Acct-203 14,15

The following costs are included in a recent summary of data for a company: advertising expense $96,000; depreciation expense - factory building $144,000; direct labor $261,000; direct material used $311,000; factory utilities $116,000; and sales salaries expense $161,000. Determine the dollar amount of overhead costs.

$260,000 (overhead doesn't include direct labor or direct materials so this is just depreciation + utilities. advertising expense and sales salaries expense are just under operating costs under selling expense. overhead includes indirect labor, factory utilities, rent, factory supplies used, insurance, maintenance, taxes, depreciation of factory stuff)

The following costs are included in a recent summary of data for a company: advertising expense $105,000; depreciation expense - factory building $153,000; direct labor $270,000; direct material used $320,000; factory utilities $125,000; and sales salaries expense $170,000. Determine the dollar amount of prime costs.

$590,000 (remember that prime costs is just direct labor and direct material. conversion costs are direct labor and overhead)

What's the basic difference between accounting and reporting practices for merchandising company, professional services company, and manufacturing company?

A merchandising company sells products without changing their condition. A manufacturing company buys raw materials and turns them into finished products for sale to customers. Merchandisers buy goods ready for sale; manufacturers produce goods. A third type of company earns revenues by providing services rather than products. The skills, tools, and techniques developed for measuring a manufacturing company's activities apply to service companies as well.

A cost object is what?

A product, process, department, or customer to which costs are assigned

Direct costs

Are those traceable to a single cost object. For example, if a product is a cost object, its material and labor costs are usually directly traceable. Ex: salaries of plant workers, materials used for product, materials/equipment purchased to make product

How do you compute cost of goods sold for a manufacturer?

Beginning finished goods inventory + cost of goods manufactured - Ending finished goods inventory

How do you compute cost of goods sold for a merchandiser?

Beginning merchandise inventory + cost of goods purchased - Ending merchandise inventory

The efforts of employees who physically convert materials to finished product is called what?

Direct labor

The manufacturing statement is organized in the following way from top to bottom:

Direct materials + direct labor + factory overhead = total manufacturing costs + goods in process inventory from last quarter = total cost of goods in process - goods in process from this quarter (not used) = cost of goods manufacturered

Traceability cost classification is all about ______ costs and _______costs

Direct, Indirect

What's the purpose of planning in managerial accounting? To set the company's ___________

Direction

What on the manufacturing statement appears on balance sheet?

Ending goods in process appears as goods in process inventory

The following information is available for Talking Toys, Inc., for the current year: Direct materials used $3,000 Goods in process, January 1 50,000 Goods in process, December 31 44,000 Total Factory overhead 6,500 Direct labor used 26,500 The total manufacturing costs incurred during the year were:

For this we just calculate DM + Overhead + DL because the goods in process stuff comes after manufacturing costs on the sheet .

If finished goods are completed products ready for sale, what are goods in process?

Goods in process relates to the partially completed goods that are somewhere in the manufacturing process and are not ready for sale.

The cost of finished products sold is reported on the__________ as cost of goods sold

Income statement

Adidas is an example of a ______________ company

Manufacturing

Manufacturers carry which 3 unique assets that each have their own inventory?

Raw materials, goods in process, and finished goods

Southwest Airlines and PWC is an example of a _____________ company

Services

Summarize materials activity

This is the beginning of the flow of manufacturing activity. They start with beginning raw materials that are reused from before (so as not to waste!) and then they make purchases for extra raw materials as needed for their project. Beginning raw materials + purchased raw materials = total raw materials available for use in production. Some or all may be used for production. Whatever is not used becomes beginning raw materials in the next period.

What is finished goods inventory?

consists of completed products ready for sale

A cost accounting system is effective because it provides timely information about inventories and manufacturing costs per unit, enabling managers to better _______ costs and ______ selling prices

control, determine

Classification by Controllability is all about _______ costs and _______ costs

controllable, not controllable. This depends on employees responsibilities and place in the pecking order. Ex. Senior manager controls costs of investments; Supervisor controls daily expenses such as supplies

Employee time tickets indicate cost of _____________ to charge to jobs and the cost of _____________ to charge to overhead

direct labor, indirect labor

Raw materials used in a product are called

direct materials (direct materials in mountain biking include the wheels, seat, tires, etc...)

