CH.15

Question 1

What is the flow of manufacturing costs?

Answer 1

Raw materials -> Work in progress -> Finished goods -> cost of goods sold

-Job in progress goes to work in progress inventory
-Completed job goes to finished goods inventory
-When a job is sold to a customer, the costs go from finished goods to cost of goods sold

Question 2

What is a job-cost sheet and what goes on it?

Answer 2

It’s a sheet that maintains a cost record for each job. It identifies the job #, costs, and key dates but also keeps track of direct labor/materials costs as well as estimated overhead costs

Question 3

What is a receiving report?

Answer 3

It’s a document that records the receipt of materials in a general ledger as well as a materials ledger

Question 4

What is the journal entry for purchasing materials?

Answer 4

Debit: Raw Materials Inventory
Credit: Accounts payable

Question 5

How do direct and indirect costs flow?

Answer 5

Direct costs: Flow to job cost sheets
Indirect: Indirect materials account via factory ledger

Question 6

What is the journal entry for using materials?

Answer 6

Debit: Work in progress
Credit: Raw materials

Question 7

What is the journal entry for factory overhead?

Answer 7

Debit: Work in process
Credit: Factory overhead

Question 8

Journal entry for indirect labor and materials used

Answer 8

Debit: Factory overhead
Credit: Raw materials inventory

Debit: Factory overhead
Credit: Factory wages payable

Question 9

Journal entry for other overhead costs

Answer 9

Debit: Factory overhead
Credit: Rent payable, utilities payable, prepaid insurance, etc

Question 10

Journal entry to transfer to finished goods?

Answer 10

Debit: Finished goods
Credit: Work in process

Question 11

Journal entry to transfer from finished goods to cost of goods sold?

Answer 11

Debit: Cost of goods sold
Credit: Finished goods inventory

Question 12

Understated vs Overstated Overhead

Answer 12

-When less overhead is applied than is actually incurred, the remaining debit balance in the Factory Overhead account is called underapplied overhead.

-When more overhead is applied than is actually incurred, the resulting credit balance in
the Factory Overhead account is called overapplied overhead.

Question 13

Cost of goods sold formula

Answer 13

Merchandiser: Beginning merch inventory + cost of merchandise purchased - ending merchandise inventory= COGS

Merchandiser: Beginning goods inventory + cost of goods manufactured - ending finished goods inventory= COGS

Question 14

Cost of goods manufactured

Answer 14

Direct materials used + direct labor + factory overhead= Total manufacturing costs + beg work in progress - ending work in progress= cost of goods manufactured

Question 15

What is the formula for raw material inventory turnover? How is avg raw materials inventory calculated?

Answer 15

Raw materials inventory turnover= Raw materials used/ avg raw materials inventory

Avg raw materials inventory calculated= Beg material inv + ending material inv/ 2

Question 16

Formula for days’ sales in raw material inventory

Answer 16

= Ending raw materials inventory / raw materials used * 365