ACCT CH. 1

Cost of goods sold- manufacturers

Beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory = cost of goods sold

Total Manufacturing Costs

Direct Materials + Direct Labor + Factory Overhead

Which of the following are included in Raw materials inventory? (Check all that apply).

Direct materials

Managerial accounting provides:

Financial AND non financial information to an organization's managers.

Direct Materials

Raw material that physically becomes part of the product and is clearly identified with specific products or batches of product.

Which of the following are period costs for a manufacturer? (Check all that apply.)

Salary for administrative staff Rent on the office building Sales commissions

Total Non-Manufacturing Costs

Selling + General & Administrative Expenses

Which of the following are direct costs for a shoe manufacturer? (Check all that apply.)

Shoe laborers who make the shoes Leather used in the shoes

Direct VS. Indirect costs

costs can be direct or indirect depending on cost object. -Cost object: Product, process, department, or customer to which costs are assigned. Direct costs: Costs incurred for the benefit of one specific cost object. Consist of direct materials and direct labor. Ex: Direct materials for bikes include tires, frame, seat, chain. Direct labor are wages and benefits of the workers making the bike. Indirect costs: costs that cannot be cost-effectively traced to a cost object. Ex: Supervisors salary who monitors production of the bikes.

3 factors that push a person to commit fraud

1. Opportunity-low risk of getting caught 2. Pressure- or incentive 3. Rationalization-justifies fraud or doesn't see its criminal nature

A manufacturing company reports the following items: Finished goods inventory, beginning balance: $1,000 Finish goods inventory, ending balance: $1,200 Cost of goods manufactured, $5,000 The cost of goods sold is ________

$4800 1000+5000-1200= 4800

Purpose of managerial accounting

(1) Determining the costs of an organization's products and services (2) Planning future activities (3) Comparing actual results to planned results

Key differences in computing costs of goods between merchandisers and manufacturers

-merchandisers have merchandise inventory and manufacturers have finished goods inventory -merchandisers have cost of inventory purchased, the cost of buying product to sell -manufacturers have cost of goods manufactured

List the items below in the correct order in which they would appear in the calculation of cost of goods sold for a manufacturing company.

1) beginning finished goods inventory 2) plus 3) cost of goods manufactured 4) minus 5) ending finished goods inventory

the managerial accounting system collects:

cost information and assigns it to an organizations products and services. Costs are important because they impact the financial position and profitability of a business. Costs are also important for decisions like product pricing, profitability analysis and whether to make or buy a product.

Prime costs consist of

direct labor + direct materials

Prime costs consists of:

direct labor and direct materials

Costs which are crucial parts of the finished product are called

direct materials

Digital manufacturing combines _____ to manufacture products. (Check all that apply.)

human control machines computers

Flow of Manufacturing Activities

materials activity (raw materials) --> production activity (work in process)--> sales activity (finished goods)

Conversion costs consist of

Direct Labor + Manufacturing Overhead

Raw Materials Inventory

Goods a company acquires to use in making products. Raw materials CAN be cost-effectively traced to materials are direct materials and are included in the raw materials inventory.

Match the activity with the activity type.

Purchase materials-------->Materials activity Use materials--------->Production activity Product sold---------->Sales activity

Sparks Fireworks manufactures and sells fireworks. Their raw materials used is $71,500. Their beginning raw materials inventory was $5,000 and their ending raw materials inventory was $6,000. Sparks' raw materials inventory turnover is

13.00 5000+6000=11,000/2=5500 71,500/5500=13.00

Major Manufacturing Company has direct materials used of $50,000, beginning raw materials inventory of $10,000 and ending raw materials inventory of $8,000. Compute the raw materials inventory turnover.

5.55 50,000/ (10,000+8000)/2 50,000/9000=5.55

Fill in the blank question. A company incurred the following costs: Selling and administrative expenses: $45,000; Direct materials: $15,000; Income tax expense: $10,000; Direct labor: $30,000; Factory overhead: $5,000. Total manufacturing costs reported on the schedule of cost of goods manufactured are______

50,000 direct materials+direct labor+overhead

Product costs

All costs that are involved in acquiring or making a product. In the case of manufactured goods, these costs consist of direct materials, direct labor, and manufacturing overhead.

digital manufacturing

Combines machines, computers, and human control to manufacture products. Data analytics: analyzing data to identify meaningful relations and trends Data visualization: graphical depiction of data to help people interpret their meaning

Which of the following are product costs for a manufacturer? (Check all that apply.)

Depreciation on the factory equipment Direct materials

Consider a service company that provides carpet cleaning. Classify the cost of the hourly workers who clean carpets for customers

Direct

Direct Materials Cost

Expenditures for direct materials that are separately and readily traced through the production process to finished goods

The following items would be included in the overhead section of the schedule of cost of goods manufactured: (Check all that apply.)

Factory supplies used Factory insurance Factory utilities

Consider a service company that provides carpet cleaning and uses straight-line depreciation. Classify the cost of the depreciation on the carpet cleaning machines.

Indirect

What types of information does managerial accounting provide? (Check all that apply.)

Information for managers Non-financial Financial

Fraud and Ethics in Managerial Accounting

On average, US businesses loses 5% of its revenues to fraud

Planning

Process of setting goals and preparing to achieve them -long term strategic plans usually span 5-10 years, then the strategic plans are turned into short term action plans, which are more concrete with better defined goals. -a short term action plan with a dollar amount is known as a BUDGET.

schedule of cost of goods manufactured

Report that summarizes the types and amounts of costs incurred in a company's production process for a period; also called manufacturing statement or cost of goods manufactured statement. 1) Direct materials 2) Direct labor 3) Factory Overhead 4) Costs of goods manufactured

Consider a company that manufactures picture frames. Which of the following costs would be considered direct costs? (Check all that apply.)

Wages of assembly line worker Oak wood used for frame Glass used in the frame

Consider a company that manufactures automobiles. Which of the following costs would be considered a direct cost?

Wages of assembly line workers

Costs of goods sold- merchandisers

beginning merchandise inventory + cost of merch purchased-ending merch inventory= cost of goods sold

Period costs

non-production costs linked to a time period (not to specific products). . Period costs are expensed in the period they incurred and reported on the income statement as either selling expenses or general and administrative expenses. Selling expenses- advertising, delivery, salesperson salary, commission and travel expenses. General and administrative expenses- accounting expenses, office employee wages, office rent, depreciation on office equipment, and office manager salaries. For a manufacturer, period costs are also known as nonmanufacturing costs.

The cost of materials a company purchases to use in making products are

raw materials

Raw materials inventory turnover

raw materials used/average raw materials inventory *average raw inventory is beginning raw + ending raw / 2 High ratio of inventory turnover is preferred

Cost Concepts for Service Companies

service companies also classify costs into direct materials and direct labor as well as overhead, selling and general and administrative costs. Selling expenses as well as general and administrative expenses for a service company are period costs unrelated to performing its services.