Chapter 3: Exchange and Markets Flashcards
1
Q
What are the goals of economic systems?
A
To satisfy human needs and wants
2
Q
What 3 key questions do economic systems answer?
A
- What to produce?
- How to produce it?
- Who gets it?
3
Q
What determines the answers to the 3 key economic questions?
A
The allocation mechanisms
4
Q
What are the 2 main types of allocation mechanisms in economic systems?
A
- Free Markets
- Central Planning
5
Q
What is Pareto efficiency in resource allocation?
A
It is when no alternative helps at least one person without harming anyone else
6
Q
How are economic decisions made in free markets?
A
They are decentralized to individuals
7
Q
How are economic decisions made in centrally planned economies?
A
Government officials make economic decisions
8
Q
What is a property right?
A
A legally enforced right to select the use of an economic good
9
Q
What are private property rights?
A
Rights assigned to a specific entity
10
Q
What does it mean for private property rights to be alienable?
A
They can be transferred to another individual, within limits
11
Q
What kind of rights do individuals have over their property?
A
Use rights within limits
12
Q
Any purchased materials that will go into the finished product are first recorded in the _____ _____ inventory account
A
raw material
13
Q
Work in Process consists of _____
A
- actual direct labor cost
- actual direct materials cost
- applied manufacturing overhead
14
Q
Finished goods _____
A
consist of completed, unsold goods
15
Q
Cost of goods manufactured _____
A
includes manufacturing costs of goods finished during the period
16
Q
The journal entry to record the purchase of materials debits _____
A
raw materials
17
Q
Costs of partially completed units are accounted for in _____
A
work in process
18
Q
Completed units that have not yet been sold are found in _____ _____ inventory
A
finished goods
19
Q
The amount transferred from Work in Process to Finished Goods is _____
A
cost of goods manufactured
20
Q
A journal entry that debits Work in process and Manufacturing overhead and credits Raw materials records the _____
A
issuance of materials
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
22
Q
The Manufacturing Overhead account is debited when _____
A
actual overhead costs are incurred
23
Q
A journal entry that debits Raw Materials and credits Accounts Payable is recording the _____
A
purchase of materials
24
Q
Labor costs charged to Manufacturing Overhead represent _____ labor costs
A
indirect
25
The journal entry to record issuing materials to be used in production credits _____
raw materials
26
Actual manufacturing overhead costs are recorded in the Manufacturing Overhead account _____
as they are incurred
27
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
credit; debit
28
When labor costs are incurred, _____ labor costs are added directly to the Work in Process account
only direct
29
Would a journal entry that debits Manufacturing overhead and credits Accounts payable be used to record direct labor costs?
no
30
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, debits Manufacturing overhead $30,000, and credits Raw materials $70,000
31
Manufacturing overhead costs include _____
- factory rent
- factory maintenance wages
- factory utilities
32
A journal entry that debits Manufacturing overhead and credits Accounts payable could be made to record _____
- rent expense on factory equipment
- factory utilities expense
33
The journal entry to record issuing both direct and indirect materials into production debits _____
Work in process and Manufacturing overhead
34
The journal entry to record accrued property taxes for a factory building debits _____
Manufacturing overhead and credits Property taxes payable
35
The journal entry to record manufacturing overhead applied to Job #40 debits _____
Work in process and credits Manufacturing overhead
36
Selling and administrative costs first appear on the _____
income statement
37
The journal entry to record selling and administrative salaries debits _____
an expense account and credits Cash or a liability
38
A journal entry that debits Manufacturing overhead and credits Property taxes payable records the _____
recognition of accrued property taxes
39
Which account is credited when manufacturing overhead is applied?
Manufacturing overhead
40
Selling and administrative costs incurred are treated as _____
period expenses
41
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
42
A journal entry debiting Salaries expense and crediting Salaries and wages payable could be recording _____
administrative salaries
43
A journal entry that debits Work in process and credits Manufacturing overhead is recording the _____
application of manufacturing overhead costs
44
A journal entry that debits Depreciation expense and credits Accumulated depreciation records _____
depreciation on office equipment
45
What costs are charged directly to the income statement?
- administrative costs
- selling costs
46
When a job is completed, its costs are transferred into _____
Finished Goods
47
The sum of all amounts transferred from Work in process to Finished goods during a period is the Cost of Goods _____
manufactured
48
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 _____
Finished goods $34,000 and credits Work in process $34,000
49
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
50
When a job is completed, the job costs are transferred OUT OF _____
work in process
51
The cost of goods manufactured for a period is the _____
sum of amounts transferred from Work in process to Finished goods during the period
52
The journal entry to record a completed job credits _____
Work in process
53
Would nonmanufacturing costs be charged to the Manufacturing overhead account?
No
54
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
55
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 _____
$120,000
56
The journal entry to record depreciation on office equipment debits _____
Depreciation expense and credits Accumulated depreciation
57
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
produced
58
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
59
When only a portion of the units involved in a job are sold, the _____
unit product cost is used to calculate the amount transferred from finished goods to cost of goods sold
60
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
$186,000
61
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.
$395,000
61
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
sold
62
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
63
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
$260,000
64
Unadjusted cost of goods sold is calculated by subtracting:
ending finished goods inventory from goods available for sale
65
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
66
Meep Industries had unadjusted cost of goods sold of $300,000. Overhead was overapplied by $20,000. Adjusted cost of goods sold is _____
$280,000
67
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 _____
$55,000
68
To calculate total manufacturing costs, add direct materials, direct labor and _____
applied manufacturing overhead
69
The difference between overhead applied to work in process and actual overhead is _____
overapplied or underapplied overhead
70
Martin Industries had unadjusted cost of goods sold of $450,000. Overhead was underapplied by $30,000. Adjusted cost of goods sold is _____
$480,000
71
Gross margin minus selling and administrative expenses equals _____
net operating income
72
Overhead is underapplied if _____
actual overhead is more than applied overhead
73
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.
$228,000
74
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.
True
75
Underapplied or overapplied overhead is the _____
difference between overhead applied to work in process and actual overhead
76
To calculate the adjusted cost of goods sold _____
add underapplied overhead to or subtract overapplied overhead from unadjusted cost of goods sold
77
Actual manufacturing overhead is _____ to the Manufacturing overhead account
debited
78
Overhead is overapplied if _____
actual overhead is less than applied overhead
79
A debit balance in Manufacturing overhead means overhead was _____
underapplied
80
What side of the Manufacturing overhead account is applied to manufacture overhead entered on?
always the credit side
81
Net operating income is calculated by subtracting:
selling and administrative expenses from gross margin
82
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
83
A credit balance in the Manufacturing Overhead account of Y dollars means that the overhead is _____ by of Y dollars
overapplied
84
If overapplied overhead is closed out to Cost of goods sold, the Cost of goods sold account will be _____
decreased
85
When overhead is underapplied, a _____ must be made to the Manufacturing overhead account to close it out
credit
86
