Question 1

The cost of goods manufactured is recorded as a debit to the Finished goods account.

Accepted Answer

The cost of goods manufactured represents the total cost of producing finished goods, including direct materials, direct labor, and manufacturing overhead. Hence, it is recorded as a debit to the Finished goods account.

Question 2

During 2012, a company incurs $500,000 of manufacturing overhead costs and allocates out $506,000 of manufacturing overhead costs. At year-end, the adjustment entry needed to clear the overhead balance to zero will include a debit to Cost of goods sold.

Accepted Answer

In order to clear the overhead balance to zero, the adjustment entry should credit manufacturing overhead and debit Cost of goods sold. Therefore, the statement in the question is false.

Question 3

At the end of the year, Martin Company has a preliminary credit balance in the Manufacturing overhead account of $95. Which of the following is the year-end adjusting entry needed to clear the balance to zero?

Accepted Answer

The Manufacturing overhead account is used to accumulate indirect costs incurred during the manufacturing process. At the end of the period, this balance needs to be transferred to either Cost of goods sold or Finished goods inventory, depending on whether the costs have become a part of the units produced or not. However, since the account has a credit balance, it means that more costs have been allocated to it than have been incurred. To clear this balance to zero, we need to debit the account by the amount of the credit balance and credit an appropriate account. The only option that achieves this is to debit Manufacturing overhead $95 and credit Cost of goods sold $95.

Question 4

During 2012, a company incurs $500,000 of manufacturing overhead costs and allocates out $460,000 of manufacturing overhead costs. At year-end, the adjustment entry needed to clear the overhead balance to zero will include a debit to Cost of goods sold.

Accepted Answer

Since only $460,000 of manufacturing overhead costs were allocated out, there is still an unallocated balance of $40,000. To clear this balance to zero, a debit entry will be made to Cost of goods sold.

Question 5

Overallocated manufacturing overhead occurs when the manufacturing overhead allocated to work in process inventory is less than the amount actually incurred.

Accepted Answer

Overallocated manufacturing overhead occurs when the manufacturing overhead allocated to work in process inventory is greater than the amount actually incurred.

Question 6

Underallocated manufacturing overhead costs are always the result of which of the following situations?

Accepted Answer

Underallocated manufacturing overhead costs occur when the amount of allocated overhead costs based on the predetermined overhead rate is less than the actual overhead costs incurred.

Question 7

Underallocation of manufacturing overhead would require which of the following year-end adjustments?

Accepted Answer

The answer of Underallocation of manufacturing overhead would require which...

Question 8

Lakeside Company estimated manufacturing overhead costs for 2012 at $378,000, based on 180,000 estimated direct labor hours. Actual direct labor hours for 2012 totaled 195,000. The manufacturing overhead account contains debit entries totaling $391,500. The manufacturing overhead for 2012 was:
A)$31,500 underallocated.
B)$31,500 overallocated.
C)$18,000 underallocated.
D)$18,000 overallocated.

Accepted Answer

Calculation: $378,000/180,000 = $2.10
$2.10 × 195,000 = $409,500
$409,500 - $391,500 = $18,000

Question 9

Overallocation of manufacturing overhead would require which of the following year-end adjustments?

Accepted Answer

The answer of Overallocation of manufacturing overhead would require which...

Question 10

At the end of the year, Deltona Company has a preliminary debit balance in the Manufacturing overhead account of $3,950. Which of the following is the year-end adjusting entry needed to clear the balance to zero?

Accepted Answer

The correct entry to clear a debit balance in the Manufacturing overhead account is to debit Cost of goods sold and credit Manufacturing overhead. This adjusts the cost of goods sold for the under-applied overhead.

Question 11

Altina Company just finished job A40. It included $400 of direct materials, and $3,600 of direct labor. Altina uses a predetermined manufacturing overhead rate based on a percentage of direct labor costs. That rate is 40%. The entry to record the completion of the job should be a:

Accepted Answer

Calculations: $400 + $3,600 + ($3,600 × 40%) = $5,440

Question 12

During 2012, a company incurs $500,000 of manufacturing overhead costs and allocates out $492,000 of manufacturing overhead costs. Overhead costs have been underallocated.

Accepted Answer

The actual manufacturing overhead costs incurred by the company ($500,000) are greater than the allocated manufacturing overhead costs ($492,000), indicating that overhead costs have been underallocated.

