ACCT 226 Exam 1

A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements, ______.

$300 is reported as a expense and $900 is reported as an asset

gross margin

=sales revenue-cost of goods sold

contribution margin

=sales-variable expenses

journal entry: direct labor and indirect labor

Debit: work in process inventory (direct labor) debit: manufacturing overhead (indirect labor) credit: salaries or wages payable (if accrued, cash if paid)

predetermined overhead rate (POHR)

Estimated Manufacturing Overhead Costs/ Estimated Activity Base

traditional income statement

Sales Revenue -Cost of goods sold =gross margin -selling & admin expenses =net income from operations

Some Vegetables Can Fall North

Sales Revenue Variable expenses Contribution margin Fixed expenses Net income

contribution format of income statement

Sales revenue -variable expenses =contribution margin -fixed expenses =net income from operations

Sarah Can Go Selling Nuts

Sales revenue COGS Selling and admin expenses Net income

total non-manufacturing costs

Selling + General & Administrative Expenses

overapplied overhead

actual overhead<overhead applied

underapplied overhead

actual overhead>overhead applied

Cost objects include: Multiple select question. -anything for which cost data is desired. -organizational subunits / departments. -anything for which revenue data is desired. -customers.

anything for which cost data is desired, organizational subunits/departments, customers

schedule of cost of goods sold

beginning finished goods inventory +cost of goods manufactured (from schedule above) =cost of goods available for sale -ending finished goods inventory =unadjusted cost of goods sold +/- under/over applied MOH =adjusted cost of goods sold

step 1: schedule of costs of goods manufactured

beginning raw materials inventory +purchase of raw materials =raw materials available for use -ending raw materials inventory =raw materials used in production -indirect materials included in MOH =direct materials used in production

manufacturing overhead

consists of indirect labor, indirect materials, and general overhead expenses like depreciation on factory equipment, rent of production facility, etc. (i.e., all product costs except direct materials and direct labor)

Direct labor and overhead costs incurred to change raw materials into finished products are known as ______ costs.

conversion

Direct labor and overhead costs incurred to change raw materials into finished products are known as _________ costs

conversion

Direct labor and overhead costs incurred to change raw materials into finished products are known as __________ costs

conversion

Any item for which cost data is desired is called a(n) ________ _________

cost object

step 4: schedule of costs of goods manufactured

cost of goods manufactured: total manufacturing costs (DM,DL,MOH) +beginning work in process inventory -ending work in process inventory =cost of goods manufactured

journal entry: record the revenue portion of the entry when units are sold

debit: accounts receivable (if sold on account) credit: sales revenue

journal entry: record expense portion of entry when units are sold

debit: cost of goods sold credit: finished goods inventory

journal entry: record under applied overhead

debit: cost of goods sold credit: manufacturing overhead

journal entry: transfer of completed goods from work in process to finished goods

debit: finished goods inventory credit: work in process inventory

journal entry: record over applied overhead

debit: manufacturing overhead credit: cost of goods sold

journal entry: issuing indirect materials to production areas

debit: manufacturing overhead credit: raw materials inventory

journal entry: purchase of raw materials

debit: raw materials inventory credit: account payable (if on account, cash if paid)

Journal entry: applying overhead

debit: work in process inventory credit: manufacturing overhead

Prime costs include ______. Multiple select question. direct labor direct materials manufacturing overhead selling and administrative expenses

direcct labor, direct materials

step 2: schedule of costs of goods manufactured

direct labor

conversion cost

direct labor + manufacturing overhead

activity bases

direct labor hours, machine hours, direct labor wages

prime cost

direct materials + direct labor

total manufacturing costs

direct materials + direct labor + manufacturing overhead

variable cost example

direct materials, direct labor, or any other expenses that will stay the same per unit but vary in total as the level of production varies

Selling and administrative costs are ______ costs.

direct or indirect

Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are _____________ materials. (Enter only one word per blank).

direct or raw

Administrative costs include ______.

executive compensation and public relations costs

Other names for manufacturing overhead include: Multiple select question. factory burden. factory overhead. prime manufacturing costs indirect manufacturing costs.

factory burden, factory overhead, indirect manufacturing costs

Indirect labor costs include: Multiple select question. -factory security guard wages. -assembly-line supervisor salary. -administrative assistant salary. -assembly-line worker wages.

factory security guard wages, assembly-line supervisor salary

All of a company's depreciation, property taxes, and insurance premiums are considered manufacturing overhead.

false

True or false: Labor costs that can be specifically traced to a product are indirect labor costs.

false

total cost (mixed costs)

fixed costs + (variable cost rate per unit x #unit) OR Y=a+bX

Y=a+bX

formula for a line- used to solve for fixed costs

variable costs behavior

increases in total proportionately as number of units increases

Minor items such as nails and glue are usually considered to be ______.

indirect materials

Manufacturing overhead costs include ______.

indirect materials, factory supervisors' salaries, and factory depreciation

Factory burden is a synonym for ______ ______

manufacturing overhead

step 3: schedule of costs of goods manufactured

manufacturing overhead (applied)

Indirect materials and indirect labor are classified as ______.

manufacturing overheadd

The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is recognized is known as the ___________ principle

matching

Indirect materials include ______.

nails, glue, and thread

X=

number of units

average fixed cost behavior

per unit changes as the number of units produced or as the activity level changes

Which of the following statements are true? Multiple select question. -Period costs are included as part of the cost of goods. -Period costs are expensed when they are incurred. -The wages of assembly-line workers are period costs. -Sales commissions are period costs.

period costs are expensed when they are incurred, sales commissions are period costs

The sum of direct materials and direct labor is called ________ cost

prime

The sum of direct materials and direct labor is called __________ cost.

prime

Direct materials, direct labor, and manufacturing overhead are all ______ costs.

product

Inventoriable costs is another term for _________ costs

product or manufacturing

Cost behavior ______. Multiple select question. -is a detailed analysis technique used to determine whether costs are fixed or variable -refers to how a cost will change as activity level changes -is the relative proportion of each type of cost in an organization -categorizes costs as fixed, mixed and variable

refers to how a cost will change as activity levl changes, categorizes costs as fixed, mixed and variable

fixed cost behavior

remain the same in total regardless of the number of units produced or the activity level

variable cost behavior

remains the same per unit

fixed cost examples

rent on the factory, advertising expenses, salaries of executives

Nonmanufacturing costs include ______. Multiple select question. insurance on plant equipment assembly-line worker wages sales commissions company president's salary

sales commissions, company presidents salary

Y=

total costs

a=

total fixed costs

product costs

total manufacturing costs

period coss

total non-manufacturing costs

b=

variable cost rate

Units that are partially complete are found in ______.

work in process

Prior to being recorded on the income statement, manufacturers' product costs flow through ______. Multiple select question. Work in Process Raw Materials Finished Goods Cost of Goods Sold

work in process, raw materials, finished goods