Managerial ACC 2304 -Beard Test 2
what is the format of a traditional income statement?
Sales -COGS --------------------- Gross Profit -operating expenses (period costs) ----------------------- Net Operating Income
what does the Work in Progress t-account look like?
Work in Progress ---------------------------------- Beg Bal _________| cost of good manufactured +actual DM_____| +actual DL______| +applied MOH| ------------------------------------------------- end bal
what is the journal entry for placing Raw Materials into production (all direct)?
Work in Progress (WIP) XX __________Raw Materials ______________XX
what is the journal entry for MOH applied?
Work in Progress (WIP) XX ___________MOH_________________________XX
what is the journal entry for direct labor costs?
Work in Progress (WIP) XX ________cash/salary/wages payable XX
where would you find the total cost of all the jobs being worked on?
Work in Progress Inventory
step 3 of activity based costing (calculate activity pool rates) how do you calculate these?
for every activity involved in making your product AR = Estimated MOH / Total Cost Driver **just like POHR (how much does it cost to move a forklift)
activity based costing will typically short costs from __________volume (standard) products to ________ volume (complex) products.
high low **this happens generally because more complex products usually consume more activities per unit than standard products
is the salary of the president of the company considered a product cost (DM,DL,MOH) or a period cost?
period cost (not in factory)
is the depreciation on office equipment considered a product cost (DM,DL,MOH) or a period cost?
period cost (not in the factory)
is the depreciation on the production equipment considered a product cost (DM,DL,MOH) or a period cost?
product cost (DM)
is the salary of the production line supervisor considered a product cost (DM,DL,MOH) or a period cost?
product cost (MOH)
are the materials used to repair the machines considered a product cost (DM,DL,MOH) or a period cost?
product cost (MOH) (indirect materials)
are the wages of the production employees considered a product cost (DM,DL,MOH) or a period cost?
product costs (DL)
Finished Goods (FG)
product that is complete and ready for sale
Customer Level cost pool
related to specific customers. does NOT affect product costs (sales calls, catalogs)
what is the second way that you can close out under or over applied manufacturing overhead?
to allocate it between WIP, FG and COGS proportionally (This is when the different between the actual and applied is found to be large and significant or material)
what is the easiest way to close under or over applied overhead?
to close it all to COGS (you do this when the difference in actual and applied to manufacturing overhead is considered to be small and or insignificant)
how do you calculate total manufacturing costs (TMC)?
DM + DL +MOH **this is added to WIP during the period ---excluded beginning WIP though!!
what are the 3 different product costs?
Direct Material costs Direct Labor costs Manufacturing Overhead (MOH)
are period costs inventoriable?
Nope , because period costs cannot be assigned to the products or to the cost of inventory.
how do you calculate applied overhead?
POHR x Actual Allocation Base
Martin Company uses a job order costing system. The company applies manufacturing overhead using a predetermined overhead rate based on machine hours. Manufacturing overhead was estimated for the year to be $40,00 and the estimated number of machine hours for the year was 8,000. At the end of the year it was determined that the company actually used 7500 machine hours and incurred $38,000 in actual manufacturing overhead costs. determine the POHR for the year? determine the amount of overhead applied to all jobs during the year? determine the amount of over or under applied overhead for the year?
POHR=est OH/est MH =40,000/8000 =$5/MH Applied overhead = POHR x Actual MH =5 x 7500 =$37,500 applied MOH over applied overhead =8000 - 7500 =500
is the sales commissions on sales of a tote bad considered a product cost (DM,DL,MOH) or a period cost?
Period Costs (bag is already made)
would a plywood manufacturer be considered a job order cost or process cost?
Process
would a potato chip manufacturer be considered a job order cost or process cost?
Process
would a soft drink bottler be considered a job order cost or process cost?
Process
is the cloth used in making a bag considered a product cost (DM,DL,MOH) or a period cost?
Product (DM)
what is the journal entry for the purchase of raw materials?
Raw Materials Inventory XX ___________Cash or A/P ____________XX
what does the Raw Materials t-account look like?
Raw materials ----------------------- beg bal | direct materials used (DM) +puch | indirect materials used (IM) --------- |------------------------------ end bal
Raw Materials (RM)
(direct and indirect materials) raw materials for use in the production process
Product (manufacturing) Costs
(plant/factory) any costs that the company INCURS to acquire ram materials and convert into a product
Job Order Costing
**unique, customized, distinct products are manufactured in batches or jobs and product cost are accumulated for each batch/job
what are the 3 costs found on the Job Cost sheet?
