Cost Accounting Chapter 15 Flashcards
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Questions and Answers

What is a cost accounting system?

It helps managers determine selling prices and is used to control costs of manufacturing activities.

Producing products that are individually designed to meet the needs of a specific customer where each customized product is manufactured separately is referred to as:

  • Process operations
  • Mass production
  • Batch production
  • Job order production (correct)

    • What are custom orders?

    Job order production.

    What is mass production?

    <p>Process operations.</p> Signup and view all the answers

    Which of the following are manufacturing costs?

    <p>Direct materials</p> Signup and view all the answers

    What is the correct order of cost flows in a job order costing system?

    <p>Work in process; finished goods; cost of goods sold.</p> Signup and view all the answers

    What does a cost accounting system accumulate?

    <p>Production costs and assigns them to products and services.</p> Signup and view all the answers

    What do job cost sheets track?

    <p>Materials, labor, and overhead costs of a job.</p> Signup and view all the answers

    Job order production is most likely used by companies that produce:

    <p>Customized wedding cakes.</p> Signup and view all the answers

    List the documents in the order used when recording direct materials costs in job order cost accounting.

    <p>Receiving reports, materials ledger cards, materials requisitions, job cost sheets.</p> Signup and view all the answers

    Manufacturing of products in a repetitive manner is referred to as:

    <p>Process operations</p> Signup and view all the answers

    What are the three types of manufacturing costs in a job order costing system?

    <p>Direct labor, direct materials, and overhead.</p> Signup and view all the answers

    Manufacturing costs include direct materials, direct labor, and:

    <p>Applied overhead costs.</p> Signup and view all the answers

    All of the following are inventory accounts for a manufacturer except:

    <p>Indirect materials inventory</p> Signup and view all the answers

    When is the predetermined overhead rate calculated?

    <p>At the start of the accounting period.</p> Signup and view all the answers

    Job cost sheets can be used to: (Check all that apply)

    <p>Provide a record for the Cost of Goods Sold account</p> Signup and view all the answers

    List the documents in order used when recording indirect materials costs in job order costing.

    <p>Receiving reports, materials ledger cards, materials requisitions, factory overhead ledger.</p> Signup and view all the answers

    List the documents in order used when recording indirect labor costs in job order costing.

    <p>Time tickets, factory overhead, allocated.</p> Signup and view all the answers

    What is the predetermined overhead rate if a company estimates 10,000 direct labor hours and $120,000 total overhead costs?

    <p>12 per hour.</p> Signup and view all the answers

    What is the journal entry to record the allocation of factory overhead?

    <p>Debit Work in Process Inventory and credit Factory Overhead.</p> Signup and view all the answers

    What is the journal entry to record indirect materials in production?

    <p>Debit Factory Overhead and credit Raw Materials Inventory.</p> Signup and view all the answers

    List the documents in order used when recording direct labor costs in job order costing.

    <p>Time tickets, job cost sheets, factory wages payable.</p> Signup and view all the answers

    What is the journal entry to record the allocation of factory overhead to work in process?

    <p>Debit Work in Process Inventory and credit Factory Overhead.</p> Signup and view all the answers

    What does the journal entry to allocate overhead costs to jobs entail?

    <p>Credit Factory Overhead.</p> Signup and view all the answers

    What does the journal entry for purchasing indirect utilities involve?

    <p>Debit Factory Overhead.</p> Signup and view all the answers

    What is the journal entry to record purchasing indirect materials?

    <p>Debit Raw Materials Inventory.</p> Signup and view all the answers

    What does the entry for the use of indirect materials involve?

    <p>Credit Raw Materials Inventory.</p> Signup and view all the answers

    What is the journal entry for direct labor used?

    <p>Debit Work in Process Inventory.</p> Signup and view all the answers

    A Schedule of Cost of Goods Manufactured includes all of the following costs except:

    <p>Cost of goods sold</p> Signup and view all the answers

    List the documents in order used when recording indirect labor costs in job order costing.

    <p>Time tickets, factory overhead, allocated to specific.</p> Signup and view all the answers

    Managers use a predetermined overhead rate for which of the following reasons?

    <p>Both A and B</p> Signup and view all the answers

    When is the predetermined overhead rate calculated?

