Chapter 3 Managerial Accounting

what is raw materials

any materials that go into final product

what is WIP

all units of production that are only partially completed

what is finish goods

completed units of product that have not been sold yet

what is Cost of Goods Manufactured

costs associated with goods that were finished during the period

What are the product costs (production flow sheet)

raw materials purchases, labor costs, MOH

What goes on the balance sheet?(production flow sheet)

raw materials inventory, WIP inventory, Finished goods inventory

What goes on the income statement? (production flow sheet)

cost of goods sold

When a transaction is on account, what do you credit?

accounts payable

Journal Entry: Corp had 5000 in raw material on hand. THey purchased additional raw materials for 23200 on account.

Dr: raw materials inventory 23200; Cr: accounts payable 23200

Journal Entry: 15000 of lumber was requisitioned from raw materials inventory for use in specifc jobs, and 1200 of nails were requisitioned from raw materials inventory for general factory use.

Dr: WIP inventory 15000; Dr: MOH 1200; Cr: Raw materials inventory 16200

Journal Entry: Labor costs were incurred as follows: 9500 for direct laborers, 6000 for factory supervisors, 2000 for factory maintenance

Dr: WIP Inventory 9500; Dr: MOH 8000; Cr: Salaries and Wages Payable

Journal Entry: Corp incurred the following expenses: utilities costs (head, water & power) for the factory totaling 12000 and depreciation on the factory equipment total 6500.

Dr: MOH 18500; Cr: Utilities Payable 12000; Cr: Accumulated depreciation 6500

Debiting Salaries expense and crediting salaries and wages payable is an example of what kind of cost?

non-manufacturing costs

Debiting depreciation expense and crediting accumulated depreciation is an example of what kind of cost?

non-manufacturing costs

Debiting advertising expense and crediting accounts payable is an example of what kind of cost?

non manufacturing cost

Journal Entry: Corp uses a POHR of $25 per direct labor hour. The company used 910 direct labor hours during the period.

Dr: WIP 22750 Cr: MOH 22750

Journal Entry: During the period, Corp completed jobs costing 35,000.

Dr: Finished Goods 35000; Cr: WIP inventory

What two entries are required when finished goods are sold?

1. record the sale (debit A/R and credit sales revenue)

2. Record COGS and reduce finished goods inventory

Journal Entry: Corp sold 25000 of finished goods inventory to customers on credit for 48000.

Dr: accounts receivable 48000; Cr: sales revenue 48000; Dr: COGS 48000; Cr: Finished goods 48000

When actual overhead is greater than overhead applied what do you call it?

underapplied overhead

When actual overhead is less than overhead applied what do you call it?

overapplied overhead

At the end of the year, what is required for under or over applied overhead?

a year-end adjustment

Journal Entry to close out underapplied/overapplied MOH

Dr: COGS; Cr: MOH

Cost of goods manufactured

goods that were finished during the period

What three product costs are associated with COGM

materials, labor and overhead (no period costs)

4 overall steps to Schedule of COGM

1. Direct Materials

2. Direct Labor

3. MOH

4. COGM

Accounts used for direct materials section for Schedule of COGM

1. Beg. Raw Materials Inventory

2. Add: purchases of raw materials

3. = raw materials available for use

4. less: ending raw materials inventory

5. = raw materials used in production

6. less: indirect materials included in MOH

7. = direct materials used in production

Accounts used for MOH section for Schedule of COGM

1. Indirect materials

2. Indirect labor

3. Factory utilities

4. Depreciation – factory equip.

5. Total Overhead

Accounts used for COGM section for Schedule of COGM

1. Total Manufacturing Costs

2. Add: Beg. WIP Inventory

3. Less: ending WIP Inventory

4. = COGM

Schedule of Cost of goods sold order:

1. Beg. Finished Goods Inventory

2. Add: Cost of Goods Manufactured

3. = Finished Goods Available for Sale

4. Less: Ending Finished Goods Inventory

5. Unadjusted COGS

6. ±Underapplied/Overapplied MOH

7. = Adjusted COGS

What to add/subtract for overapplied/underapplied MOH on COGS

add underapplied and subtract overapplied