ACCT 2210 Vansant Exam 1

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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=


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