    <p>At the start of the accounting period.</p> Signup and view all the answers

    When is overhead allocated to jobs?

    <p>During the accounting period.</p> Signup and view all the answers

    When is the overhead account adjusted for over- or underapplied overhead?

    <p>At the end of the accounting period.</p> Signup and view all the answers

    If the factory overhead is underapplied, then the adjusting journal entry to close the factory overhead account includes a:

    <p>Debit to Factory Overhead</p> Signup and view all the answers

    A Schedule of Cost of Goods Manufactured includes which costs?

    <p>Direct materials used</p> Signup and view all the answers

    What effect does an adjustment for overapplied overhead have on net income?

    <p>It increases net income.</p> Signup and view all the answers

    What happens to the Factory Overhead account for applied overhead costs?

    <p>It is credited.</p> Signup and view all the answers

    If the factory overhead is overapplied, then the adjusting journal entry to close the factory overhead account includes a:

    <p>Credit to Cost of Goods Sold</p> Signup and view all the answers

    One important difference between service companies and manufacturing companies is that:

    <p>Service companies do not have raw materials inventory</p> Signup and view all the answers

    The journal entry to record indirect materials costs used in production includes a debit to factory ______.

    <p>overhead</p> Signup and view all the answers

    If a company's overhead is underapplied by $150, how does this affect net income?

    <p>Net income will be overstated by $150.</p> Signup and view all the answers

    What does the Factory Overhead account reflect for actual overhead costs?

    <p>It is debited.</p> Signup and view all the answers

    A company incurs factory overhead costs of $1,200 and applied $1,500. If considered immaterial, the adjusting entry will require:

    <p>Factory Overhead account has a credit balance</p> Signup and view all the answers

    Both service companies and manufacturing companies have:

    <p>A and B</p> Signup and view all the answers

    Study Notes

    Cost Accounting System

    • A cost accounting system assists managers in setting selling prices and controlling manufacturing costs.
    • It accumulates production costs and assigns them to specific products and services.

    Job Order Production

    • Customized products are manufactured separately to meet individual customer needs, known as job order production.
    • Job order production is exemplified by companies making tailored items, such as wedding cakes.

    Production Types

    • Mass production refers to the manufacturing of products using process operations in a repetitive manner.
    • Job order production contrasts with mass production, focusing on unique custom orders.

    Manufacturing Costs

    • Types of manufacturing costs include direct materials, direct labor, and applied overhead.
    • Office salaries are not classified as manufacturing costs.
    • A Schedule of Cost of Goods Manufactured encapsulates direct materials used, direct labor, and factory overhead applied.

    Cost Flows

    • The proper sequence of cost flows in a job order costing system is from work in process to finished goods, then to cost of goods sold.

    Job Cost Sheets

    • Companies utilize job cost sheets to monitor materials, labor, and overhead costs related to a specific job.

    Overhead Rates

    • The predetermined overhead rate is calculated at the start of the accounting period and is based on direct labor hours.
    • During the accounting period, overhead costs are allocated to jobs, with adjustments made at the period's end for over- or underapplied overhead.

    Journal Entries

    • To record factory overhead allocation, debit Work in Process Inventory and credit Factory Overhead.
    • Indirect materials are recorded by debiting Factory Overhead and crediting Raw Materials Inventory.
    • Indirect labor costs employ a sequence of time tickets and factory overhead before allocating to specific jobs.

    Inventory Accounts

    • Common inventory accounts for manufacturers include raw materials inventory, work in process inventory, and finished goods inventory.
    • Indirect materials inventory is not typically recognized as a separate inventory account.

    Net Income Impact

    • Adjustments for overapplied or underapplied overhead affect net income, positively impacting it when overhead is overapplied, and negatively when underapplied.

    Differences Between Companies

    • Service companies differ from manufacturing companies as they do not hold raw materials inventory.
    • Both service and manufacturing companies incur overhead and direct labor costs.

    Miscellaneous

    • The process for recording costs involves various documents, including receiving reports, materials ledger cards, and job cost sheets, arranged in a specific order based on the type of costs being recorded.

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    Description

    Test your knowledge on cost accounting concepts with these flashcards from Chapter 15. Learn about cost accounting systems, job order production, and customized product orders to enhance your understanding of manufacturing costs.

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