Managerial Accounting Test 1
How do you find fixed cost element?
Total cost at hight level of activity- less variable cost element less variable cost element(High level-direct labor hours x variable cost element)
Go over in class assignment: Ch1 [L01-4] C01 Class
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How do you find cost of goods sold?
beginning merchandise inventory+ purchases- ending merchandise inventory
product or period cost: Materials used for boxing products for shipment overseas (units are not normally boxed)
period cost
Product or period cost: The cost of packaging the company product
product cost
How do you find Variable cost per unit sold?
Add: -direct materials -direct labor -variable manufacturing overhead -sales commissions -variable administrative expenses
Establishing goals and specifying how to achieve them is called
Planning
T/F Variable selling and administrative expenses are variable with respect to the number of units sold, not the number of units produced.
True
Tolden Marketing, Inc., a merchandising company, reported sales of $2,861,700 and cost of goods sold of $1,491,700 for December. The company's total variable selling expense was $76,000; its total fixed selling expense was $68,700; its total variable administrative expense was $98,900; and its total fixed administrative expense was $193,900. The cost of goods sold in this company is a variable cost. The contribution margin for December is: $1,371,400 $2,423,500 $1,195,100 $931,100
$1,195,100 Add up Cost of goods sold, variable selling expense, and variable administrative expense. It says variable cost company at the end of the question. (1,191,700+76,000+ . 98,900=1,666,600) Subtract that from the sales. (2,861,700- 1,666,600=1,195,100)
TWO QUESTIONS WITH THIS DATA (Q1) Martinez Company's relevant range of production is 10,700 units to 15,700 units. When it produces and sells 13,200 units, its unit costs are as follows: Amount Per Unit Direct materials $ 5.00 Direct labor $ 2.50 Variable manufacturing overhead $ 1.40 Fixed manufacturing overhead $3.00 Fixed selling expense $ 2.00 Fixed administrative expense $ 2.20 Sales commissions $ 1.20 Variable administrative expense $ 0.45 If the selling price is $21.00 per unit, what is the contribution margin per unit sold? (Round your answer to 2 decimal places.)
$10.45 First, find the variable cost per unit sold. Add: -direct materials -direct labor -variable manufacturing overhead -sales commissions -variable administrative expenses (5.00+2.50+1.40+1.20+0.45) Variable cost per unit sold= $10.55 Then, Take the selling price per unit (21.00) and subtract the variable cost per unit (10.55) Contribution margin per unit sold= 21.00-10.55=10.45
Calip Corporation, a merchandising company, reported the following results for October: Sales $406,000 Cost of goods sold (all variable) $175,800 Total variable selling expense $25,200 Total fixed selling expense $16,100 Total variable administrative expense $12,700 Total fixed administrative expense $33,000 The gross margin for October is: $192,300 $230,200 $143,200 $356,900
$230,200 Gross margin=sales-cost of goods sold 406,000-175,800=230,200
Nieman Inc., a local retailer, has provided the following data for the month of March: Merchandise inventory, beginning balance $42,800 Merchandise inventory, ending balance $ 43,700 Sales $263,300 Purchases of merchandise inventory $140,600 Selling expense $ 16,900 Administrative expense $ 60,400 The net operating income for March was: $52,500 $123,700 $46,300 $122,700
$46,300 First, find cost of goods sold. COGS=42,800+140,600-43,700 COGS=139,700 Then find Net operating income NOI=Sales-COGS-Selling and administrative expenses NOI=263,300-139,700-(16,900+60,400) NOI=46,300
Sawaya Co., Ltd., of Japan is a manufacturing company whose total factory overhead costs fluctuate considerably from year to year according to increases and decreases in the number of direct labor-hours worked in the factory. Total factory overhead costs at high and low levels of activity for recent years are given below: Level of Activity Low High Direct labor-hours 68,400 91,200 Total factory overhead costs $ 270,980 $ 309,740 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 68,400-hour level of activity as follows: Indirect materials (variable) $ 95,760 Rent (fixed) 122,000 Maintenance (mixed) 53,220 Total factory overhead costs $ 270,980 To have data available for planning, the company wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $309,740 factory overhead cost at the high level of activity consists of maintenance cost.