Materials requisition indicates cost of ___________ to charge to jobs and the cost of ______________ to charge to overhead

direct materials, indirect materials

raw materials are used in what two ways?

directly and indirectly

What is the formula for the predetermined overhead rate based on direct labor?

estimate of total manufacturing overhead cost for coming period/estimated total direct labor costs for coming period

What are prime costs?

expenditures directly associated with the manufacture of finished goods (direct labor + direct material)

What are conversion costs?

expenditures incurred in the process of converting raw materials to finished goods (direct labor + factory overhead)

Cost classification by behavior is all about _____ costs and _____ costs

fixed, variable

Financial accounting is governed by GAAP whereas managerial accounting is more _________

flexible

What is raw materials inventory?

goods a company acquires to use in making products

Cost of goods manufactured = total cost of goods in process - ____________

goods in process inventory from this period

Raw materials not clearly identified with specific units or batches of a product are called

indirect materials

In the flow of manufacturing activity, there are three important sections

materials, production, and sales

One key difference between managerial accounting and financial accounting is not in managerial accounting __________ information

nonmonetary information, includes customer and employee satisfaction data, the percentage of on-time deliveries, and product defect rates.

All expenses of service companies are _________ costs because these companies do not have inventory.

period

A general accounting system uses a __________ inventory system.

periodic

A cost accounting system uses a _________ inventory system, which continuously updates records for cost of materials, goods in process, and finished goods inventories

perpetual

Managerial accounting helps internal managers make _______ and ______ decisions

planning, control

direct labor is considered both a ______ and ______ cost

prime, conversion

Manufacturers treat costs such as depreciation and rent as _______ costs if they are related to manufacturing.

product

Classification by function is all about _______ costs and ______ costs

product (necessary and integral for finished products, costs of production), period (not part of the manufacturing process. pertain to a time period instead of finished products like selling and general administrative expenses)

What is goods in process inventory?

products in the process of being manufactured but not yet complete.

Classification by relevance is all about _____ costs, _____ costs, and _____ costs

sunk costs (irrelevant to future decisions), out-of-pocket costs (requires future outlay of cash. like purchasing coffee beans for starbucks), and opportunity costs.

The formula for total cost of goods in process is:

total manufacturing costs (DL + DM + overhead) + goods in process inventory from last period

_______ costs appear only on the income statement under operating expenses.

Period

Summarize sales activity

Pretty simple. Newly produced goods are combined with beginning finished goods inventory to equal total finished goods available for sale

________ costs are either in the income statement as part of cost of goods sold or in the balance sheet as inventory

Product

Summarize production activity

Production involves four things: beginning goods in process inventory (partially completed goods from last period), direct materials, direct labor, and overhead. Production activity will result in either finished or unfinished goods. Cost of finished products (minus unfinished goods) = cost of goods manufactured. Unfinished products are identified as ending goods in process inventory. The cost of unfinished products consists of direct materials, direct labor, and factory overhead, and is reported on the current period's balance sheet. The costs of both finished goods manufactured and goods in process are product costs.

A short-term plan often covers a one-year period that, when translated in monetary terms, is known as a __________

Budget

Indirect costs

Cannot be easily and cost-beneficially traced to a single cost object. An example of an indirect cost is a maintenance plan that benefits two or more departments. Ex. factory rent, factory light and heat, factory intranet

What on the manufacturing statement appears on company's balance sheet?

Cost of goods manufactured appears as an expense

Payless is an example of a ____________company

Merchandising

The cost of products not sold is reported on the current period's ______________ as _______________

balance sheet, ending finished goods inventory

There are _ cost classifications. They are:

behavior, traceability, controllability, relevance, and function

What are factory overhead costs?

cannot be separately or readily traced to finished goods. These costs include indirect materials and indirect labor, costs not directly traceable to the product. Overtime paid to direct laborers is also included in overhead because overtime is due to delays, interruptions, or constraints not necessarily identifiable to a specific product or batches of product. Factory overhead costs also include maintenance of the mountain bike factory, supervision of its employees, repairing manufacturing equipment, factory utilities (water, gas, electricity), production manager's salary, factory rent, depreciation on factory buildings and equipment, factory insurance, property taxes on factory buildings and equipment, and factory accounting and legal services. Factory overhead does not include selling and administrative expenses because they are not incurred in manufacturing products. These expenses are called period costs and are recorded as expenses on the income statement when incurred.

Financial accounting is more concerned with ______ performance whereas managerial accounting is more concerned with _______ performance

company, product