Financial and Managerial Accounting Ch 15 (week 1)

Which of the following is not a factory overhead cost?

materials used directly in the manufacturing process of the product

Period costs include

operating costs that are shown on the income statement in the period in which they are incurred

A company manufactured 50,000 units of a product at a cost of $450,000. It sold 45,000 units at $15 each. The gross profit is

$270,000 (Cost of Manufacturing 45,000 Units = ($450,000 ÷ 50,000 units) × 45,000 = $405,000 Gross Profit = Sales - Cost of Manufacturing = ($15 × 45,000) - $405,000 = $675,000 - $405,000 = $270,000)

For April, determine the cost of goods manufactured. Using the data given, prepare a statement of Cost of Goods Manufactured. Cost of Goods Sold, Cost of Goods Manufactured Glenville Company has the following information for April: Cost of direct materials used in production $36,000 Direct labor $42,000 Factory overhead $31,000 Work in process inventory, April 1 $25,000 Work in process inventory, April 30 $25,000 Finished goods inventory, April 1 $32,000 Finished goods inventory, April 30 $24,000

(Add direct materials, direct labor, and factory overhead to the beginning work in process inventory. Subtract the ending work in process inventory.) Glenville Company Statement of Cost of Goods Manufactured Work in process inventory, April 1 $25,000 Cost of direct materials used in production $36,000 Direct labor $42,000 Factory overhead $31,000 Total manufacturing costs incurred in April $109,000 Total manufacturing costs $134,000 Work in process inventory, April 30 $25,000 Cost of goods manufactured $109,000

For April, determine the cost of goods sold. Using the data given, prepare a statement of Cost of Goods Sold Cost of Goods Sold, Cost of Goods Manufactured Glenville Company has the following information for April: Cost of direct materials used in production $36,000 Direct labor $42,000 Factory overhead $31,000 Work in process inventory, April 1 $25,000 Work in process inventory, April 30 $25,000 Finished goods inventory, April 1 $32,000 Finished goods inventory, April 30 $24,000

(Add the cost of goods manufactured to the beginning finished goods inventory. Subtract the ending finished goods inventory.) Glenville Company Statement of Cost of Goods Sold Finished goods inventory, April 1 $32,000 Cost of goods manufactured $109,000 Cost of finished goods available for sale $141,000 Finished goods inventory, April 30 $24,000 Cost of goods sold $117,000

Identify the following costs as direct materials, direct labor, or factory overhead for a magazine publisher:

(Direct materials are the costs of any material integral to the finished product. Employee wages integral to the finished product are direct labor. Factory overhead costs are manufacturing costs that are neither direct materials nor direct labor.) a. Staples used to bind magazines Direct Materials b. Wages of printing machine employees Direct Labor c. Maintenance on printing machines Factory Overhead d. Paper used in the magazine Direct Materials

Indicate whether each of the following costs of an automobile manufacturer would be classified as direct materials cost, direct labor cost, or factory overhead cost

(Direct materials cost are the cost of any material integral to the finished product. Employee wages integral to the finished product are direct labor costs. Factory overhead costs are manufacturing costs that are neither direct materials nor direct labor.) Automobile engine Direct materials cost Brake pads Direct materials cost Depreciation of robotic assembly line equipment Factory overhead cost Glass for front and rear windshields Direct materials cost Safety helmets and masks for assembly line workers Factory overhead cost Salary of quality control inspector Factory overhead cost Steering wheel Direct materials cost Tires Direct materials cost Wages of assembly line workers Direct labor cost

Identify the following costs as a prime cost (P), conversion cost (C), or both (B) for a magazine publisher:

(Prime costs are direct materials and direct labor. Conversion costs are direct labor and overhead.) a. Paper used for the magazine P b. Wages of printing machine employees B c. Glue used to bind magazine P d. Maintenance on printing machines C

For apparel manufacturer Abercrombie & Fitch, Inc. (ANF), classify each of the following costs as either a product cost or a period cost:

(Product costs are costs associated with the product. Period costs are selling and administrative expenses.) Advertising expenses Period cost Chief financial officer's salary Period cost Depreciation on office equipment Period cost Depreciation on sewing machines Product cost Fabric used during production Product cost Factory janitorial supplies Product cost Factory supervisors' salaries Product cost ✔ Property taxes on factory building and equipment Product cost Oil used to lubricate sewing machines Product cost Repairs and maintenance costs for sewing machines Product cost Research and development costs Period cost Sales commissions Period cost Salaries of distribution center personnel Period cost Salaries of production quality control supervisors Product cost Travel costs of media relations employees Period cost Utility costs for office building Period cost Wages of sewing machine operators Product cost

Identify the following costs as a product cost or a period cost for a magazine publisher:

(Product costs are costs associated with the product. Period costs are selling and administrative expenses.) a. Sales salaries Period cost b. Paper used for the magazine Product cost c. Maintenance on printing machines Product cost d. Depreciation expense—corporate headquarters Period cost

