ACCTG 102 - concept overview videos

LO 1-4 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Skip to question We discussed cost behavior and cost structure. Costs are often categorized as variable, fixed, or mixed. A variable cost varies, in total, in direct proportion to changes in the level of activity. A fixed cost is a cost that remains constant, in total, regardless of changes in the level of activity. A mixed cost contains both variable and fixed cost elements. We also discuss the significance of relevant range that affects cost behavior. In a small manufacturing facility, one welder is needed for every 200 hours of machine-hours or fewer in a month. The welder is paid a monthly salary of $2,500. If the total monthly requirement is 1,300 machine-hours, the total salaried employee expense is ________.

$17,500

LO 2-3: Compute the total cost and the unit product cost of a job using a plantwide predetermined overhead rate. Skip to question In this learning objective we compute the total cost and average cost per unit of a job. After adding the totals for direct materials, direct labor, and manufacturing overhead in the Cost Summary section of the job cost sheet to obtain the total cost for the job, the total product cost is divided by the number of units to obtain the unit product cost. To improve job cost accuracy, the allocation base in the predetermined overhead rate should drive the overhead cost. Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200, respectively. If Job X23 used 100 direct labor-hours, what is the total cost assigned to this job? Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200, respectively. If Job X23 used 100 direct labor-hours to produce 50 audio controllers, what is this job's unit product cost (per audio controller)?

$6,200 $124

LO 3-3: Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement. Skip to question We explain the preparation of schedules of cost of goods manufactured and cost of goods sold as well as an income statement. The schedule of cost of goods manufactured contains three elements of product costs--direct materials, direct labor, and manufacturing overhead--and it summarizes the portions of those costs that remain in ending Work in Process inventory and that are transferred out of Work in Process into Finished Goods. The schedule of cost of goods sold also contains three elements of product costs--direct materials, direct labor, and manufacturing overhead--and it summarizes the portions of those costs that remain in ending Finished Goods inventory and that are transferred out of Finished Goods into Cost of Goods Sold. Zimmer, Incorporated started the month of January with beginning finished goods inventory of $20,000. The cost of goods manufactured during the month was $120,000 and the ending finished goods inventory was $50,000. What is the unadjusted cost of goods sold for January?

$90,000

LO 4-1: Understand the basic approach in activity-based costing and how it differs from conventional costing. Skip to question In this Learning Objective, we will learn about the three common approaches to assign overhead costs to products: plantwide overhead rate, departmental overhead rates, and activity-based costing. The plantwide overhead rate is the simplest approach to allocating overhead costs but can lead to distorted product costs. The departmental overhead rates are a more refined approach to allocating overhead costs but fall short in situations where a company has a range of products and complex overhead costs. Activity-based costing attempts to assign overhead costs more accurately by identifying the underlying activity that causes the consumption of overhead resources and then allocating overheads based on these activities. Which of the following are part of the four-level hierarchy used in activity-based costing systems? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

- Batch-level activities - Facility-level activities - Product-level activities - Unit-level activities

LO 1-6 Prepare income statements for a merchandising company using the traditional and contribution formats. Skip to question You will learn how to prepare traditional and contribution format income statements for a merchandising company. Traditional income statements are prepared primarily for external reporting purposes. They organize costs into two categories: cost of goods sold and selling and administrative expenses. The contribution approach overcomes the limitations of the traditional format and provides managers with an income statement that clearly distinguishes between fixed and variable costs and therefore aids in planning, controlling, and decision making. The traditional income statement uses which of the following cost categories? Audio Corporation purchased $20,000 of DVDs during the current year. The company had DVD inventory of $15,000 at the beginning of the year. An end of the year audit revealed that the company had DVD inventory of $10,000. The amount that would be reported as cost of goods sold in the income statement for the current year is ________.

