overapplied overhead into Cost of Goods Sold on the t-accounts?

A

You add 30,000 to Mfg. overhead’s debit and COGS’ credit

55
Q

What is the formula to find the total value of accounts?

A

WIP + FG + COGS

56
Q

What is the formula to find the allocation percentage for Work in Process?

A

(Work in process / total value of accounts) x 100

57
Q

What is the formula to find the allocation percentage for Finished Goods?

A

(Finished goods / total value of accounts) x 100

58
Q

What is the formula to find the allocation percentage for Cost of Goods Sold?

A

(Cost of goods sold / total value of accounts) x 100

59
Q

Let’s assume the overhead applied in Ending Work in Process Inventory, Ending Finished Goods Inventory, and Cost of Goods Sold is $68,000, $204,000, and $408,000. What is the allocation percentage for Work in Process?

A

Total value of accounts = 68,000 + 204,000 + 408,000
TVoA = $680,000

AP = (68,000 / 680,000) x 100
AP = 10%
60
Q

Let’s assume the overhead applied in Ending Work in Process Inventory, Ending Finished Goods Inventory, and Cost of Goods Sold is $68,000, $204,000, and $408,000. What is the allocation percentage for Finished Goods?

A

Total value of accounts = 68,000 + 204,000 + 408,000
TVoA = $680,000

AP = (204,000 / 680,000) x 100
AP = 30%
61
Q

Let’s assume the overhead applied in Ending Work in Process Inventory, Ending Finished Goods Inventory, and Cost of Goods Sold is $68,000, $204,000, and $408,000. What is the allocation percentage for Cost of Goods Sold?

A

Total value of accounts = 68,000 + 204,000 + 408,000
TVoA = $680,000

AP = (408,000 / 680,000) x 100
AP = 60%
62
Q

What is the formula to find the allocation of total allocation?

A

Total allocation x %

63
Q

Work in Process has 10% of the total allocation. What is Work in Process’ allocation of the 30,000 of overapplied overhead?

A 
A = TA x %
A = 30,000 x 10%
A = 3,000
64
Q

Finished Goods has 30% of the total allocation. What is Finished Goods’ allocation of the 30,000 of overapplied overhead?

A 
A = TA x %
A = 30,000 x 30%
A = 9,000
65
Q

Cost of Goods Sold has 60% of the total allocation. What is Cost of Goods Sold’s allocation of the 30,000 of overapplied overhead?

A 
A = TA x %
A = 30,000 x 60%
A = 18,000
66
Q

Make a journal entry for the overapplied allocate between Work in Process, Finished Goods, and Cost of Goods Sold:

WIP = 3,000
FG = 9,000
COGS = 18,000
TA = 30,000
A

D: Manufacturing Overhead 30,000
C: Work in Process 3,000
C: Finished Goods 9,000
C: Cost of Goods Sold 18,000

67
Q

Make a journal entry for the underapplied allocate between Work in Process, Finished Goods, and Cost of Goods Sold:

WIP = 3,000
FG = 9,000
COGS = 18,000
TA = 30,000
A

D: Work in Process 3,000
D: Finished Goods 9,000
D: Cost of Goods Sold 18,000
C: Manufacturing Overhead 30,000

68
Q

True or False:

The allocate between Work in Process, Finished Goods, and Cost of Goods Sold method is considered to be the more accurate than closing out to Cost of Goods Sold

A

True

69
Q

What effect will the overapplied overhead have on net operating income?

A. Net operating income will increase
B. Net operating income will be unaffected
C. Net operating income will decrease

A

A. Net operating income will increase

70
Q

What is actual expenses also known as?

A

Incurred

71
Q

What does “applied to production” indicate?

A

The predetermined overhead rate

72
Q

What is the debit and credit of the following:

Manufacturing overhead cost was applied to production

A

D: Work in Process
C: Manufacturing Overhead

73
Q

Is the manufacturing overhead that goes into work in process estimated or actual?

A

Estimated

74
Q

What account needs to be 0 at the end of the period?

A

Manufacturing Overhead

75
Q

What is the formula to find the gross profit from t-accounts?

A

Sales - Cost of Goods Sold

76
Q

What is the formula to find the net operating income using t-accounts?

A

Gross Profit - Selling & Administration Expense

77
Q

What is the formula to find the cost of raw materials used in production during the year using t-accounts?

A

(RM beginning inventory + RM purchases) - RM ending inventory

78
Q

What is the formula to find how much of the raw material used in production during the year consisted of indirect material using t-accounts?

A

The cost of raw materials used in production during the year - WIP direct material

79
Q

What is the formula to find out how much of the factory labor cost for the year consisted of indirect labor using t-accounts?

A

Factory Wages Payable Credit - WIP direct labor

80
Q

What is the cost of goods manufactured for the year equal to on a t-account?

A

WIP credit

81
Q

What is the formula to find the unadjusted cost of goods sold for the year using t-accounts?

A

FG Beginning balance + COGM (aka WIP credit) - FG ending inventory

82
Q

Which t-account do you look at to figure out if overhead is underapplied or overapplied?

A

Manufacturing overhead

83
Q

What is the formula to find the PDOR using t-accounts?

A

Applied MOH / WIP direct labor

84
Q

What is the applied manufacturing overhead equal to on a t-account?

A

WIP overhead

85
Q

Fill in the Blank: Increase/Decrease

Because manufacturing overhead is underapplied, the journal entry would ________ cost of goods sold by $8,160

A

Increase

86
Q

Fill in the Blank: Increase/Decrease

Because manufacturing overhead is underapplied, the gross margin would ________ by $8,160

A

Decrease

87
Q

What do you debit and credit for the cost of goods manufactured?

A

You debit finished goods and credit work in process

88
Q

What is the formula to find out how much of WIP’s ending balance is direct material cost when you are given a new direct labor cost?

A

WIP: EB - new DLC - (new DLC x PDOR)

89
Q

What is the formula to find adjusted cost of goods sold?

A

Unadjusted COGS - MOH under/overapplied overhead adjustment amount

90
Q

What does you debit and credit when you allocate underapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold?

A

D: WIP
D: FG
D: COGS
C: MOH

91
Q

What does you debit and credit when you allocate overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold

A

D: MOH
C: WIP
C: FG
C: COGS

92
Q

What is the formula to find cost of goods sold if the underapplied overhead is closed to cost of goods sold?

A

Original COGS + MOH

93
Q

What is the formula to find cost of goods sold if the underapplied overhead is closed to Work in Process, Finished Goods, and Cost of Goods Sold?

A

Original COGS + new COGS

94
Q

What is the change in net operating income equal to?

A

The difference in COGS

95
Q

What is the formula to find the difference in COGS?

A

COGS closed to COGS - COGS closed to COGS, WIP, FG

Principles of Accounting - Managerial (11 decks)

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