Determine the occupancy rate for June. Occupancy Rate Jake's Cabins is a small motel chain with locations near the national parks of Utah, Wyoming, and Montana. The chain has a total of 500 guest rooms. The following operating data are available for June: Number of Guests Nights per Visit Guest Nights 4,400 1 4,400 1,800 2 3,600 750 3 2,250 600 4 2,400 20 5 100

(To determine occupancy rate, you need to know the guest nights and the available room nights) 85% Occupancy Rate = Guest Nights Available Room Nights Occupancy Rate = 12,750 15,000 = 85%

Determine the guest nights for June. Occupancy Rate Jake's Cabins is a small motel chain with locations near the national parks of Utah, Wyoming, and Montana. The chain has a total of 500 guest rooms. The following operating data are available for June: Number of Guests Nights per Visit Guest Nights 4,400 1 4,400 1,800 2 3,600 750 3 2,250 600 4 2,400 20 5 100

(To determine occupancy rate, you need to know the guest nights and the available room nights.) 12,750 Number of Guests Nights per Visit Guest Nights 4,400 1 4,400 1,800 2 3,600 750 3 2,250 600 4 2,400 20 5 100 12,750

Determine the available room nights for June. Occupancy Rate Jake's Cabins is a small motel chain with locations near the national parks of Utah, Wyoming, and Montana. The chain has a total of 500 guest rooms. The following operating data are available for June: Number of Guests Nights per Visit Guest Nights 4,400 1 4,400 1,800 2 3,600 750 3 2,250 600 4 2,400 20 5 100

(To determine occupancy rate, you need to know the guest nights and the available room nights.) 15,000 15,000 available room nights (500 rooms × 30 nights in June)

occupancy rate

= Guest Nights Available Room Nights

utilization rate

A measure of the use of a fixed asset in serving customers relative to the asset's capacity.

Controlling

A phase in the management process that consists of monitoring the operating results of implemented plans and comparing the actual results with the expected results.

planning

A phase of the management process whereby objectives are outlined and courses of action determined.

cost object

A product, sales territory, department, or activity to which costs are assigned, depending on the decision-making needs of management.

statement of cost of goods manufactured

A statement prepared by manufacturing companies that summarizes the cost of goods manufactured during the period.

Chief Accounting Officer (CAO)

A vice president of accounting who reports t the CFO and oversees technical accounting, accounting poicy, credit, collections, tax, treasury, and internal audit functions.

factory overhead cost

All of the costs of producing a product except for direct materials and direct labor.

Chief Financial officer (CFO)

An executive vice president responsible for overseeing the financial activities of an entire company.

factory burden

Another term for manufacturing overhead or factory overhead.

verticals

Business units often structured as seperate businesses with in a parent company that develop products sold directly to consumers.

decision making

Choosing among alternative actions; a component inherent in the other management processes of planning, directing, controlling, and improving.

direct costs

Costs that are identified with and traced to a cost object.

indirect costs

Costs that are not identified with or traced to a cost object.

manufacturing overhead

Costs, other than direct materials and direct labor costs, that are incurred in the manufacturing process.

horizontals

Departments within a company that do not develop products but provide services to the various verticals and other horizontals.

objectives (goals)

Developed in the planning stage, these reflect the direction and desired outcomes of certain courses of action.

Strategic Planning

Developing long-term actions to achieve a company's objectives.

operational planning

Developing short-term actions for managing the day-to-day operations of a company.

Determine Fuller Manufacturing's cost of goods manufactured for the month ended October 31. Cost of Goods Manufactured for a Manufacturing Company The following information is available for Fuller Manufacturing Company for the month ending October 31: Cost of direct materials used in production $121,700 Direct labor $146,000 Work in process inventory, October 1 $54,800 Work in process inventory, October 31 $74,200 Total factory overhead $66,900

Fuller Manufacturing Company Statement of Cost of Goods Manufactured For the Month Ended October 31 (Add direct materials, direct labor, and factory overhead to the beginning work in process inventory. Subtract the ending work in process inventory.) Work in process inventory, October 1 $54,800 Manufacturing costs incurred during October: Cost of direct materials used in production $121,700 Direct labor $146,000 Factory overhead $66,900 Total manufacturing costs incurred $334,600 Total manufacturing costs $389,400 Work in process inventory, October 31 $74,200 Cost of goods manufactured $315,200

Assume that the occupancy rate for June of the prior year was 82%. Has the utilization rate for Jake's Cabins improved or declined? Occupancy Rate Jake's Cabins is a small motel chain with locations near the national parks of Utah, Wyoming, and Montana. The chain has a total of 500 guest rooms. The following operating data are available for June: Number of Guests Nights per Visit Guest Nights 4,400 1 4,400 1,800 2 3,600 750 3 2,250 600 4 2,400 20 5 100

Improved The utilization (occupancy) rate has improved from 82% in the prior year to 85% in the current year.

feedback

Measures provided to operational employees or managers on the performance of subunits of the organization. These measures are used by employees to adjust a process or behavior to achieve goals.

