When raw materials are issued into production the raw materials account is debited?

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• What account is debited for the issuance of indirect materials?
• When raw materials are issued into production the raw materials account is debited?
• What is journal entry in indirect materials used in the production?
• When indirect materials are issued to production the raw materials inventory account is credited?

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B. $812,500
Answer (B) is correct.
Factory overhead is 30% of total manufacturing costs, or $750,000. Direct labor is $937,500 (750,000 ÷ 0.8). Thus, raw materials must account for the remaining $812,500 ($2,500,000 - $750,000 - $937,500).

A. $300,000.
Answer (A) is correct.
Cost of goods manufactured ($2,425,000) equals total manufacturing costs ($2,500,000) plus beginning work-in-process (75% of EWIP) minus ending work-in-process. The ending work-in-process is $300,000.

$2,500,000 + .75 EWIP - EWIP = $2,425,000

$2,500,000 - .25 EWIP = $2,425,000

EWIP = $75,000 ÷ .25

EWIP = $300,000

D. $937,500
Answer (D) is correct.
Total manufacturing cost of $2,500,000 is composed of raw materials, direct labor, and factory overhead. Factory overhead is 30% of total manufacturing costs, or $750,000. If factory overhead is 80% of direct labor cost, direct labor cost is $937,500 ($750,000 ÷ 80%).

During the current accounting period, a manufacturing company purchased $70,000 of raw materials, of which $50,000 of direct materials and $5,000 of indirect materials were used in production. The company also incurred $45,000 of total labor costs and $20,000 of other manufacturing overhead costs. An analysis of the work-in-process control account revealed $40,000 of direct labor costs. Based upon the above information, what is the total amount accumulated in the manufacturing overhead control account?

A. $25,000
B. $30,000
C. $45,000
D. $50,000

Carley Products has no work-in-process or finished goods inventories at year end. The balances of Carley's accounts include the following:

Cost of goods sold $2,040,000
General selling and administrative expenses 900,000
Sales 3,600,000
Manufacturing overhead control 700,000
Manufacturing overhead applied 648,000

Carley's pretax income for the year is

A. $608,000
B. $660,000
C. $712,000
D. $1,508,000

A. $608,000
Answer (A) is correct.
The pretax income is equal to sales minus cost of goods sold, general selling and administrative expenses, and underapplied manufacturing overhead (the excess of actual overhead over the amount applied).

Sales $3,600,000
Cost of goods sold (2,040,000)
Underapplied overhead (52,000)

Gross margin $1,508,000
GS&A expenses (900,000)

Income before income taxes $ 608,000

Answer (B) is correct.
Applied overhead equals the actual labor hours (210,000) times the estimated application rate ($500,000 ÷ 200,000 DLH = $2.50 per direct labor hour), or $525,000. This amount is $10,000 ($525,000 - $515,000 actual cost) higher than the actual overhead cost incurred. Thus, overhead was overapplied by $10,000.

Mason Co. uses a job-order cost system and applies manufacturing overhead to jobs using a predetermined overhead rate based on direct-labor dollars. The rate for the current year is 200% of direct-labor dollars. This rate was calculated last December and will be used throughout the current year. Mason had one job, No. 150, in process on August 1 with raw materials costs of $2,000 and direct-labor costs of $3,000. During August, raw materials and direct labor added to jobs were as follows:

No. 150 No. 151 No. 152
Raw materials $ -- $4,000 $1,000
Direct labor 1,500 5,000 2,500

Actual manufacturing overhead for the month of August was $20,000. During the month, Mason completed Job Nos. 150 and 151. For August, manufacturing overhead was

A. Overapplied by $4,000.
B. Underapplied by $7,000.
C. Underapplied by $2,000.
D. Underapplied by $1,000.

Answer (C) is correct.
Mason incurred direct-labor costs in August of $9,000 ($1,500 Job 150 + $5,000 Job 151 + $2,500 Job 152). Thus, overhead applied was $18,000 ($9,000 × 200%). The amount underapplied was $2,000 ($20,000 actual OH - $18,000).

