ACC 252 Exam 2

Calculate the predetermined overhead rate

(Estimated Total Manufacturing over head)/ (Estimated total amount of allocation base)

Unit Selling price:

(Manufacturing cost (DM + DL +MOH) )/ (number of units) * markup = Unit selling price

Compute the gross margin

Adjusted GOGS(COGM + Underapplied MOH, or -underapplied MOH) + Underapplied MOH then do Sales - Adjusted COGS = Gross Margin

Schedule of COGM

DM + DL + MOH Applied = Total Manufacturing cos + beginning WIP -(WIP) =COGM

Record depreciation for factory assets

Debit MOH for amount Credit accumulated depreciation

Journal entry for underapplied overhead

Debit: COGS for amount underapplied Credit: MOH for amount underapplied

Record depreciation on selling and admin expenses

Debit: Depreciation expense for amount Credit: Accumulated depreciation for total amount

Journal entry for overapplied overhead

Debit: MOH for amount overapplied Credit: COGS for amount overapplied

Journal entry to record salaries of Direct labor, indirect labor, and selling and administrative salaries

Debit: WIP for direct labor amount Debit: MOH for indirect labor Debit: Selling and admin expenses for sell and admin salaried Credit: Wages and Salaries Payable for total amount

Journal entry to apply overhead

Debit: WIP for full amount Credit: MOH for full amount

Journal Entry to move goods to COGS

Debit: finished goods for full amount Credit: WIP for full ammount

Manufacturing Overhead-

Includes other costs in manufacturing that are neither direct materials costs nor direct labor costs.

Apply overhead

POHR * allocation base allocated

Period costs

Period costs are all the costs that are not product costs. All selling and administrative expenses are treated as period costs. For example, sales commissions, advertising, executive salaries, public relations, and the rental costs of administrative offices are all period costs. Period costs are not included as part of the cost of either purchased or manufactured goods; instead, period costs are expensed on the income statement in the period in which they are incurred using the usual rules of accrual accounting.

The cost of fire insurance for a manufacturing plant is generally considered to be a:

Product Cost

Product cost-

Product cost refers to the costs used to create a product. These costs include direct labor, direct materials, consumable production supplies, and factory overhead.

The balance in the Work in Process account equals

The balance in the Finished Goods inventory account. The balance in the Cost of Goods Sold account. The balances on the job cost sheets of uncompleted jobs.

Figure out POHR

Total predicted overhead / total predicted allocation base

How to calculate the high low method

Variable Cost =(change in cost)/(change in activity)

Choice of allocation base should be made based on

Whatever most closely drives over head should be chosen- in labor intensive production it should be direct labor hours, while in a machine intensive production, it should be machine hours.

Relevant Range-

a specific activity level that is bounded by a minimum and maximum amount. Within the designated boundaries, certain revenue or cost levels can be expected to occur. Outside of that relevant range, revenues and expenses will likely differ from the expected amount

High low method-

aking the highest level of activity and the lowest level of activity and comparing the total costs at each level. If the variable cost is a fixed charge per unit and fixed costs remain the same, it is possible to determine the fixed and variable costs by solving the system of equations.

Period cost-

all the costs that are not product costs. All selling and administrative expenses are treated as period costs. For example, sales commissions, advertising, executive salaries, public relations, and the rental costs of administrative offices are all period costs. Period costs are not included as part of the cost of either purchased or manufactured goods; instead, period costs are expensed on the income statement in the period in which they are incurred

Mixed Cost-

consist of a fixed component and a variable component. The annual expense of operating an automobile is a mixed cost. Some of the expenses are fixed, because they do not change in total as the number of annual miles change. Think insurance, parking fees, and some depreciation.

Variable cost-

cost that varies with the level of output

Raw materials-

direct materials used for production

Direct Labor-

materials directly used- ex the wood to make the box but not nails, glue etc

Apply overhead rate

predetermined over head rate * amount of allocation base being used

Determine over or under applied overhead

subtract actual overhead from applied. If positive it is under applied

In computing its predetermined overhead rate, Marple Company inadvertently left its indirect labor costs out of the computation. This oversight will cause:

the Cost of Goods Manufactured to be understated.

Allocation base-

the basis upon which an entity allocates its overhead costs. An allocation base takes the form of a quantity, such as machine hours used, kilowatt hours consumed, or square footage occupied.