60,060 First: Determine per unit direct labor hours (DLH) DLH=direct Materials/low direct labor hours (95,750/68,400) DLH per unit= 1.40 Second: Find Indirect materials. Multiply 1.40 x high direct labor hours. (91,200) (1.40 x 91,200) Indirect Materials= 127,680 Rent= Same (Fixed cost) (122,000) Third: Take total factory overhead cost (309,740) subtract indirect materials (127,680) and rent (122,000) 309,740-127,680-122000= 60,060
TWO QUESTIONS WITH THIS DATA (Q2) Martinez Company's relevant range of production is 10,700 units to 15,700 units. When it produces and sells 13,200 units, its unit costs are as follows: Amount Per Unit Direct materials $ 5.00 Direct labor $ 2.50 Variable manufacturing overhead $ 1.40 Fixed manufacturing overhead $3.00 Fixed selling expense $ 2.00 Fixed administrative expense $ 2.20 Sales commissions $ 1.20 Variable administrative expense $ 0.45 What total incremental cost will Martinez incur if it increases production from 13,200 to 13,201 units? (Round your answer to 2 decimal places.)
8.90 Add: -Direct Materials per unit -Direct labor per unit -Variable manufacturing overhead per unit (5.00+2.50+1.40) Incremental cost per unit produced= 8.90
Haab Inc. is a merchandising company. Last month the company's cost of goods sold was $66,600. The company's beginning merchandise inventory was $11,000 and its ending merchandise inventory was $29,500. What was the total amount of the company's merchandise purchases for the month? $66,600 $107,100 $48,100 $85,100
85,100 Solve for Purchases Cost of goods sold=beginning merchandise inventory+purchases-ending inventory. 66,600=11,000+P-29,500 P(purchases)=85,100
How do you find variable cost element?
Change in cost/change in activity
Monitoring and ensuring the proper execution of plans is called
Controlling
Selecting the best possible course of action is called
Decision Making
The cost of a hard drive installed in a computer is Direct Labor Cost Marketing and Selling Cost Direct Materials Cost Manufacturing Overhead Cost
Direct Materials Cost
T/F Managerial accounting has to follow GAAP
False- financial accounting does
The following data relating to units shipped and total shipping expense have been assembled by Archer Company, a wholesaler of large, custom-built air-conditioning units for commercial buildings: Month (ex Jan) Units Shipped (ex 3) Total Shipping expense (ex 1,800) January 3 $1,800 Feb 6 $2,300 March 4 $1,700 April 5 $2,000 May 7 $2,300 June 8 $2,700 July 2 $1,200 Using the high-low method, estimate the cost formula for shipping expense. High activity Level(Units shipped and Shipping Expense)= Low activity Level Units shipped and shipping expense= Change= Variable Cost Element= Fixed Cost=
High Activity Level: Units Shipped= 8 Shipping Expense= 2,700 Low Activity Level: Units Shipped= 2 Shipping Expense=1,200 Change= 6 and 1,500 (subtract from high and low) Variable Cost Element=change in expense/change in activity (1,500/6) Variable cost element=250 Fixed Cost=shipping expense at high activity level-less variable cost element(250per unit x 8 units) (2,700-(250x8)= 700 Fixed Cost= 700
Depreciation on equipment used to test assembled computers before release to customers Administrative Cost Manufacturing Overhead Cost Direct Labor Cost Direct Materials Cost
Manufacturing Overhead Cost
How do you find net operating income?
Net operating income= Sales-cost of goods sold-selling and administrative expenses
What are the three pillars of managerial accounting?
Planning, controlling, decision making
What goes in a traditional income statement (remember order)
Sales Cost of goods sold Gross Margin Selling and Admin Expenses: Selling expenses Admin Expenses Net operating income (sales-selling and admin expenses)
What goes in a contribution format income statement? (list order)
Sales Variable Expenses: Cost of goods sold Selling expenses Admin expenses Contribution Margin (sales-variable expenses) Fixed Expenses: Selling Expenses Admin Expenses Net operating income (contribution margin-fixed expenses)
How do you find gross margin? (also called gross profit/loss)
Sales-cost of goods sold
How do you find contribution margin per unit sold?
Selling price per unit-variable cost per unit.