Worley Company has underapplied overhead of $45,000 for the year. Before disposition of the underapplied overhead, selected year-end balances from Worley's accounting records were:

Sales $1,200,000
Cost of goods sold 720,000
Direct materials inventory 36,000
Work-in-process inventory 54,000
Finished goods inventory 90,000

Under Worley's cost accounting system, over- or underapplied overhead is assigned to appropriate inventories and COGS based on year-end balances. In its year-end income statement, Worley should report COGS of:

A. $682,500
B. $684,000
C. $757,500
D. $765,000

Answer (C) is correct.
The assignment of underapplied overhead increases COGS. The underapplied overhead of $45,000 for the year should be assigned on a pro rata basis to work-in-process ($54,000), finished goods ($90,000), and COGS ($720,000). The sum of these three items is $864,000. Thus, $37,500 should be assigned to COGS [($720,000 ÷ $864,000) × $45,000]. COGS after assignment is $757,500 ($37,500 + $720,000). The remaining $7,500 should be assigned proportionately to work-in-process and finished goods.

At the beginning of the year, Smith, Inc., budgeted the following:

Units 10,000
Sales $100,000
Total variable expenses 60,000
Total fixed expenses 20,000

Manufacturing overhead:
Variable 30,000
Fixed 10,000

There were no beginning inventories. At the end of the year, no work was in process, total manufacturing overhead incurred was $39,500, and underapplied manufacturing overhead was $1,500. Manufacturing overhead was applied on the basis of budgeted unit production. How many units were produced this year?

A. 10,250
B. 10,000
C. 9,875
D. 9,500

Answer (D) is correct.
Given actual overhead of $39,500 and underapplied overhead of $1,500, overhead applied was $38,000 ($39,500 - $1,500). Overhead is applied at the rate of $4 per unit ($40,000 budgeted overhead ÷ 10,000 budgeted units). Accordingly, 9,500 units were produced ($38,000 applied overhead ÷ $4 per unit application rate).

A company manufactures plastic products for the home and restaurant market. The company also does contract work for other customers and uses a job-order costing system. The flexible budget covering next year's expected range of output is

Direct labor hours 50,000 80,000 110,000
Machine hours 40,000 64,000 88,000
Variable OH costs $100,000 $160,000 $220,000
Fixed OH costs 150,000 150,000 150,000
Total OH costs $250,000 $310,000 $370,000

A predetermined overhead rate based on direct labor hours is used to apply total overhead. Management has estimated that 100,000 direct labor hours will be used next year. The predetermined overhead rate per direct labor hour to be used to apply total overhead to the individual jobs next year is

A. $3.36
B. $3.50
C. $3.70
D. $3.88

Answer (A) is correct.
Factory (manufacturing) overhead consists of all costs other than direct materials and direct labor that are associated with the manufacturing process. Because the excess of actual manufacturing costs over standard costs is $20,000, and the standard costs are $100,000, the actual manufacturing costs are $120,000. However, because $80,000 of these costs are prime costs, the remainder is factory overhead. Thus, actual manufacturing overhead is therefore $40,000 ($120,000 - $80,000).

The accountant for Champion Brake, Inc., applies overhead based on machine hours. The budgeted overhead and machine hours for the year are $260,000 and 16,000, respectively. The actual overhead and machine hours incurred were $275,000 and 20,000. The cost of goods sold and inventory data compiled for the year is as follows:

Direct materials $ 50,000
COGS 450,000
WIP (units) 100,000
Finished goods (units) 150,000

What is the amount of over/underapplied overhead for the year?

A. $15,000
B. $50,000
C. $65,000
D. $67,000

Jonathan Manufacturing adopted a job-costing system. For the current year, budgeted cost driver activity levels for direct labor hours and direct labor costs were 20,000 and $100,000, respectively. In addition, budgeted variable and fixed factory overhead costs were $50,000 and $25,000, respectively. Actual costs and hours for the year were as follows:

Direct labor hours 21,000
Direct labor costs $110,000
Machine hours 35,000

For a particular job, 1,500 direct-labor hours were used. Using direct-labor hours as the cost driver, what amount of overhead should be applied to this job?

A. $3,214
B. $5,357
C. $5,625
D. $7,500

Answer (C) is correct.
To apply overhead to the job, both variable and fixed overhead must be properly allocated using standard rates and direct-labor hours as the cost driver. The pertinent information given for this year's budget includes direct-labor hours of 20,000 and the budgeted variable and fixed factory overhead of $50,000 and $25,000, respectively. The variable overhead cost per direct labor hour is $2.50 ($50,000 ÷ 20,000 DLH), and the fixed overhead per direct labor hour is $1.25 ($25,000 ÷ 20,000 DLH). Thus, the total standard overhead cost per direct labor hour is $3.75. The total overhead to be applied is $5,625 (1,500 DLH × $3.75).

