Part 6 (Accounting for FOH)

Question 1

There are two accounts used in FOG, which is the:

Answer 1

factory overhead control and factory overhead applied.

Question 2

is used to accumulate actual overhead incurred,

Answer 2

Factory overhead control

Question 3

is used to accumulate estimated factory overhead applied to production.

Answer 3

factory overhead applied

Question 4

For factory overhead applied to production, a predetermined rate is used and this is computed using any of the following as s base:

Answer 4

1. Units of production
2. Direct material cost
3. Direct labor hours
4. Direct labor cost
5. Machine hours

Question 5

When do we use and compute predetermined rate?

Answer 5

for using factory overhead applied

Question 6

The predetermined factory overhead rate computed may be used for:

all departments in the company - ________?

or rate may be computed for each department to fit the nature of the operations of the department- ___________?

Answer 6

blanket rate

departmentalized rate

Question 7

______________________ is used even if there is actual factory overhead because at the time the overhead is needed for costing of jobs completed, the actual overhead is not yet available (the actual will be known only at the __________?)

Answer 7

Estimated factory overhead (Factory overhead applied)

end of the month

Question 8

The computation of the cost of each job will be done upon the ____________ of the job and this may be during the first week, second week, or third week of the month

and at this time, the actual overhead is not yet available because some of the items included in the actual overhead will be known only at the _____________?

Answer 8

completion

end of the month.

Question 9

As items in the factory overhead control account are incurred, the Factory Overhead Control account is (dr or cr?).

Answer 9

debited

Question 10

The applied factory overhead entered on the job order cost sheet for each job is the basis for the following entry:

Answer 10

Dr: WIP
Cr: Applied FOH

(entry in the cost sheet of FOH section)

Question 11

Some actual overhead costs, such as indirect materials, indirect labor, and payroll taxes, are debited to Factory Overhead Control as they are ________.

Answer 11

incurred

Question 12

Other overhead costs, such as depreciation and expired insurance are debited to Factory Overhead Control when adjusting entries are _________.

Answer 12

recorded

Question 13

The controlling, account for accumulating the indirect charges incurred in production is:

Answer 13

MANUFACTURING OVERHEAD CONTROL

Dr side
1. Total debit footing at the end of the
accounting period when closing the books.
2. Cost of indirect labor at the same time crediting payroll.
3. Cost of indirect expense purchased from outsiders
4. Cost of other indirect expense incurred by the company.

Cr side:
1. Cost of indirect materials and supplies issued from the warehouse at the same time crediting materials.

Question 14

Manufacturing overhead applied - account used for accumulating the total overhead charged to production during period.

Answer 14

MANUFACTURING OVERHEAD APPLIED

Dr side
1. Total credit footings at the end of the accounting period upon closing of the books.

Cr side
1. Cost of overhead allocated production and computed by to multiplying the actual factor being used during the period by the predetermined rate, at the same time, debiting work in process.

Question 15

Over/under applied overhead - the difference between the actual overhead incurred and the applied overhead.

Answer 15

OVER/UNDER APPLIED OVERHEAD

Dr side
1. Difference between the actual manufacturing overhead and the applied overhead when the actual is
more the applied.

Cr side
1. Difference between actual manufacturing overhead and the
applied overhead when applied is more than the actual.

Question 16

The closing of the Factory Overhead Control account and the Factory Overhead Applied account may be done at the end of the month or at the end of the year. If the closing is to be done monthly, the following are the entries:

Answer 16

End of the month:
Dr: Factory Overhead Applied
Under/over-applied overhead
Cr: Factory Overhead Control

End of the year:
Dr: Cost of Goods Sold
Cr: Under/over-applied overhead

Question 17

If the closing is to be done yearly, the entry will be at the end of the year only.
The entry is:

Answer 17

End of the year:
Dr: Factory Overhead Applied
Cost of Goods Sold
Cr: Factory Overhead Control

Question 18

The variance is computed as follows:
(in terms actual and applied)

Answer 18

Actual factory overhead
Less: Applied factory overhead
= Variance

Question 19

If actual is bigger than applied, the variance is called ______________?, and this is taken as an addition to the Cost of Goods Sold in the statement.

Answer 19

under-applied factory overhead (unfavorable)

Question 20

If applied is bigger than actual, the variance is called ___________________? and this is taken as deduction from the Cost of Goods Sold in the statement.

Answer 20

over-applied factory overhead (favorable)

Question 21

Whatever method of closing the control and applied account is used, the statement is always adjusted for the _______________ on the statement.