Question 13

On January 1, 2012, Jackson Company's work in process inventory account had a balance of $65,000. During 2012, materials requisitioned for use in production amounted to $70,000, of which $66,000 represented direct materials. Factory wages for the period were $209,000, of which $186,400 were for direct labor. Manufacturing overhead is allocated on the basis of 60% of direct labor cost. Actual overhead was $116,440. Jobs costing $353,240 were completed during 2012. The December 31, 2012, balance in work in process inventory is:

Accepted Answer

Calculations: $65,000 + $66,000 + $186,400 + ($186,400 × 60%) - $353,240 = $76,000

Question 14

Gardner Machine Shop uses a predetermined manufacturing overhead rate of $63.20 per direct labor hour. In January, Gardener completed job number A33, which included 15 direct labor hours. Please provide the journal entry to allocate overhead to the job.

Accepted Answer

The answer of Gardner Machine Shop uses a predetermined manufacturing...

Question 15

During 2012, a company incurs $500,000 of manufacturing overhead costs and allocates out $506,000 of manufacturing overhead costs. Overhead costs have been underallocated.

Accepted Answer

The company has allocated more manufacturing overhead costs than it actually incurred, meaning that overhead costs have been overallocated, not underallocated.

Question 16

The cost of goods manufactured is recorded as a debit to the Work in process account.

Accepted Answer

The cost of goods manufactured is recorded as a debit to the Finished Goods account, not the Work in Process account. The Work in Process account is debited during the manufacturing process, and upon completion, the costs are transferred out to the Finished Goods account.

Question 17

When jobs are completed, the total cost of the job is recorded as a debit to Finished goods and a credit to Work in process.

Accepted Answer

This statement is true. When a job is completed, its total cost is transferred from the Work in process account to the Finished goods account. This is done by debiting the Finished goods account and crediting the Work in process account.

Question 18

On January 1, 2012, Matthew Company's work in process inventory account had a balance of $30,000. During 2012, $58,000 of direct materials was placed into production. Manufacturing wages incurred amounted to $84,000, of which $66,000 were for direct labor. Manufacturing overhead is allocated on the basis of 120% of direct labor cost. Actual manufacturing overhead was $90,000. Jobs costing $220,400 were completed during 2009. What is the December 31, 2012 balance in work in process inventory?

Accepted Answer

To find the ending balance in work in process inventory, we need to calculate the total manufacturing costs incurred during the year and then subtract the cost of completed jobs.

Total manufacturing costs = Direct materials + Direct labor + Manufacturing overhead

Direct materials = $58,000
Direct labor = $66,000
Manufacturing overhead (allocated) = 120% x $66,000 = $79,200
Actual manufacturing overhead = $90,000

Total manufacturing costs = $58,000 + $66,000 + $79,200 = $203,200

Cost of completed jobs = $220,400

Ending balance in work in process inventory = Total manufacturing costs - Cost of completed jobs
Ending balance in work in process inventory = $203,200 - $220,400 = -$17,200

Since the ending balance is negative, it means that the cost of completed jobs exceeded the total manufacturing costs, so the work in process inventory account has been fully depleted. To get the correct answer, we need to take the absolute value of the negative balance, which is $17,200. Then we subtract this amount from the beginning balance in work in process inventory to get:

Ending balance in work in process inventory = Beginning balance - Cost of completed jobs + Total manufacturing costs
Ending balance in work in process inventory = $30,000 - $220,400 + $203,200 = $12,800

Therefore, the answer is D) $12,800.

Question 19

Caltran Company has just completed manufacturing job number 445. It included $320 of direct materials cost, $1,240 of direct labor cost, and $560 of allocated overhead. Which of the following is the correct journal entry needed to record the completed job?

Accepted Answer

The answer of Caltran Company has just completed manufacturing job...

Question 20

Cost of goods sold needs to be debited at year-end when the manufacturing overhead is overallocated in order to clear the overhead account to zero.

Accepted Answer

When manufacturing overhead is overallocated, it means that the overhead applied to products exceeds the actual overhead costs incurred. Instead of debiting cost of goods sold, the overallocated amount is typically credited to cost of goods sold or allocated between work in process, finished goods, and cost of goods sold based on their relative sizes, thereby reducing the expense and increasing income.

Quiz 17: Job Order and Process Costing