Cost of goods sold and selling and administrative expenses. $25,000

LO 3-4: Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts. Skip to question We determine the amount of underapplied or overapplied overhead and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts. We compute the underapplied or overapplied overhead by taking the difference between actual total manufacturing cost and total manufacturing overhead applied. The balance of under or overapplied overhead remaining in the manufacturing overhead account is closed either by transferring to the cost of goods sold account or by allocating among the Work in Process, Finished Goods, and Cost of Goods Sold accounts. The following information is available for the current year ending December 31: Manufacturing overhead applied$ 150,000 Actual amount of manufacturing overhead costs120,000 Amount of overhead applied during the year that is in: Work in Process$ 37,500 25% Finished Goods52,500 35% Cost of Goods Sold60,000 40% Total overhead applied $ 150,000 100% If the Manufacturing Overhead account is closed to Cost of Goods Sold, the related entry will ________. If the Manufacturing Overhead account is closed proportionally to Work in Process, Finished Goods, and Cost of Goods Sold, the related entry will include a ________.

decrease the cost of goods sold by $30,000 credit to Cost of Goods Sold for $12,000

LO 3-1: Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs. Skip to question We discuss the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs. We observe how product costs flow through inventories on the balance sheet and costs of goods manufactured schedule and then move on to cost of goods sold in the income statement. We will also explain how to calculate underapplied or overapplied Manufacturing Overhead cost and prepare journal entries to close its balance to the appropriate accounts. When companies incur selling and administrative costs, those costs ________.

do not flow through the three inventory accounts

LO 4-4: Contrast the product costs computed under activity-based costing and conventional costing methods. Skip to question In this Learning Objective, we will compare the costs computed under activity-based costing and conventional costing methods. We will identify the reasons for the shift in overhead costs from high-volume products to low-volume products. We will see how techniques of activity-based costing can help in identifying processes that can benefit from improvements. We will also look at the benefits and limitations of activity-based costing Activity-based management involves focusing on activities to:

eliminate waste, decrease processing time, and reduce defects.

LO 2-3: Compute the total cost and the unit product cost of a job using a plantwide predetermined overhead rate. Skip to question In this learning objective we compute the total cost and average cost per unit of a job. After adding the totals for direct materials, direct labor, and manufacturing overhead in the Cost Summary section of the job cost sheet to obtain the total cost for the job, the total product cost is divided by the number of units to obtain the unit product cost. To improve job cost accuracy, the allocation base in the predetermined overhead rate should drive the overhead cost. Companies can improve job cost accuracy by using ________.

multiple predetermined overhead rates

LO 1-5 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs. Skip to question We will discuss cost classifications used in making decisions: differential costs, sunk costs and opportunity costs. For purposes of making decisions, the concepts of differential cost and revenue, sunk cost, and opportunity cost are vitally important. Differential costs and revenues are the future costs and revenues that differ between alternatives. Sunk cost is a cost that occurred in the past and cannot be altered. Opportunity cost is the benefit forgone when one alternative is selected over another. Differential costs and opportunity costs are always relevant and should be carefully considered in decisions. Sunk costs are always irrelevant in decisions and should be ignored. Differential costs are always ________.

relevant in making business decisions

LO 1-4 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Skip to question We discussed cost behavior and cost structure. Costs are often categorized as variable, fixed, or mixed. A variable cost varies, in total, in direct proportion to changes in the level of activity. A fixed cost is a cost that remains constant, in total, regardless of changes in the level of activity. A mixed cost contains both variable and fixed cost elements. We also discuss the significance of relevant range that affects cost behavior. A fixed cost is a cost which ________.

remains constant in total with changes in the level of activity

LO 3-1: Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs. Skip to question We discuss the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs. We observe how product costs flow through inventories on the balance sheet and costs of goods manufactured schedule and then move on to cost of goods sold in the income statement. We will also explain how to calculate underapplied or overapplied Manufacturing Overhead cost and prepare journal entries to close its balance to the appropriate accounts. All of the following are product costs except ________.

sales commissions

LO 1-4 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Skip to question We discussed cost behavior and cost structure. Costs are often categorized as variable, fixed, or mixed. A variable cost varies, in total, in direct proportion to changes in the level of activity. A fixed cost is a cost that remains constant, in total, regardless of changes in the level of activity. A mixed cost contains both variable and fixed cost elements. We also discuss the significance of relevant range that affects cost behavior. If a firm increases its activity level, ________.