Answer 21

under-applied/(over-applied)

Question 22

For purposes of preparing the Cost of Goods Sold statement, factory overhead applied is used because this is the amount charged to the __________ account.

Answer 22

work in process

Question 23

As stated above, the Cost of Goods Sold will be adjusted for the variance only at the ____________.

Answer 23

end of the year

Question 24

If the Cost of Goods Sold is stated in the problem, then it must be taken as ______, prior to the adjustment for the variance.

Answer 24

normal

Question 25

Work in process - controlling account used to record the flow of the elements of cost through the factory during a given period:

Answer 25

WIP Dr: 1. Cost of beginning inventory 2. Cost of direct materials issued to production at the same time crediting materials 3. Cost of direct labor applied to production during the period at the same time crediting the payroll account 4. Amount of overhead applied to production at the same time crediting applied overhead. Cr: 1. Cost of materials, labor, and factory overhead applied to jobs completed during the period at the same time debiting finished goods. 2. Cost of direct materials returned to the warehouse at the same time debiting materials.

Question 26

The _____________ account is used to accumulate during the month the total cost of materials placed in process, labor used, and factory overhead applied.

Answer 26

work in process

Question 27

The amounts entered on the cost sheet should ______ the amounts debited to the work in process account during the month.

Answer 27

equal

Question 28

As jobs are completed, the cost sheets for the corresponding jobs are ______ and the amount is now transferred to the __________account.

Answer 28

totaled finished goods

Question 29

The journal entry to record the cost of the jobs completed is:

Answer 29

Dr: Finished goods Cr: Work in process

Question 30

When the finished goods are delivered to customers, the sales and the cost of goods sold are recorded as follows:

Answer 30

Dr: Accounts receivable Cr: Sales # Dr:Cost of goods sold Cr: finished goods #

Question 31

If a job is delivered directly to a customer, the entries to record the completion of the job and the delivery to the customer may be merged into one as follows:

Answer 31

Dr: Cost of goods sold Cr: Work in process

Question 32

- a controlling account used to record the flow of the cost of goods completed and transferred to the finished goods storeroom during the period

Answer 32

Finished goods

Question 33

FINISHED GOODS dr and cr side in t accounts:

Answer 33

Dr side: - Cost of inventory at the beginning Cr side: - Cost of finished goods sold during the period at same time debiting cost of goods sold. - Factory cost of job order completed at the same time crediting work in process. - Cost of goods returned by the customer at the same time crediting cost of goods sold.

Question 34

an account used to accumulate the cost of finished goods disposed through sale to customers.

Answer 34

Cost of goods sold

Question 35

COST OF GOODS SOLD dr and cr side in t-accounts

Answer 35

Dr side: - Cost of finished goods disposed through sale to customers at the same time crediting finished goods. - Adjustment for under-applied factory overhead Cr side: - Cost of finished goods returned by customers at the same time debiting the finished goods account. - Adjustment of over-applied factory overhead - Balance of the account at the end of the period at the same time debiting income summary

Question 36

The under applied factory overhead is computed as follows:

Answer 36

Actual factory overhead Less: Applied factory overhead = Under-applied factory overhead

Question 37

The closing of the Factory Overhead Control account and the Factory Overhead Applied account maybe done on a ________ basis or an ________ basis. Whatever method is used, the statement is always adjusted for the _____________________________________ factory overhead.

Answer 37

monthly annual under-applied (unfavorable) or the over-applied (favorable)

Question 38

Under-applied factory overhead is considered unfavorable because the effect is an _________ in the cost of goods sold, thereby _________ the gross profit.

Answer 38

increase decreasing

Question 39

On the other hand, the over-applied overhead is considered favorable because the effect is a __________ of the cost of goods sold thereby _________ the gross profit.

Answer 39

decrease increasing

Question 40

If the closing is done on a monthly basis a special account, ____________________________, will accumulate the differences period-to-period.

Answer 40

Under-and Over-applied Factory Overhead

Question 41

At the end of the calendar or fiscal year, the balance of the under-and over-applied account will be closed to _________________ or allocated on a _________________,____________,__________. The remaining balance should be pro-rated if the amount of the balance would ______________ net income if it were charged entirely to Cost of Goods Sold.

Answer 41

Cost of Goods Sold pro-rata basis to Work in Process, Finished Goods and Cost of Goods Sold materially distort

Question 42

If a small balance remains in the Under-and Over-applied Factory Overhead at year-end, it may be closed directly to ______________ because it will not materially affect net income.

Answer 42

Cost of Goods sold