ACCT 226 Exam 1
A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements, ______.
$300 is reported as a expense and $900 is reported as an asset
gross margin
=sales revenue-cost of goods sold
contribution margin
=sales-variable expenses
journal entry: direct labor and indirect labor
Debit: work in process inventory (direct labor) debit: manufacturing overhead (indirect labor) credit: salaries or wages payable (if accrued, cash if paid)
predetermined overhead rate (POHR)
Estimated Manufacturing Overhead Costs/ Estimated Activity Base
traditional income statement
Sales Revenue -Cost of goods sold =gross margin -selling & admin expenses =net income from operations
Some Vegetables Can Fall North
Sales Revenue Variable expenses Contribution margin Fixed expenses Net income
contribution format of income statement
Sales revenue -variable expenses =contribution margin -fixed expenses =net income from operations
Sarah Can Go Selling Nuts
Sales revenue COGS Selling and admin expenses Net income
total non-manufacturing costs
Selling + General & Administrative Expenses
overapplied overhead
actual overhead<overhead applied
underapplied overhead
actual overhead>overhead applied
Cost objects include: Multiple select question. -anything for which cost data is desired. -organizational subunits / departments. -anything for which revenue data is desired. -customers.
anything for which cost data is desired, organizational subunits/departments, customers
schedule of cost of goods sold
beginning finished goods inventory +cost of goods manufactured (from schedule above) =cost of goods available for sale -ending finished goods inventory =unadjusted cost of goods sold +/- under/over applied MOH =adjusted cost of goods sold
step 1: schedule of costs of goods manufactured
beginning raw materials inventory +purchase of raw materials =raw materials available for use -ending raw materials inventory =raw materials used in production -indirect materials included in MOH =direct materials used in production
manufacturing overhead
consists of indirect labor, indirect materials, and general overhead expenses like depreciation on factory equipment, rent of production facility, etc. (i.e., all product costs except direct materials and direct labor)
Direct labor and overhead costs incurred to change raw materials into finished products are known as ______ costs.
conversion
Direct labor and overhead costs incurred to change raw materials into finished products are known as _________ costs
conversion
Direct labor and overhead costs incurred to change raw materials into finished products are known as __________ costs
conversion
Any item for which cost data is desired is called a(n) ________ _________
cost object
step 4: schedule of costs of goods manufactured
cost of goods manufactured: total manufacturing costs (DM,DL,MOH) +beginning work in process inventory -ending work in process inventory =cost of goods manufactured
journal entry: record the revenue portion of the entry when units are sold
debit: accounts receivable (if sold on account) credit: sales revenue
journal entry: record expense portion of entry when units are sold
debit: cost of goods sold credit: finished goods inventory
journal entry: record under applied overhead
debit: cost of goods sold credit: manufacturing overhead
journal entry: transfer of completed goods from work in process to finished goods
debit: finished goods inventory credit: work in process inventory
journal entry: record over applied overhead
debit: manufacturing overhead credit: cost of goods sold
journal entry: issuing indirect materials to production areas
debit: manufacturing overhead credit: raw materials inventory
journal entry: purchase of raw materials
debit: raw materials inventory credit: account payable (if on account, cash if paid)
Journal entry: applying overhead
debit: work in process inventory credit: manufacturing overhead
Prime costs include ______. Multiple select question. direct labor direct materials manufacturing overhead selling and administrative expenses
direcct labor, direct materials
step 2: schedule of costs of goods manufactured
direct labor
conversion cost
direct labor + manufacturing overhead
activity bases
direct labor hours, machine hours, direct labor wages
prime cost
direct materials + direct labor
total manufacturing costs
direct materials + direct labor + manufacturing overhead
variable cost example
direct materials, direct labor, or any other expenses that will stay the same per unit but vary in total as the level of production varies
Selling and administrative costs are ______ costs.
direct or indirect
Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are _____________ materials. (Enter only one word per blank).
direct or raw
Administrative costs include ______.
executive compensation and public relations costs
Other names for manufacturing overhead include: Multiple select question. factory burden. factory overhead. prime manufacturing costs indirect manufacturing costs.
factory burden, factory overhead, indirect manufacturing costs
Indirect labor costs include: Multiple select question. -factory security guard wages. -assembly-line supervisor salary. -administrative assistant salary. -assembly-line worker wages.
factory security guard wages, assembly-line supervisor salary
All of a company's depreciation, property taxes, and insurance premiums are considered manufacturing overhead.
false
True or false: Labor costs that can be specifically traced to a product are indirect labor costs.
false
total cost (mixed costs)
fixed costs + (variable cost rate per unit x #unit) OR Y=a+bX
Y=a+bX
formula for a line- used to solve for fixed costs
variable costs behavior
increases in total proportionately as number of units increases
Minor items such as nails and glue are usually considered to be ______.
indirect materials
Manufacturing overhead costs include ______.
indirect materials, factory supervisors' salaries, and factory depreciation
Factory burden is a synonym for ______ ______
manufacturing overhead
step 3: schedule of costs of goods manufactured
manufacturing overhead (applied)
Indirect materials and indirect labor are classified as ______.
manufacturing overheadd
The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is recognized is known as the ___________ principle
matching
Indirect materials include ______.
nails, glue, and thread
X=
number of units
average fixed cost behavior
per unit changes as the number of units produced or as the activity level changes
Which of the following statements are true? Multiple select question. -Period costs are included as part of the cost of goods. -Period costs are expensed when they are incurred. -The wages of assembly-line workers are period costs. -Sales commissions are period costs.
period costs are expensed when they are incurred, sales commissions are period costs
The sum of direct materials and direct labor is called ________ cost
prime
The sum of direct materials and direct labor is called __________ cost.
prime
Direct materials, direct labor, and manufacturing overhead are all ______ costs.
product
Inventoriable costs is another term for _________ costs
product or manufacturing
Cost behavior ______. Multiple select question. -is a detailed analysis technique used to determine whether costs are fixed or variable -refers to how a cost will change as activity level changes -is the relative proportion of each type of cost in an organization -categorizes costs as fixed, mixed and variable
refers to how a cost will change as activity levl changes, categorizes costs as fixed, mixed and variable
fixed cost behavior
remain the same in total regardless of the number of units produced or the activity level
variable cost behavior
remains the same per unit
fixed cost examples
rent on the factory, advertising expenses, salaries of executives
Nonmanufacturing costs include ______. Multiple select question. insurance on plant equipment assembly-line worker wages sales commissions company president's salary
sales commissions, company presidents salary
Y=
total costs
a=
total fixed costs
product costs
total manufacturing costs
period coss
total non-manufacturing costs
b=
variable cost rate
Units that are partially complete are found in ______.
work in process
Prior to being recorded on the income statement, manufacturers' product costs flow through ______. Multiple select question. Work in Process Raw Materials Finished Goods Cost of Goods Sold
work in process, raw materials, finished goods