1. Direct Materials 2. Direct Labor 3. Manufacturing Overhead
what are the 5 steps to implement activity based costing?
1. Identify Activities 2. Develop Activity Cost Pools 3. Calculate Activity Cost Pool Rate 4. Allocate Costs to Products/Services 5. Calculate Unit Product Costs
what are the 3 most common allocation bases
1. Machine hours 2. Direct labor hours 3. Direct labor costs
what are the 3 different types MANUFACTURING companies inventory?
1. Raw Materials (RM) 2. Work in Progress (WIP) 3. Finished Goods (FG)
what are the 3 common allocation bases (denominators)?
1. Total estimated direct labor hours (how much assembly line workers work) 2. total estimated direct labor costs (what you pay your assembly line workers) 3. total estimated machine hours (how much the assembly line workers work the machines)
Step 2 of activity based costing (develop activity cost pools) what are the 5 different cost pools?
1. Unit Level 2. Batch Level 3. Product Level 4. Customer Level 5. Organizational Level
why cant ACTUAL overhead to added to the job cost sheet?
1. the cost is NOT traced directly back to the job 2. amount of MOH incurred is unknown at the time the job is being worked on (property tax) 3. Overhead costs can be seasonal (air-conditioning) 4. some costs are fixed and not related to the number of units produced
assume that the company estimates applied overhead based on direct labor cost. estimated direct labor is $400,000 and the company will incur 600,000 in manufacturing overhead costs. The company's POHR is?
600,000 ------------- 400,000 =1.50/DLC
Assume that the Parker Co. allocates overhead costs to jobs on a basis of machine-hours. For the coming year the company estimates that it will incur 600,000 in manufacturing overhead costs and work 75,000 machine hours. what is the companies POHR?
600,000 ------------- 75,000 = 8.00/MH
is a machine setup pool is based on the number of setups instead of the number of units produced this is an example of what kind of level activity?
Batch level
how do you find COGS using a traditional format?
Beginning Finished Goods +COGM ------------------------------------ Cost of Goods Available for Sale (COGAS) - End Finished Goods ------------------------------------ Cost of Good Sold (COGS)
NOW ON TA THA SECOND CHAPTER
CHAPTER 7
what is the journal entry for selling goods?
COGS XX ____Finished Goods (FG) XX AND Cash / A/R XX _____revenue
if overhead is under-applied and it is found to be insignificantly different what journal entry do you make?
COGS XX _________MOH XX
is a sale's managers salary a VC or FC, also is it a period or product cost and if product it is DM,DL or OH?
FC and period cost
is depreciation on an executive jet a VC or FC, also is it a period or product cost and if product it is DM,DL or OH?
FC and period cost
is the secretary to the company president a VC or FC, also is it a period or product cost and if product it is DM,DL or OH?
FC and period cost
what are the one type MERCHANDISING companies inventory?
Finished Goods
what does the Finished Goods t-account look like?
Finished Goods ---------------------------- Beg Bal | cost of good sold (COGS) +COGM | ---------------------------------------------- end bal
what is the journal entry for goods that are completed?
Finished Goods (FG) XX _______Work in Progress (WIP) XX
Manufacturing Overhead costs (MOH)
Indirect materials and indirect labor. All the manufacturing costs that CANNOT be easily traced to the product. Anything that happens in the factory that isnt DM or DL (electricity, security guards, insurance)
would a business consultant be considered a job order cost or process cost?
Job Cost --attorney accountant
would a custom yacht builder be considered a job order cost or process cost?
Job Order
would a golf course designer be considered a job order cost or process cost?
Job Order --no golf course is ever the same
how do you calculate total product costs?
MOH + DM + DL
if overhead is over applied and it is found to be insignificantly different what journal entry do you make?
MOH XX _____COGS XX
if overhead is over applied and it is found to be significantly (material) different what journal entry do you make?
MOH XX _________WIP___ XX _________FG______XX _________COGS XX
step 5 of activity based costing (calculate unit product costs) how do you calculate this?
MOH/unit = total MOH / # of units produced
what is the journal entry for MOH incurred?
Manufacturing Overhead XX _______cash/ A/p__________________________XX or Manufacturing Overhead XX _______salary payable__________________________XX or Manufacturing Overhead XX _______accumulated depreciation_________XX
what is the journal entry for non-manufacturing period costs?