some costs will change, other costs will remain the same

LO 1-4 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Skip to question We discussed cost behavior and cost structure. Costs are often categorized as variable, fixed, or mixed. A variable cost varies, in total, in direct proportion to changes in the level of activity. A fixed cost is a cost that remains constant, in total, regardless of changes in the level of activity. A mixed cost contains both variable and fixed cost elements. We also discuss the significance of relevant range that affects cost behavior. In the equation, Y = a + bX, X represents ________.

the level of activity

LO 2-1: Compute a predetermined overhead rate. Skip to question In this learning objective we overview job-order costing and explain the four-step process to compute a predetermined overhead rate. Remember that it is "predetermined," that is, based on estimates and determined before costs are incurred. In the cost formula (Y = a + bX) that is used to estimate the total manufacturing overhead cost for a given period, the letter "a" refers to the estimated ________.

total fixed manufacturing overhead cost

LO 4-4: Contrast the product costs computed under activity-based costing and conventional costing methods. Skip to question In this Learning Objective, we will compare the costs computed under activity-based costing and conventional costing methods. We will identify the reasons for the shift in overhead costs from high-volume products to low-volume products. We will see how techniques of activity-based costing can help in identifying processes that can benefit from improvements. We will also look at the benefits and limitations of activity-based costing Activity-based costing improves accuracy of product costs by:

using multiple-activity pools to accumulate overhead costs.

LO 2-1: Compute a predetermined overhead rate. Skip to question In this learning objective we overview job-order costing and explain the four-step process to compute a predetermined overhead rate. Remember that it is "predetermined," that is, based on estimates and determined before costs are incurred The management of Blue Ocean Company estimates that 50,000 machine-hours will be required to support the production planned for the year. It also estimates $300,000 of total fixed manufacturing overhead cost for the coming year and $4 of variable manufacturing overhead cost per machine-hour. What is the predetermined overhead rate?

$10.00 per machine hour.

LO 3-3: Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement. Skip to question We explain the preparation of schedules of cost of goods manufactured and cost of goods sold as well as an income statement. The schedule of cost of goods manufactured contains three elements of product costs--direct materials, direct labor, and manufacturing overhead--and it summarizes the portions of those costs that remain in ending Work in Process inventory and that are transferred out of Work in Process into Finished Goods. The schedule of cost of goods sold also contains three elements of product costs--direct materials, direct labor, and manufacturing overhead--and it summarizes the portions of those costs that remain in ending Finished Goods inventory and that are transferred out of Finished Goods into Cost of Goods Sold. For the month of October, Janus Corporation used $30,000 worth of direct materials in production and incurred direct labor costs of $60,000. Actual manufacturing overhead costs were $40,000, whereas $45,000 was the manufacturing overhead applied to work in process. What is the amount of total manufacturing costs added to production that would appear in the Schedule of Cost of Goods Manufactured for October?

$135,000

LO 1-1 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs. Skip to question We will discuss the differences between direct and indirect costs. A direct cost is a cost that can be easily and conveniently traced to a cost object. An indirect cost is a cost that cannot be easily and conveniently traced to a cost object. A common cost is a type of an indirect cost. A particular cost may be direct or indirect, depending on the cost object. Knowledge Check 01 Match the term and the definition 1. Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) _________ of selling a tour package. 2. A ___________ is a cost that is incurred to support a number of cost objects but cannot be traced to them individually. 3. Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) _________ of the branch.

1- indirect cost 2- common cost 3- direct cost

LO 1-5 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs. Skip to question We will discuss cost classifications used in making decisions: differential costs, sunk costs and opportunity costs. For purposes of making decisions, the concepts of differential cost and revenue, sunk cost, and opportunity cost are vitally important. Differential costs and revenues are the future costs and revenues that differ between alternatives. Sunk cost is a cost that occurred in the past and cannot be altered. Opportunity cost is the benefit forgone when one alternative is selected over another. Differential costs and opportunity costs are always relevant and should be carefully considered in decisions. Sunk costs are always irrelevant in decisions and should be ignored. Which of the following statements about opportunity costs is not correct?

An opportunity cost cannot be changed by any decision made now or in the future.

