Accounting Chapter 15

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direct labor (DL)

The wages of employees who convert raw materials into finished products

An example of a period cost is a. depreciation on factory equipment b. advertising expense c. indirect materials d. property taxes on plant facilities

b. advertising expense

Given the following data: Work in process, beginning $14,000 Work in process, ending 20,000 Direct labor costs 4,000 Cost of goods manufactured 8,000 Factory overhead 8,000 Direct materials used is

2000

Work in process inventory on December 31 of the current year is $44,000. Work in process inventory increased by 60% during the year. Cost of goods manufactured amounts to $275,000. The total manufacturing costs incurred in the current year are

291,500

Compute conversion costs given the following data: direct materials, $390,100; direct labor, $205,900; factory overhead, $187,500 and selling expenses, $47,700.

393,400

2 types of period cost expenses

selling and administrative expenses

examples of direct material

tires of a car, wood to make a guitar

examples of direct labor

wages of workers putting tires on car, wages of workers making wood into guitar

when are direct labor and direct materials expensed?

when the goods are sold

Which of the following would be least likely to be considered a managerial accounting report? a. statement of cost of goods manufactured b. report to analyze potential efficiencies and savings for the purchase of new production equipment c. statement of stockholders' equity d. schedule of total manufacturing costs incurred

c. statement of stockholders' equity

In order to be useful to managers, managerial accounting reports should possess all of the following characteristics except a. be prepared to report information for any unit of the business to support decision making b. provide objective measures of past operations and subjective estimates about future decisions c. be provided at any time management needs information d. be prepared in accordance with generally accepted accounting principles

d. be prepared in accordance with generally accepted accounting principles

2 types of direct product cost

direct material, direct labor

what are prime costs?

direct materials and direct labor

other indirect costs examples

factory depreciation, insurance on factory buildings

what is indirect labor and indirect materials classified as?

factory overhead and product costs

other indirect costs

factory overhead that is not IM or IL

indirect material examples

gloves for workers, service parts for factory equipment

where do product costs appear?

income statement and balance sheet

three types of indirect costs

indirect material (IM), indirect labor (IL), other

2 types of product cost

indirect, direct

what is the primary criterion for the preparation of managerial accounting reports?

manager needs

The cost of goods sold for Michaels Manufacturing in the current year was $233,000. The January 1 finished goods inventory balance was $31,600, and the December 31 finished goods inventory balance was $24,200. Cost of goods manufactured during the period was

225,600

At the beginning of the current year, Grant Company's work in process inventory account had a balance of $30,000. During the year, $68,000 of direct materials were used in production, and $66,000 of direct labor costs were incurred. Factory overhead for the year amounted to $90,000. Cost of goods manufactured is $230,000. The balance in work in process inventory on December 31 is

24,000

Work in process inventory on December 31 is $42,000. Work in process inventory decreased by 40% during the year. Total manufacturing costs incurred amount to $260,000. The cost of goods manufactured is

288,000

work in process inventory =

Beginning Work in Process Inventory + Direct Materials Used + Direct Labor Incurred + Factory Overhead - Cost of Goods Manufactured

direct materials used =

Cost of Goods Manufactured - Work in Process, Beginning + Work in Process, Ending - Direct Labor Costs - Factory Overhead

classify each cost: factory supervisors salaries

product - OH - IL

classify each cost: Oil used to lubricate sewing machines

product - OH - IM

classify each cost: factory janitorial supplies

product - OH - IM

classify each cost: Repairs and maintenance costs for sewing machines

product - OH - IM or IL

classify each cost: Property taxes on factory building and equipment

product - OH - other

classify each cost: depreciation on sewing machines

product - OH - other

Insurance expense incurred on a factory building would be treated as a

product cost

what are direct labor and direct materials?

product costs

what's the primary goal of managerial accounting?

provide info to managers

indirect material (IM)

related to production but not part of the product

if managerial accounting reports are going to help managers what are the three characteristics they should have?

report info for decision making, provide objective measures of past operations and subjective estimates about future decisions, be provided at any time

examples of indirect labor

salaries of production supervisors, wages of factory janitors

indirect labor (IL)

salaries of workers contributing to production but not directly working on the product.

examples of administrative expense

office supplies expense, accountants salary expense

indirect costs (OH)

other production costs

classify each cost: Research and development costs

period

classify each cost: Salaries of distribution center personnel

period

classify each cost: Travel costs of media relations employees

period

classify each cost: Utility costs for office building

period

classify each cost: advertising expense

period

classify each cost: chiefs financial officer's salary

period

classify each cost: depreciation on office equipment

period

classify each cost: sales commissions

period

classify each cost: Wages of sewing machine operators

product - DL

classify each cost: fabric used during production

product - DM

classify each cost: Salaries of production quality control supervisors

product - OH - IL

period cost

not directly related to making product

Total Manufacturing Costs =

costs of goods manufactured - beginning work in process inventory + ending work in process inventory

direct product cost

can be traced to specific product

conversion cost equation

conversion cost = direct labor cost + factory overhead

product cost

cost of product

direct material (DM)

cost of raw materials converted into product

examples of selling expenses

marketing expense, delivery expense


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