D101 Cost and Managerial Accounting - Set 1 - Part 1

Correct Answer: The wages of factory custodians

The wages of factory custodians are considered part of manufacturing overhead because they are indirect labor costs related to production.

Correct Answer: Manufacturing overhead costs

Glue and nails are considered indirect materials and are part of manufacturing overhead costs.

Correct Answer: Debit to raw materials inventory

A purchase of raw materials on account increases raw materials inventory, which is recorded as a debit.

Correct Answer: Debit to manufacturing overhead

Payment for factory rent is recorded as manufacturing overhead, which is an indirect cost of production.

Correct Answer: An estimate based on expected overhead and machine/labor hours

Manufacturing overhead is typically applied to work-in-process using a predetermined overhead rate based on expected costs and allocation factors like machine or labor hours.

Correct Answer: Assigning direct labor costs to products being manufactured

This journal entry reflects assigning direct labor costs to the work-in-process inventory.

Correct Answer: Recording indirect labor costs to manufacturing overhead

Indirect labor costs (such as supervisors) are recorded as part of manufacturing overhead.

Correct Answer: $25 per direct labor hour

The predetermined overhead rate is calculated as budgeted overhead divided by budgeted direct labor hours ($500,000 / 20,000 = $25).

Correct Answer: Budget overhead, record actual overhead, apply overhead to WIP, eliminate overapplied/underapplied overhead

The process begins by budgeting overhead, recording actual overhead, applying overhead, and adjusting for over- or underapplied overhead.

Correct Answer: Debits to the manufacturing overhead account

Actual manufacturing overhead costs are debited to the manufacturing overhead account.

Correct Answer: Materials that are a key component to making manufactured goods

Key materials used directly in manufacturing goods are considered direct materials, not overhead.

Correct Answer: Manufacturing overhead

When manufacturing overhead is applied, it is credited to the manufacturing overhead account.

Correct Answer: Debit to cost of goods sold

Underapplied overhead means not enough overhead was applied, so it is added to cost of goods sold.

Correct Answer: Manufacturing overhead is overapplied by $3,000

Overapplied overhead occurs when more overhead is applied than actually incurred ($28,000 - $25,000 = $3,000 overapplied).

Correct Answer: Recording underapplied manufacturing overhead

This entry adjusts for underapplied overhead by increasing cost of goods sold.

Correct Answer: Allocate to work-in-process inventory, finished goods inventory, and cost of goods sold

Over- or underapplied overhead can be prorated across inventory and cost of goods sold based on ending balances.

Correct Answer: Debiting manufacturing overhead and crediting cost of goods sold

To correct overapplied overhead, manufacturing overhead is debited (to reduce it) and cost of goods sold is credited.

Correct Answer: When the activities performed in each process center are different for all units produced

Job costing is used when production processes and costs vary by job or product.

Correct Answer: Debit work-in-process inventory

Direct labor costs are debited to work-in-process inventory.

Correct Answer: A method of product costing in which costs are accumulated and tracked by process and averaged over all products made during the period

Process costing is used when products are manufactured in continuous processes and costs are averaged over all units produced.