LO 3-1: Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs. Skip to question We discuss the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs. We observe how product costs flow through inventories on the balance sheet and costs of goods manufactured schedule and then move on to cost of goods sold in the income statement. We will also explain how to calculate underapplied or overapplied Manufacturing Overhead cost and prepare journal entries to close its balance to the appropriate accounts. Which of the following occurs when manufacturing overhead is applied to Work in Process?

Credit to Manufacturing Overhead.

LO 1-6 Prepare income statements for a merchandising company using the traditional and contribution formats. Skip to question You will learn how to prepare traditional and contribution format income statements for a merchandising company. Traditional income statements are prepared primarily for external reporting purposes. They organize costs into two categories: cost of goods sold and selling and administrative expenses. The contribution approach overcomes the limitations of the traditional format and provides managers with an income statement that clearly distinguishes between fixed and variable costs and therefore aids in planning, controlling, and decision making. Which of the following is true of the contribution approach? Davidson Company has sales of $100,000, variable cost of goods sold of $40,000, variable selling expenses of $15,000, variable administrative expenses of $5,000, fixed selling expenses of $7,000, and fixed administrative expenses of $9,000. What is Davidson's contribution margin?

It separates costs into fixed and variable categories. $40,000

LO 1-3 Understand cost classifications used to prepare financial statements: product costs and period costs. Skip to question We classify costs as either product costs or period costs. Product costs include all costs involved in acquiring or making a product. For most companies, period costs include all selling and administrative expenses. We also discuss the difference between prime cost and conversion cost. Prime cost is the sum of direct materials cost and direct labor cost. Conversion cost is the sum of direct labor cost and manufacturing overhead cost. How should the wages of a sheet metal worker in a fabrication plant be classified? The ________ requires that the costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized.

Product cost matching principle

LO 1-2 Identify and give examples of each of the three basic manufacturing cost categories. Skip to question We will discuss the three basic categories of manufacturing costs: direct materials, direct labor, and manufacturing overhead. We will also cover the various nonmanufacturing costs in an organization. Manufacturing costs include all of the following categories except ________.

administrative costs

LO 2-1: Compute a predetermined overhead rate. Skip to question In this learning objective we overview job-order costing and explain the four-step process to compute a predetermined overhead rate. Remember that it is "predetermined," that is, based on estimates and determined before costs are incurred. The direct materials required to manufacture each unit of product are listed on a ________.

bill of materials

LO 2-2: Apply overhead cost to jobs using a predetermined overhead rate. Skip to question In this learning objective we explain how to apply overhead cost to jobs using a predetermined overhead rate. Overhead is applied to jobs by multiplying the predetermined overhead rate by the actual amount of the allocation base recorded for the job. A normal cost system applies overhead to jobs ________.

by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job

LO 1-2 Identify and give examples of each of the three basic manufacturing cost categories. Skip to question We will discuss the three basic categories of manufacturing costs: direct materials, direct labor, and manufacturing overhead. We will also cover the various nonmanufacturing costs in an organization. Which of the following is common to both prime cost and conversion cost?

Direct labor

LO 1-2 Identify and give examples of each of the three basic manufacturing cost categories. Skip to question We will discuss the three basic categories of manufacturing costs: direct materials, direct labor, and manufacturing overhead. We will also cover the various nonmanufacturing costs in an organization. ________ is sometimes called "touch labor."

Direct labor

LO 3-1: Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs. Skip to question We discuss the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs. We observe how product costs flow through inventories on the balance sheet and costs of goods manufactured schedule and then move on to cost of goods sold in the income statement. We will also explain how to calculate underapplied or overapplied Manufacturing Overhead cost and prepare journal entries to close its balance to the appropriate accounts. Which of the following best describes the journal entry to record the withdrawal of raw materials from the storeroom for use as direct and indirect materials in production?

Debit Work in Process, debit Manufacturing Overhead, and credit Raw Materials.

LO 3-1: Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs. Skip to question We discuss the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs. We observe how product costs flow through inventories on the balance sheet and costs of goods manufactured schedule and then move on to cost of goods sold in the income statement. We will also explain how to calculate underapplied or overapplied Manufacturing Overhead cost and prepare journal entries to close its balance to the appropriate accounts. Which of the following best describes the journal entry to record the use of direct and indirect labor in production?

