acct202 exam1

Facility-level activities

activities and costs incurred no matter how many units, batches, or products are produced in the plant example: plant management salaries, plant depreciation, property taxes, utilities

Calculation of cost of goods manufactured (COGM)

beginning WIP + total manufacturing costs = total cost of work in progress THEN total cost of work in progress - ending WIP = COGM

Overapplied overhead is debited or credited to COGS at the end of yearend?

credited

Actual MOH > applied MOH?

underapplied

A firm has 16,000 equivalent units that are 80% complete. How many physical units are currently in process? 16,000 12,800 20,000 28,800

Because we know equivalent units, we can find physical units by dividing this amount by the percentage of process completion: 16,000/80% = 20,000 physical units

When units are sold, the cost is transferred to the _ account.

Cost of Goods Sold

he Manufacturing Overhead account shows debits of $240,000, $192,000, and $224,000 and one credit for $624,000. Based on this information, what is the impact, if any, on Cost of Goods Sold? Cost of Goods Sold will be credited for the $32,000 of underapplied overhead Cost of Goods Sold will be credited for the $32,000 of overapplied overhead Cost of Goods Sold will be debited for the $32,000 of overapplied overhead Cost of Goods Sold will be debited for the $32,000 of underapplied overhead

Cost of Goods Sold will be debited for the $32,000 of underapplied overhead Total overhead incurred = $240,000 + $192,000 + $224,000 = $656,000. Total overhead applied = $624,000. Therefore, overhead has been underapplied by $32,000. When overhead is underapplied, Cost of Goods Sold is debited.

The Raw Materials Inventory account had a balance of $13,463 on January 1. During the month of January, the company had the following transactions: 1. Purchased $12,481 of wool. 2. Purchased $15,327 of cotton. 3. Spent $312 on freight charges. 4. Received a discount of $153 for their cotton order. 5. Returned $1,722 of flawed polyester. 6. Used $8,318 of wool. 7. Used $16,964 of cotton. What is the balance of the Raw Materials Inventory account on January 31?

Costs associated with the Raw Materials Inventory account include purchased materials, used materials, returned and discounted materials, and freight charges. Therefore, the balance of the account should be $13,463 + $12,481 + $15,327 + $312 - $153 - $1,722 - $8,318 - $16,964 = $14,426.

Manufacturing Overhead

Costs that are indirectly associated with manufacturing the finished product. ▫ Includes all manufacturing costs except direct materials and direct labor

Metlock Express reports the following costs and expenses in June 2022 for its delivery service. Indirect materials used $5,510 Drivers' salaries $13,760 Depreciation on delivery equipment 9,620 Advertising 3,980 Dispatcher's salary 4,300 Delivery equipment repairs 258 Property taxes on office building 760 Office supplies 559 CEO's salary 10,320 Office utilities 860 Gas and oil for delivery trucks 1,880 Repairs on office equipment 162 Determine the total amount of (a) delivery service (product) costs and (b) period costs.

Delivery service (product) costs: 35328 Period Costs: 16641

Cost of completed jobs is transferred to the _ account.

Finished Goods Inventory

Manegerial Accounting

INTERNAL users: officers, managers internal reports, as frequently as needed special purpose very detailed no intependent audits

Step 1 of Activity Based Costing

Identify and classify activities and allocate overhead to cost pools

Step 2 of activity based costing

Identify cost drivers for each cost pool

Indirect labor - charged to _____ account

MOH

Applied Manufacturing Overhead

The amount of overhead applied to work-in-process during the period

Total work in process

cost of beginning work in process + total manufacturing costs for the current period

Product (manufacturing) costs

costs, both direct and indirect, of producing a product in a manufacturing firm or of acquiring a product in a merchandising firm and preparing it for sale direct materials, direct labor, manufacturing overhead

Manufacturing costs include a) direct materials and direct labor only. b) direct materials and manufacturing overhead only. c) direct labor and manufacturing overhead only. d) direct materials, direct labor, and manufacturing overhead.

d) direct materials, direct labor, and manufacturing overhead.

