ACCT 2210 Vansant Exam 1
reasons to use an allocation base
-it is difficult to trace overhead costs to particular jobs -manufacturing overhead consists of many different items ranging from grease used in the machines to production manager's salary -many types of manufacturing overhead costs are fixed even though output fluctuates during the period
companies that use job-order costing
1. boeing (aircraft manufacturing) 2. Bechtle international (large scale construction) 3. walt disney studios (movie production)
fixed cost
A cost that remains constant, in total, regardless of changes in the level of activity
variable cost
A cost that varies, in total, in direct proportion to changes in the level of activity
differential revenue
A difference in revenue between two alternatives
direct cost
A direct material is an example of a:
direct materials
A radio installed in an automobile.
period, fixed
Advertising by a dental office.
administrative costs
All executive, organizational & clerical costs; can be either direct or indirect
subsidiary ledger
All of a company's job cost sheets
product costs
All the costs that are involved in acquiring or making a product
activity-based costing
An alternative approach to developing multiple predetermined overhead rates
raw materials
Any materials that go into the final product
product, variable
Apples processed and canned by Del Monte.
conversion cost
Manufacturing overhead goes into what kind of cost?
indirect cost
Manufacturing overhead is an example of:
discretionary fixed cost
May be altered in the short-term by current managerial decisions
Work in process to finished goods
Once units of product are completed, their costs are transferred from
The relevant range of activity for a fixed cost
The range of activity over which the graph of the cost is flat.
1. direct materials 2. direct labor 3. manufacturing overhead
The schedules contain three types of costs:
period costs
sales & corporate headquarters
total manufacturing overhead
total conversion - direct labor=
total direct materials
total prime - direct labor=
total cost
variable cost + fixed cost
fixed in total
______ is not affected by changes in the activity level within the relevant range
period, variable
Commissions paid to automobile salespersons.
finished goods
Consist of completed units of product that have not been sold to customers
finished goods costs
Consists of completed units of product that have not yet been sold to customers
work in process
Consists of units of product that are only partially complete and will require further work before they are ready for sale to the customer
work in process
Consists of units of production that are only partially complete & will require further work before they are ready for sale to customers
selling costs
Costs necessary to secure the order & deliver the product; can be either direct or indirect
product, fixed
Depreciation of factory lunchroom facilities at a General Electric plant.
manufacturing overhead
Depreciation of manufacturing equipment.
Work in Process to convert direct materials into finished goods
Direct labor and manufacturing overhead are added to
prime cost & conversion cost
Direct labor goes into what kind of cost?
direct cost
Direct labor is an example of:
total manufacturing costs
Direct labor used in production & manufacturing overhead applied to production are added to direct materials
prime cost
Direct materials go into what kind of cost?
POHR equation
Estimated total manufacturing overhead cost for the coming period / estimated total units in the allocation base for the coming period
product, variable
Hamburger buns in a Wendy's restaurant.
raw materials
Includes any materials that go into the final product
cost of goods manufactured
Includes the manufacturing costs associated with the goods that were finished during the period
common costs
Indirect costs incurred to support a number of cost objects are known as:
period, fixed
Insurance on IBM's corporate headquarters.
product, fixed
Insurance on a Bausch & Lomb factory producing contact lenses.
manufacturing overhead
Insurance premiums incurred to operate a manufacturing facility.
direct materials
Items that are removed from raw materials inventory & placed into the production process
true
Job order costing systems often are too simplistic to aid managerial decision making.
places that use job-order costing
Law firms, accounting firms, & medical treatment
all selling costs & administrative costs
Period costs include
direct materials, direct labor & manufacturing overhead
Product costs include
manufacturing overhead
Property taxes.
product, fixed
Salary of a supervisor overseeing production of printers at Hewlett-Packard.
period, variable
Shipping canned apples from a Del Monte plant to customers.
product, variable
Steering wheels installed in BMWs.
increases cost of goods sold & decreases net income
The adjustment for overapplied overhead
decreases cost of goods sold & increases net income
The adjustment for underapplied overhead
differential costs
The difference in revenue between two alternatives
cost of goods manufactured
The ending work in process inventory is deducted from the total work in process for the period
opportunity cost
The potential benefit that is given up when one alternative is selected over another
total work in process
Total manufacturing costs are added to the beginning work in process
committed fixed cost
Type of fixed cost that is long-term, cannot be significantly reduced in the short term
manufacturing overhead
Utility costs.
direct labor
Wages paid to automobile assembly workers.
underapplied overhead
When a company applies less overhead to production than it actually incurs
overapplied overhead
When a company applies more overhead to production than it actually incurs
activity-based costing
When a company creates overhead rates based on the activities that it performs
Finished goods to cost of goods sold
When a manufacturer sells its finished goods to customers, the costs are transferred from
Raw materials to work in process
When direct materials are used in production, their costs are transferred from
sunk costs
_____ are costs that have already been incurred and cannot be changed now or in the future
variable per unit
_____ remains constant
manufacturing overhead
______ ______ includes all the manufacturing costs except direct material and direct labor
fixed per unit
______ decreases as the activity level rises & increases as the activity level falls
variable in total
______ increase & decrease in proportion to changes in the activity level
conversion cost
direct labor + manufacturing overhead
prime cost
direct materials + direct labor
total manufacturing cost
direct materials + direct labor + manufacturing overhead=