Debit Work in Process, debit Manufacturing Overhead, and credit Salaries and Wages Payable.

LO 3-1: Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs. Skip to question We discuss the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs. We observe how product costs flow through inventories on the balance sheet and costs of goods manufactured schedule and then move on to cost of goods sold in the income statement. We will also explain how to calculate underapplied or overapplied Manufacturing Overhead cost and prepare journal entries to close its balance to the appropriate accounts. Which of the following occurs when finished jobs are shipped to customers?

Debit to Cost of Goods Sold.

LO 4-2: Compute activity rates for an activity-based costing system. Skip to question In this Learning Objective, we will see how allocating the overhead costs using a single plantwide overhead rate can distort the unit product costs. We will learn how to compute the activity rates based on the assigned overhead costs and the activity measures. We will also learn how to determine the per unit overhead cost of a product by dividing the overhead costs assigned to a product by the number of units produced Activities and Activity Measures Expected Activity Estimated Overhead Costs Product 1 Product 2 Hand-processing (direct labor-hours)$ 320,000 45,000 55,000 Setting up equipment (number of setups)150,000 9,000 21,000 Administering parts inventories (number of part types) 30,000 110 90 $ 500,000 Transformation Corporation has provided the information set forth above regarding the overhead to be allocated between the two products it produces: CDE and EFG. What is the activity rate for the hand-processing units activity?

$3.20 per direct labor-hour

LO 2-2: Apply overhead cost to jobs using a predetermined overhead rate. Skip to question In this learning objective we explain how to apply overhead cost to jobs using a predetermined overhead rate. Overhead is applied to jobs by multiplying the predetermined overhead rate by the actual amount of the allocation base recorded for the job. Spartan Corporation estimates that it will incur $200,000 of total manufacturing overhead cost at an estimated activity level of 10,000 direct labor-hours. What is the amount of manufacturing overhead that would be applied to a job that required 200 direct labor-hours?

$4,000

LO 1-4 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. Skip to question We discussed cost behavior and cost structure. Costs are often categorized as variable, fixed, or mixed. A variable cost varies, in total, in direct proportion to changes in the level of activity. A fixed cost is a cost that remains constant, in total, regardless of changes in the level of activity. A mixed cost contains both variable and fixed cost elements. We also discuss the significance of relevant range that affects cost behavior. Cyber Devices manufactures PCTV products that enable people to watch television content on their computers. It sells its product to retailers for $50. A tuner component that goes into each of these devices costs $5 to acquire. The total variable cost at an activity level of 1,000 units equals ________.

$5,000

LO 3-2: Use T-accounts to show the flow of costs in a job-order costing system. Skip to question We explain how to use T-accounts to show the flow of costs in a job-order costing system. Direct material costs and direct labor costs are charged to Work in Process. Indirect material costs and indirect labor costs are charged to Manufacturing Overhead. Finally, Manufacturing Overhead is applied to the Work in Process account at the predetermined overhead rate. For each of the five transactions described below, use the dropdown boxes to indicate which account should be debited and which account should be credited. 1. Direct materials are issued into production for a specific job. 2. Salary of the Production Supervisor is payable. 3. Lubricating oil, waste cotton, and solder are used in the factory. 4. The wages of direct laborers who worked on a particular job are payable. 5. Manufacturing overhead is applied to jobs using a predetermined overhead rate.

1. debit/Work in Process, credit/Raw Materials 2. debit/ Manufacturing Overhead , credit/Salaries and Wages Payable 3. debit/ Manufacturing Overhead , credit/Raw Materials 4. debit/Work in Process , credit/Salaries and Wages Payable 5. debit/Work in Process , credit/Manufacturing Overhead

LO 4-2: Compute activity rates for an activity-based costing system. Skip to question In this Learning Objective, we will see how allocating the overhead costs using a single plantwide overhead rate can distort the unit product costs. We will learn how to compute the activity rates based on the assigned overhead costs and the activity measures. We will also learn how to determine the per unit overhead cost of a product by dividing the overhead costs assigned to a product by the number of units produced. Helio Company has two products: A and B. The annual production and sales of Product A is 1,850 units and of Product B is 1,250 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labor-hours per unit and Product B requires 0.6 direct labor-hours per unit. The total estimated overhead for next period is $100,485. What is the company's predetermined overhead rate?

