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Managerial Accounting > Chapter 3: Exchange and Markets > Flashcards

Chapter 3: Exchange and Markets Flashcards

1
Q

What are the goals of economic systems?

A

To satisfy human needs and wants

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2
Q

What 3 key questions do economic systems answer?

A
  1. What to produce?
  2. How to produce it?
  3. Who gets it?
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3
Q

What determines the answers to the 3 key economic questions?

A

The allocation mechanisms

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4
Q

What are the 2 main types of allocation mechanisms in economic systems?

A
  1. Free Markets
  2. Central Planning
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5
Q

What is Pareto efficiency in resource allocation?

A

It is when no alternative helps at least one person without harming anyone else

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6
Q

How are economic decisions made in free markets?

A

They are decentralized to individuals

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7
Q

How are economic decisions made in centrally planned economies?

A

Government officials make economic decisions

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8
Q

What is a property right?

A

A legally enforced right to select the use of an economic good

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9
Q

What are private property rights?

A

Rights assigned to a specific entity

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10
Q

What does it mean for private property rights to be alienable?

A

They can be transferred to another individual, within limits

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11
Q

What kind of rights do individuals have over their property?

A

Use rights within limits

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12
Q

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

A

raw material

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13
Q

Work in Process consists of _____

A
  • actual direct labor cost
  • actual direct materials cost
  • applied manufacturing overhead
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14
Q

Finished goods _____

A

consist of completed, unsold goods

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15
Q

Cost of goods manufactured _____

A

includes manufacturing costs of goods finished during the period

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16
Q

The journal entry to record the purchase of materials debits _____

A

raw materials

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17
Q

Costs of partially completed units are accounted for in _____

A

work in process

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18
Q

Completed units that have not yet been sold are found in _____ _____ inventory

A

finished goods

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19
Q

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

A

cost of goods manufactured

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20
Q

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

A

issuance of materials

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21
Q

Units of product that are only partially complete and will require further work before they are ready for sale to the customer are contained in the _____ _____ _____ account

A

work in process

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22
Q

The Manufacturing Overhead account is debited when _____

A

actual overhead costs are incurred

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23
Q

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

A

purchase of materials

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24
Q

Labor costs charged to Manufacturing Overhead represent _____ labor costs

A

indirect

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25
Q

The journal entry to record issuing materials to be used in production credits _____

A

raw materials

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26
Q

Actual manufacturing overhead costs are recorded in the Manufacturing Overhead account _____

A

as they are incurred

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27
Q

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 costs incurred

A

credit; debit

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28
Q

When labor costs are incurred, _____ labor costs are added directly to the Work in Process account

A

only direct

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29
Q

Would a journal entry that debits Manufacturing overhead and credits Accounts payable be used to record direct labor costs?

A

no

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30
Q

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 _____

A

Work in process $40,000, debits Manufacturing overhead $30,000, and credits Raw materials $70,000

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31
Q

Manufacturing overhead costs include _____

A
  • factory rent
  • factory maintenance wages
  • factory utilities
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32
Q

A journal entry that debits Manufacturing overhead and credits Accounts payable could be made to record _____

A
  • rent expense on factory equipment
  • factory utilities expense
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33
Q

The journal entry to record issuing both direct and indirect materials into production debits _____

A

Work in process and Manufacturing overhead

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34
Q

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

A

Manufacturing overhead and credits Property taxes payable

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35
Q

The journal entry to record manufacturing overhead applied to Job #40 debits _____

A

Work in process and credits Manufacturing overhead

36
Q

Selling and administrative costs first appear on the _____

A

income statement

37
Q

The journal entry to record selling and administrative salaries debits _____

A

an expense account and credits Cash or a liability

38
Q

A journal entry that debits Manufacturing overhead and credits Property taxes payable records the _____

A

recognition of accrued property taxes

39
Q

Which account is credited when manufacturing overhead is applied?

A

Manufacturing overhead

40
Q

Selling and administrative costs incurred are treated as _____

A

period expenses

41
Q

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 _____

A

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

42
Q

A journal entry debiting Salaries expense and crediting Salaries and wages payable could be recording _____

A

administrative salaries

43
Q

A journal entry that debits Work in process and credits Manufacturing overhead is recording the _____

A

application of manufacturing overhead costs

44
Q

A journal entry that debits Depreciation expense and credits Accumulated depreciation records _____

A

depreciation on office equipment

45
Q

What costs are charged directly to the income statement?