TRICK question it doesnt have one! Why is that?!?! whelp period costs DO NOT go on the balance sheet therefore they do NOT need a journal entry as they go straight to the income statement
is the electricity use in furniture manufacturing a VC or FC, also is it a period or product cost and if product it is DM,DL or OH?r
VC and product cost (MOH)
is the cost of shipping finished goods to customers a VC or FC, also is it a period or product cost and if product it is DM,DL or OH?
VC and period cost
is the packing supplies for the shipping products overseas a VC or FC, also is it a period or product cost and if product it is DM,Dl or OH?r
VC and period cost
is the aerosol attachment placed on a spray can produced by the company a VC or FC, also is it a period or product cost and if product it is DM,DL or OH?
VC and product cost (DM)
is the wood used in furniture manufacturing a VC or FC, also is it a period or product cost and if product it is DM,DL or OH?
VC and product cost (DM)
if overhead is under-applied and it is found to be insignificantly different what journal entry do you make?
WIP XX FG XX COGS XX ______________MOH____XX
Process Costing
a method of assigning costs to units of production in companies producing large quantities of homogeneous products
Period (non-manufacturing) costs
any costs that is NOT a product cost. Costs associated with the selling and administration of the business (things that happen at headquarters)
when do period costs become and expense?
as incurred **they go straight to the income statement
Product costs are ______________________ to inventory and not expensed until ________________
capitalized sold
Work in Progress (WIP)
consists of DM, DL, and MOH all the products started but NOT yet complete
how do you calculate the predetermined overhead rate (POHR)?
estimated total MOH ---------------------------------- estimated total allocation base
Overhead Application
dividing or allocating overhead to various jobs
Period costs are expensed when _______________
incurred **these costs never go on the balance sheet
Product Level cost pool
incurred b the development, production or acquisition of a product and support the products/services a company provides. Performed for the entire product line, regardless of how many units or batches are produced (design pattern)
Batch Level cost pool
incurred by a group of SIMILAR products (set up). Consumes same amount of resources if there are 20 or 2000 in a batch (forklift)
Unit Level cost pool
incurred per production of a SINGLE product. Ech unit of a particular product requires the same level of activity and thereby consumes the same amount of resources that provide the activity (labor, supplies)
inventoriable
is the cost from the supplier plus all costs necessary to get the item into inventory and ready for sale **included with PRODUCT COSTS
what kind of cost is an item considered if it is incurred after the product is finished?
it is always a PERIOD cost if it comes after the product is complete (shipping costs of finished goods, or moving a finished good else where)
step 4 of activity based costing (allocate costs to products/services) how do you calculate this allocation?
just like applying MOH under traditional costing but not you do that for each activity allocated cost = activity rate x activity driver consumption
where do period costs go?
on the income statement **NOT the balance sheet
Organizational Level cost pool
required to provide productive capacity and to keep the business running. carried out regardless of customers or production. (accounting, management salaries, property taxes)
where would you find the costs of each individual job in progress?
the Job Cost sheet
Applied Overhead
the amount of overhead allocated to each job
the low volume product is usually called?
the complex product
Cost of Goods Manufactured (COGM)
the cost of everything that is FINISHED during the period
Direct Material Costs (DM)
the main ingredients; material that can be easily and directly identified and traced to the final product
the high volume product is usually called?
the standard product
Step 1 of activity based costing (identify activities)
these are events that consume resources
assume the following balances WIP $7,000 RM $5,000 AP $3,000 FG $5,000 COGS $6,000 Actual OH $8,000 Applied OH $7,000 estimated OH $9,000 what is the journal entry made if the over/under applied overhead is closed directly to COGS? what is the journal entry made if the over/under applied overhead is closed to the 3 accounts that are affected by a significant difference?
under applied over head of 1000 directly to COGS COGS 1000 ________MOH_____1000 to the 3 accounts **first you have to allocate the 1000 proportionally to all of them WIP 7000 /18000 = 39% FG 5000 / 18000 = 28% COGS 6000 / 18000 = 33% ------------------- 18000_____________________100% .39 x 1000 = 390 .28 x 1000 = 280 .33 x 1000 = 330 WIP___ 390 FG _____280 COGS 330 ___________MOH 1000
Activity Based Costing
under this you typically use MULTIPLE allocation bases or activities to assign the overhead costs **a costing technique that assigns costs to cost objects such as products (inventory) or customers, based on the activities those cost objects require (most time consuming)
Traditional Costing
under this you typically use ONE allocation base
Direct Labor costs (DL)
wages paid to the workers that transform direct materials into a finished product. Easily Traceable. The salary paid to those that actually work directly on the product
when do product costs become an expense
when the product is SOLD (COGS)