77 $

LO 4-3: Compute activity rates for an activity-based costing system. Skip to question In this Learning Objective, we will learn to use the activity rates computed under activity-based costing to determine the total overhead cost to be assigned to each product. Based on the total overhead cost assigned to the product, we will compute the per unit overhead cost, which along with the direct material and direct labor costs, gives the unit product cost. We will also compare the unit product costs computed using activity-based costing systems with the ones computed using traditional costing systems. Activities Activity Rates Assembly $ 14.35per machine-hour Processing Orders $ 47.85per order inspection$ 70.30per inspection-hour True Blue Corporation provided the data set forth above from its activity-based costing system. The company makes 430 units of product D28K a year, requiring a total of 690 machine-hours, 40 orders, and 10 inspection-hours per year. The product's direct materials cost is $35.82 per unit and its direct labor cost is $29.56 per unit. What is the unit product cost of product D28K? (Round your answer to 2 decimal places.)

94.49$

LO 4-1: Understand the basic approach in activity-based costing and how it differs from conventional costing. Skip to question In this Learning Objective, we will learn about the three common approaches to assign overhead costs to products: plantwide overhead rate, departmental overhead rates, and activity-based costing. The plantwide overhead rate is the simplest approach to allocating overhead costs but can lead to distorted product costs. The departmental overhead rates are a more refined approach to allocating overhead costs but fall short in situations where a company has a range of products and complex overhead costs. Activity-based costing attempts to assign overhead costs more accurately by identifying the underlying activity that causes the consumption of overhead resources and then allocating overheads based on these activities. Which of the following is a product-level activity?

Administering parts inventories

LO 3-4: Compute underapplied or overapplied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts. Skip to question We determine the amount of underapplied or overapplied overhead and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts. We compute the underapplied or overapplied overhead by taking the difference between actual total manufacturing cost and total manufacturing overhead applied. The balance of under or overapplied overhead remaining in the manufacturing overhead account is closed either by transferring to the cost of goods sold account or by allocating among the Work in Process, Finished Goods, and Cost of Goods Sold accounts. The following information is available for the current year ending December 31: Manufacturing overhead applied$ 150,000 Actual amount of manufacturing overhead costs120,000 What is the balance of the Manufacturing Overhead account and is overhead underapplied or overapplied at the end of the year?

Credit of $30,000,overapplied.

LO 3-1: Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs. Skip to question We discuss the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs. We observe how product costs flow through inventories on the balance sheet and costs of goods manufactured schedule and then move on to cost of goods sold in the income statement. We will also explain how to calculate underapplied or overapplied Manufacturing Overhead cost and prepare journal entries to close its balance to the appropriate accounts Which of the following occurs when a job has been completed and transferred to the finished goods warehouse?

Credit to Work in Process.

LO 4-1: Understand the basic approach in activity-based costing and how it differs from conventional costing. Skip to question In this Learning Objective, we will learn about the three common approaches to assign overhead costs to products: plantwide overhead rate, departmental overhead rates, and activity-based costing. The plantwide overhead rate is the simplest approach to allocating overhead costs but can lead to distorted product costs. The departmental overhead rates are a more refined approach to allocating overhead costs but fall short in situations where a company has a range of products and complex overhead costs. Activity-based costing attempts to assign overhead costs more accurately by identifying the underlying activity that causes the consumption of overhead resources and then allocating overheads based on these activities. Which of the following is a reason for the popularity of plantwide overhead rates to allocate overhead costs?

Simplicity

LO 1-5 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs. Skip to question We will discuss cost classifications used in making decisions: differential costs, sunk costs and opportunity costs. For purposes of making decisions, the concepts of differential cost and revenue, sunk cost, and opportunity cost are vitally important. Differential costs and revenues are the future costs and revenues that differ between alternatives. Sunk cost is a cost that occurred in the past and cannot be altered. Opportunity cost is the benefit forgone when one alternative is selected over another. Differential costs and opportunity costs are always relevant and should be carefully considered in decisions. Sunk costs are always irrelevant in decisions and should be ignored. Which of the following is always an irrelevant cost?

