Chapter Two Flashcards
What costs are assigned to the work in process inventory account?
Manufacturing costs
Where is the cost of completed jobs transferred?
The finished goods inventory account
Where is the cost of goods sold transferred?
Cost of goods sold account
What are factory labor costs?
Gross earnings of factory workers, payroll taxes, and fringe benefits.
What entries does assigning manufacturing costs to work in process produce?
Debit to work in process inventory and credits to raw materials inventory, factory labor, and manufacturing overhead.
Where are direct materials and indirect materials charged?
Direct materials are charged to job specific work in progress account, and indirect materials are charged to manufacturing overhead.
What is the activity base?
Direct labor costs, direct labor hours, machine hours, whichever is determined to be the cost driver
What is the formula for predetermined overhead rates?
Estimated total manufacturing overhead divided by estimated total units in the allocation base.
How do you determine if MOH
applied is over-applied and under-applied?
If the actual MOH applied is more than applied MOH, it is under-applied. If the actual MOH applied is less than applied MOH applied, it is over-applied.
How do you adjust for over-application/under application of MOH?
Adjust the cost of goods sold and manufacturing accounts (debit manufacturing account and credit cost of goods sold if it’s over-applied. Debit cost of goods sold and credit manufacturing accounts if it’s under-applied.