Under Pick Co.'s job-order costing system, manufacturing overhead is applied to work-in-process using a predetermined annual overhead rate. During January, Pick's transactions included the following:

Direct materials issued to production $ 90,000
Indirect materials issued to production 8,000
Manufacturing overhead incurred 125,000
Manufacturing overhead applied 113,000
Direct labor costs 107,000

Pick had neither beginning nor ending work-in- process inventory. What was the cost of jobs completed in January?

A. $302,000
B. $310,000
C. $322,000
D. $330,000

Answer (B) is correct.
Given no beginning or ending work-in-process, the cost of jobs completed equals the sum of direct materials, direct labor, and manufacturing overhead applied. Indirect materials costs are charged to overhead control and are not included in the amount transferred from work-in- process to finished goods except to the extent they are reflected in applied overhead. The difference between overhead incurred and overhead applied, if material, is assigned to finished goods, cost of goods sold, and ending work-in-process ($0 in this case). Thus, the cost of jobs completed was $310,000 ($90,000 + $113,000 + $107,000).

Answer (C) is correct.
Prime cost is the sum of direct materials and direct labor costs. Conversion cost is the sum of direct labor and overhead costs.

OH = 200% × DL
DL + OH = $1,800,000
DL + 2DL = $1,800,000
DL =$600,000
DM + DL = $1,500,000
DM + $600,000 = $1,500,000
DM = $900,000

Ajax Corporation transferred $72,000 of materials to its production department in February and incurred $37,000 of conversion costs ($22,000 of direct labor and $15,000 of overhead). At the beginning of the period, $14,000 of inventory (direct materials and conversion costs) was in process. At the end of the period, $18,000 of inventory was in process. What was the cost of goods manufactured?

A. $105,000
B. $109,000
C. $123,000
D. $141,000

Answer (A) is correct.
The total cost incurred in the production process, the sum of BWIP, direct materials, direct labor, and overhead, minus the cost of goods not completed during the period (EWIP), is the cost of goods manufactured.

BWIP $14,000
Materials $72,000
Conversion costs $37,000
Minus EWIP $(18,000)
COGM $105,000

Lucy Sportswear manufactures a specialty line of T-shirts using a job-order cost system. During March, the following costs were incurred in completing Job ICU2: direct materials, $13,700; direct labor, $4,800; administrative, $1,400; and selling, $5,600. Manufacturing overhead was applied at the rate of $25 per machine hour, and Job ICU2 required 800 machine hours. If Job ICU2 resulted in 7,000 good shirts, the cost of goods sold per unit would be

A. $6.50
B. $6.30
C. $5.70
D. $5.50

The work-in-process of Parrott Corporation increased $11,500 from the beginning to the end of November. Costs incurred during November included $12,000 for direct materials, $63,000 for direct labor, and $21,000 for overhead. What was the cost of goods manufactured during November?

A. $75,000
B. $84,500
C. $96,000
D. $107,500

What account is debited for the issuance of indirect materials?

When indirect materials are issued, the manufacturing overhead control account is debited. The manufacturing overhead is also known as the indirect costs.

When raw materials are issued into production the raw materials account is debited?

When recording raw materials, a debit is made to the raw materials inventory account, while a credit is made to the accounts payable account. When raw materials are used, the accounting treatment varies according to whether the raw materials are direct or indirect.

What is journal entry in indirect materials used in the production?

The entry to record the indirect material is to debit manufacturing overhead and credit raw materials inventory. Indirect labor records are also maintained through time tickets, although such work is not directly traceable to a specific job.

When indirect materials are issued to production the raw materials inventory account is credited?

True, when indirect materials are issued to production, they are debited to manufacturing overhead and the Raw Materials Inventory account is credited. Indirect materials are materials that are used in the production process but cannot be directly traced to a cost object.

What account is debited when raw materials are used?

Does raw materials have a debit or credit balance?

Is raw materials an asset or expense?

When indirect materials are issued to production the raw materials inventory account is credited?