Sunk cost

LO 4-1: Understand the basic approach in activity-based costing and how it differs from conventional costing. Skip to question In this Learning Objective, we will learn about the three common approaches to assign overhead costs to products: plantwide overhead rate, departmental overhead rates, and activity-based costing. The plantwide overhead rate is the simplest approach to allocating overhead costs but can lead to distorted product costs. The departmental overhead rates are a more refined approach to allocating overhead costs but fall short in situations where a company has a range of products and complex overhead costs. Activity-based costing attempts to assign overhead costs more accurately by identifying the underlying activity that causes the consumption of overhead resources and then allocating overheads based on these activities. Under an ABC system, overhead costs are allocated to the products using a two-stage process. What happens during the second stage of that process?

We allocate the costs in the activity pools to the products using activity rates and activity measures.

LO 4-1: Understand the basic approach in activity-based costing and how it differs from conventional costing. Skip to question In this Learning Objective, we will learn about the three common approaches to assign overhead costs to products: plantwide overhead rate, departmental overhead rates, and activity-based costing. The plantwide overhead rate is the simplest approach to allocating overhead costs but can lead to distorted product costs. The departmental overhead rates are a more refined approach to allocating overhead costs but fall short in situations where a company has a range of products and complex overhead costs. Activity-based costing attempts to assign overhead costs more accurately by identifying the underlying activity that causes the consumption of overhead resources and then allocating overheads based on these activities. In an activity-based costing system, the_________ expresses how much of the activity is carried out and is used as the allocation base for assigning overhead costs.

activity measure

LO 1-2 Identify and give examples of each of the three basic manufacturing cost categories. Skip to question We will discuss the three basic categories of manufacturing costs: direct materials, direct labor, and manufacturing overhead. We will also cover the various nonmanufacturing costs in an organization. Materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product are called ________.

direct materials

LO 4-4: Contrast the product costs computed under activity-based costing and conventional costing methods. Skip to question In this Learning Objective, we will compare the costs computed under activity-based costing and conventional costing methods. We will identify the reasons for the shift in overhead costs from high-volume products to low-volume products. We will see how techniques of activity-based costing can help in identifying processes that can benefit from improvements. We will also look at the benefits and limitations of activity-based costing Implementing an activity-based costing system often results in a shift of overhead costs from:

high-volume to low-volume products.

LO 1-2 Identify and give examples of each of the three basic manufacturing cost categories. Skip to question We will discuss the three basic categories of manufacturing costs: direct materials, direct labor, and manufacturing overhead. We will also cover the various nonmanufacturing costs in an organization. Items such as indirect materials, indirect labor, maintenance and repairs on production equipment, depreciation, and insurance on manufacturing facilities are included in ________.

manufacturing overhead costs

LO 4-3: Compute activity rates for an activity-based costing system. Skip to question In this Learning Objective, we will learn to use the activity rates computed under activity-based costing to determine the total overhead cost to be assigned to each product. Based on the total overhead cost assigned to the product, we will compute the per unit overhead cost, which along with the direct material and direct labor costs, gives the unit product cost. We will also compare the unit product costs computed using activity-based costing systems with the ones computed using traditional costing systems. Harrington Company has two products: A and B. The annual production and sales of Product A is 1,750 units and of Product B is 1,150 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B requires 0.7 direct labor-hours per unit. The predetermined overhead rate is $66.00 per direct labor-hour. What it the amount of overhead cost that will be allocated to each unit of Product B? (Round your answer to 2 decimal places.)

46.20 $

LO 1-2 Identify and give examples of each of the three basic manufacturing cost categories. Skip to question We will discuss the three basic categories of manufacturing costs: direct materials, direct labor, and manufacturing overhead. We will also cover the various nonmanufacturing costs in an organization. Property taxes associated with a company's administrative facility are considered ________.

nonmanufacturing costs