A
  • administrative costs
  • selling costs
46
Q

When a job is completed, its costs are transferred into _____

A

Finished Goods

47
Q

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

A

manufactured

48
Q

Himber, Inc. just completed a job that cost $14,000 in direct materials, $12,000 in direct labor, and $8,000 in applied manufacturing overhead. The journal entry to record completion of the job debits _____

A

Finished goods $34,000 and credits Work in process $34,000

49
Q

The difference between the entries to record depreciation on office equipment and depreciation on factory equipment is that one _____

A

debits Depreciation expense, while the other debits Manufacturing overhead

50
Q

When a job is completed, the job costs are transferred OUT OF _____

A

work in process

51
Q

The cost of goods manufactured for a period is the _____

A

sum of amounts transferred from Work in process to Finished goods during the period

52
Q

The journal entry to record a completed job credits _____

A

Work in process

53
Q

Would nonmanufacturing costs be charged to the Manufacturing overhead account?

A

No

54
Q

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

A

True

55
Q

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 _____

A

$120,000

56
Q

The journal entry to record depreciation on office equipment debits _____

A

Depreciation expense and credits Accumulated depreciation

57
Q

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

A

produced

58
Q

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

A

ending raw materials inventory and Indirect materials used

59
Q

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

A

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

60
Q

Given the following, calculate the total manufacturing costs added to production:
Direct materials cost used in production: $62,000
Direct labor cost: $78,000
Manufacturing overhead applied to work in process: $46,000
Actual manufacturing overhead: $51,000
Beginning work-in-process inventory: $32,000
Ending work-in-process inventory: $35,000

A

$186,000

61
Q

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.

A

$395,000

61
Q

The schedule of cost of goods
produced _____ 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

A

sold

62
Q

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.

A

$74,000

63
Q

Given the following, calculate the total manufacturing costs added to production:
Direct materials used in production: $40,000
Direct labor: $100,000
Manufacturing overhead applied to work in process: $120,000
Beginning work-in-process inventory: $30,000
Ending work-in-process inventory: $12,000

A

$260,000

64
Q

Unadjusted cost of goods sold is calculated by subtracting:

A

ending finished goods inventory from goods available for sale

65
Q

When calculating the cost of direct materials on the schedule of cost of goods manufactured, the cost of indirect materials is _____

A

subtracted from raw materials used in production

66
Q

Meep Industries had unadjusted cost of goods sold of $300,000. Overhead was overapplied by $20,000. Adjusted cost of goods sold is _____

A

$280,000

67
Q

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 _____

A

$55,000

68
Q

To calculate total manufacturing costs, add direct materials, direct labor and _____

A

applied manufacturing overhead

69
Q

The difference between overhead applied to work in process and actual overhead is _____

A

overapplied or underapplied overhead

70
Q

Martin Industries had unadjusted cost of goods sold of $450,000. Overhead was underapplied by $30,000. Adjusted cost of goods sold is _____

A

$480,000

71
Q

Gross margin minus selling and administrative expenses equals _____

A

net operating income

72
Q

Overhead is underapplied if _____

A

actual overhead is more than applied overhead

73
Q

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.

A

$228,000

74
Q

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.

A

True

75
Q

Underapplied or overapplied overhead is the _____

A

difference between overhead applied to work in process and actual overhead

76
Q

To calculate the adjusted cost of goods sold _____

A

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

77
Q

Actual manufacturing overhead is _____ to the Manufacturing overhead account

A

debited

78
Q

Overhead is overapplied if _____

A

actual overhead is less than applied overhead

79
Q

A debit balance in Manufacturing overhead means overhead was _____

A

underapplied

80
Q

What side of the Manufacturing overhead account is applied to manufacture overhead entered on?

A

always the credit side

81
Q

Net operating income is calculated by subtracting:

A

selling and administrative expenses from gross margin

82
Q

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

A

Cost of goods sold or allocating it to Work in process, Finished goods, and Cost of goods sold

83
Q

A credit balance in the Manufacturing Overhead account of Y dollars means that the overhead is _____ by of Y dollars

A

overapplied

84
Q

If overapplied overhead is closed out to Cost of goods sold, the Cost of goods sold account will be _____

A

decreased

85
Q

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

A

credit

86
Q
A

Managerial Accounting (3 decks)

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