CH3 ACC 220

Three inventory accounts in job costing system:

1. raw materials

2. WIP

3. FG

Cost of Goods Manufactured (COGM) refers to the total cost of goods…

completed DURING the period

Cost of Goods Manufactured (COGM) moves from __ to __?

WIP to FG

Cost of Goods Sold (COGS) moves from __ to __ on the income statement.

FG to COGS

Product costs are costs directly attached to the __.

product

Is Direct materials, direct labor, and manufacturing overhead product or period costs?

product

Period costs are costs incurred __ the factory.

outside

Journal entry for the Purchase of Raw Materials on account:

1. Debit RM inventory

2. Credit AP

Journal entry for the Movement of Raw Materials into Production (3) include amounts:

• Debit WIP (direct materials)

• Debit MOH (Indirect materials)

• Credit Raw Materials (WIP +MOH)

Journal entry for Direct Labor (3) include amounts:

• Debit WIP (direct labor amount)

• Debit MOH (indirect labor amount)

• Credit Wages Payable (WIP+MOH)

Journal entry for Other Manufacturing Overhead:

• Debit MOH

• Credit Cash/AP

Journal entry for Applying Overhead.. include amount:

• Debit WIP (for applied overhead amount)

• Credit MOH

When recording Applied Overhead, we debit WIP to assign ….

overhead costs to jobs

When recording Applied Overhead, we credit MOH to remove that amount from the ___ ___.

overhead “pool”

Total Manufacturing Cost =

DM + DL + Applied OH

Journal entry for Depreciation

• Debit DE

• Credit AD

Cost of Goods Manufactured (COGM) =

Beginning WIP + Total Manufacturing Costs - WP

Journal Entry for Cost of Goods Manufactured (COGM):

• Debit FG

• Credit WIP

Cost of Goods Sold (COGS) =

Beginning FG + Cost of Goods Manufactured - Ending FG

Journal Entry for Cost of Goods Sold (COGS):

• Debit COGS

• Credit FG

Cost of Goods Sold (COGS) has a normal ___ balance.

debit

(t/f) The amounts recognized when recording COGS and revenue are completely different.

true

COGS is recorded at the cost to…

produce those goods

Revenue is recorded at the __ __ of the goods.

Selling price

For a manufacturing company specifically, COGS can also be viewed as:

Units Sold x Cost Per unit

Gross Profit =

Sales - COGS

RM → WIP → FG →

COGS

Indirect costs → ______________ → applied to WIP

manufacturing overhead

Indirect costs → manufacturing overhead → applied to __

WIP

Product costs are ____ until sold.

inventory

Manufacturing overhead is first collected in the ___ account.

MOH

Manufacturing overhead is first collected in the MOH account and then assigned to jobs in __________.

works in processes

Manufacturing overhead is first collected in the MOH account and then assigned to jobs in WIP using what rate?

POHR

What process using Predetermined Overhead Rate to calculate its amounts?

Applying overhead to WIP

 Each job in works in processes receives overhead based on how much of…

activity it uses

Journal entry for the Applied Overhead to jobs:

• Debit WIP

• Credit MOH

Journal entry for Actual Manufactured costs incurred:

• Debit Manufacturing Overhead

• Credit Cash/AP

MOH acts as a ___ account.

clearing

Actual vs Applied Overhead: You debit the MOH account when…

actual costs are incurred

Actual vs Applied Overhead: You credit the MOH account when…

applying overhead

(t/f) Applied overhead ≠ actual overhead

true

Depreciation on factory equipment → MOH (product or period cost?)

product

Depreciation on office equipment → expense (period or product cost?)

period

A Job cost sheet summarizes..

all costs for a specific job

Does applied or actual overhead appear on a job cost sheet?

applied

Is Actual MOH charged directly to jobs?

No

Do Cost flows mimic physical movement of goods in production?

Yes

What summarizes direct materials, direct labor, and manufacturing overhead costs?

COG Manufactured Schedule

What summarizes direct materials, direct labor, and applied MOH costs, showing?

COG Sold

COGS and COGM both help prepare the income statement.

true

COGM schedule shows portions from ending ….

WIP

COGS schedule shows portions from ending ….

finished goods

COGM and COGS schedules link production costs to financial statements.

true

Period costs bypass inventory and flow directly to the income statement.

true

___ for under/overapplied overhead ensure COGS reflects total production costs.

Adjustments

Underapplied overhead: Applied MOH _?_ Actual MOH

<

Overapplied overhead: Applied MOH _?_ Actual MOH

>

Causes of differences between Actual and Applied Overhead (2)

1. fixed OH does not change with allocation base

2. OH control

When is Applied Overhead calculated?

during the period

What are the two methods of Disposing Underapplied or Overapplied Overhead?

1. Close to COGS

2. Close proportionally to WIP, Finished Goods, and COGS

Journal entry for Closing the Underapplied or Overapplied Overhead to Cost of Goods Sold:

• Debit COGS

• Credit MOH

Step 1 of Closing the Underapplied/Overapplied Overhead Proportionally:

Break the total Applied OH into portions in WIP, FG, and COGS

Step 2 of Closing the Underapplied/Overapplied Overhead Proportionally:

Divide Portion Allocated by Total Underapplied/Overapplied Overhead for each account

Step 3 of Closing the Underapplied/Overapplied Overhead Proportionally:

Multiply percent by amount Underapplied/Overapplied for each account

Journal Entry for Closing the Underapplied Overhead Proportionally (4):

• Debit WIP

• Debit FG

• Debit COGS

• Credit MOH

Journal Entry for Closing the Overapplied Overhead Proportionally (4):

• Debit MOH

• Credit WIP

• Credit FG

• Credit COGS

Closing all to COGS is less accurate and can __state COGS and __state net operating income.

• overstate COGS

• understate net income

Applied overhead is always recorded on the __ side of MOH.

credit

Actual overhead is always on the ___ side of MOH.

right

A debit to Manufacturing Overhead to record expired prepaid insurance on factory equipment reflects the allocation of…

indirect factory costs to production