Strategies

Planned long-term actions by which business goals and objectives will be achieved.

period costs

Selling and administrative expenses incurred in marketing the product, delivering the product, or managing the company and not directly related to manufacturing the product.

financial accounting

The branch of accounting that is concerned with recording transactions using generally accepted accounting principles (GAAP) for a business or other economic unit and with a periodic preparation of various statements from such records.

managerial accounting

The branch of accounting that uses both historical and estimated data in providing information that management uses in conducting daily operations, in planning future operations, and in developing overall business strategies.

conversion costs

The combination of direct labor and manufacturing overhead costs; in lean accounting, the account in which is accumulated the costs of direct labor and factory overhead.

prime costs

The combination of direct material and direct labor costs.

direct materials cost

The cost of materials that are an integral part of the finished product.

materials inventory

The cost of materials that have not yet entered into the manufacturing process.

cost of goods sold

The cost of merchandise sold recognized as an expense; the cost of finished goods available for sale minus the ending finished goods inventory.

finished goods inventory

The direct materials costs, direct labor costs, and factory overhead costs of finished products that have not been sold.

work in process inventory

The direct materials costs, the direct labor costs, and the applied factory overhead costs that have entered into the manufacturing process but are associated with products that have not been finished.

management process

The five basic management functions of 1) planning 2) directing 3) controlling 4) improving 5) decision making

Chief Executive Officer (CEO)

The highest-ranking person in a company.

controller

The manager of the accounting function of a vertical (business unit).

Continuous Process Improvement

The philosophy of continually improving employees, business processes, and products with the objective of eliminating the source of problems and delivering the right products (services) in the right quantities at the right time.

management by exception

The philosophy of controlling by comparing actual and expected results and isolating ares for further investigation and possible remedial action.

directing

The process by which managers, given their assigned level of responsibilities, run day-to-day operations.

product costs

The three components of manufacturing cost: direct materials, direct labor, and factory overhead costs.

cost of goods manufactured

The total cost of making and finishing a product.

direct labor cost

The wages of factory workers who are directly involved in converting materials into a finished product.

cost

a sacrifice made to obtain some benefit

__________ are identified with and can be traced to a cost object. a. Direct costs b. Factory overhead costs c. Indirect costs d. None of these choices are correct.

a. Direct costs

Product costs

appear on both the income statement and balance sheet

__________ is the philosophy of enhancing employees, business processes, and products on a regular basis. a. Improvement process b. Continuous process improvement c. Quality process d. None of these choices are correct.

b. Continuous process improvement

The process by which managers run day-to-day operations is called ________. a. planning b. directing c. executing d. None of these choices are correct.

b. directing

Inventory that consists of the costs of the direct and indirect materials that have not yet entered the manufacturing process is known as ________. a. work in process inventory b. materials inventory c. finished goods inventory d. None of these choices are correct.

b. materials inventory

Finished goods inventory is reported on the

balance sheet as a current asset

In order to be useful to managers, managerial accounting reports should possess all of the following characteristics except

be prepared in accordance with generally accepted accounting principles

__________ cannot be identified with or traced to a cost object. a. Direct costs b. Prime costs c. Indirect cost d. None of these choices are correct.

c. Indirect cost

__________ consist of selling and administrative costs. a. Direct costs b. Prime costs c. Period costs d. Indirect Costs.

c. Period costs

The total cost of making products that are available for sale during the period is called ________. a. cost of goods sold b. inventory cost expense c. cost of goods manufactured d. None of these choices are correct.

c. cost of goods manufactured

Inventory that consists of the direct materials, direct labor, and factory overhead costs for products that have entered the manufacturing process but are not yet completed is known as ________. a. materials inventory b. finished goods inventory c. work in process inventory d. None of these choices are correct.

c. work in process inventory

Managerial accounting provides performance reports to internal users. Which of the following is considered an advantage of performance reports? a. Performance reports allow management to identify any large amounts of scrap materials or employee downtime. b. A report could analyze the potential efficiencies and dollar savings of purchasing computerized equipment to speed up the production process. c. A report could analyze how many units need to be sold to cover operating costs and expenses and used to set monthly selling targets and bonuses for sales personnel. d. All of these choices are correct.

d. All of these choices are correct.

Which of the following are ways by which managerial accounting provides information and reports for managers to use in operating the business? a. Managerial accounting provides the cost of manufacturing a product, which can be used to determine its selling price. b. Managerial accounting allows for comparing the costs of manufacturing products over time and can be used to monitor and control the cost of direct materials, direct labor, and factory overhead. c. Performance reports allow management to identify any large amounts of scrap materials or employee downtime. d. All of these choices are correct.

d. All of these choices are correct.

All of the following are considered phases of the management process except ________. a. planning b. directing c. controlling d. executing

d. executing

Which of the following is part of factory overhead cost?

depreciation of factory equipment and machines

The cost of a manufactured product generally consists of which of the following costs?

direct labor cost, direct materials cost, and factory overhead cost

A product cost is

expensed in the period the product is sold

Conversion costs are

factory overhead and direct labor