The income statements of a merchandiser and a manufacturer differ in the cost of goods sold section. What is the process of obtaining COST OF GOODS SOLD for a manufacturing company?

beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory

The income statements of a merchandiser and a manufacturer differ in the cost of goods sold section. What is the process of obtaining COST OF GOODS SOLD for a merchandising company?

beginning inventory + cost of goods purchased - ending inventory

how to calculate number of units in finished goods inventory? value of the ending finished goods inventory?

beginning inventory + units made - units sold that ^ value is then multiplied by the unit cost (not the unit sale price) to determine the value of the ending finished goods inventory

Total cost of work in process

beginning work in process inventory + total manufacturing costs (direct labor + direct materials + manufacturing overhead)

Assigning Costs to Cost of Goods Sold

debit accounts receivable for amount items were sold for, credit sales revenue THEN debit cost of goods sold for amount items were worth, finished goods inventory

Underapplied overhead is debited or credited to COGS at the end of yearend?

debited

Total Manufacturing Costs

direct materials + direct labor + manufacturing overhead

activity based overhead rate

estimated overhead per activity / expected use of cost drivers per activity

activity-based overhead rate

estimated overhead per activity / expected use of cost drivers per activity

In a process cost system, a production cost report is prepared for all departments in the aggregate. only for the first processing department. for each processing department. only for the last processing department.

for each processing department.

Direct labor - charged to ________ account

job specific WIP

Direct materials - charged to______ account

job specific WIP

triple bottom line

recognition of the need for organizations to improve the state of people, the planet, and profit simultaneously if they are to achieve sustainable, long-term growth

Conversion costs are calculated by

summing all overhead costs assigned to the period and assigned direct labor costs.

When a company switched to an activity-based costing system, it realized that it was allocating a much lower percentage of factory overhead to a product line that the marketing department was trying to push. The product line may contain products that involve fewer total tasks. that are high volume but simple in nature. that involve fewer batch level tasks. that are low volume and complex in nature.

that are low volume and complex in nature.

payable

that which must be paid or can be paid, must be credited

process costing system

the cost object is masses of identical or similar units of a product or service

Production cost reports show

the department's production quantity and costs.

Equivalent units of production measure..

the work done during the period, expressed in fully completed units.

unit conversion cost

total conversion costs / equivalent units of conversion costs subtract total materials costs from total manufacturing costs to find total conversion costs. Divide this by the equivalent units of production for conversion costs to find the unit conversion cost

classification of activity levels

unit level, batch level, product level, facility level

Step 4 of Activity Based Costing

Step 4: Allocate overhead costs to products

Total Conversion Costs Formula

Subtract total materials costs from total manufacturing costs

During 2022, Handy Appliances made and sold coffee makers. At the beginning of the year, the company had 37 units, 14,382 units were sold during the year, and 14,385 units were made during the year. Each coffee maker costs $8.42 to produce and each coffee maker is sold for $15.50. At the end of the year, what amount will Handy report on its balance sheet for finished goods inventory? $527.00 $25.26 $336.80 $286.28

$336.80 The number of units in finished goods inventory can be calculated as beginning inventory + units made - units sold. This value is then multiplied by the unit cost (not the unit sale price) to determine the value of the ending finished goods inventory or (37 + 14,385 - 14,382) x $8.42 = $336.80.

MW Company manufactures down-filled comforters and uses an activity-based costing system. During the current period, the company expects to produce 16,500 down-filled comforters using 19,800 direct labor hours and 21,450 machine hours. Additionally, it expects to make 660 orders of down and fabric and to ship 165 completed comforters to its distributors. The order-processing cost pool is $54,120, the shipping cost pool is $14,025, and the product assembly cost pool is $71,280. What is the activity rate for order processing? $82.00/order $3.28/unit $211.25/order $8.45/unit

$82.00/order

Step 3 of activity based costing

Step 3: Compute activity-based overhead rates

The Molding Department of Kennett Company has the following production data: beginning work in process inventory of 25,000 units (60% complete with respect to conversion), completed and transferred out 450,000 units, and ending work in process inventory of 50,000 units (40% complete with respect to conversion). Assuming all materials are issued at the beginning of the process, equivalent units of production for materials are 450,000. 500,000. 425,000. 525,000.

500,000.

Tektron Industries applies overhead on the basis of 200% of direct labor cost. Job No. 275 is charged with $30,000 of direct materials costs and $40,000 of manufacturing overhead. What are the total manufacturing costs for Job No. 275? $100,000 $110,000 $70,000 $90,000

90,000 To determine total manufacturing costs for Job No. 275, one must first find direct labor. Applied overhead is 200% of direct labor cost. Hence, $40,000/200% = $20,000 direct labor cost. Now add everything to find total manufacturing costs ($30,000 + $40,000 + $20,000 = $90,000).

job order cost system

A cost accounting system in which costs are assigned to each job or batch. for unique and not high batch items

overhead application rate

A rate used to apply manufacturing overhead to output; estimated factory overhead for a period divided by the estimated application base

Predetermined Overhead Rate

A rate used to charge manufacturing overhead cost to jobs that is established in advance for each period.

Batch-level activities

Activities that are performed each time a batch of goods is handled or processed, regardless of how many units are in the batch. The amount of resource consumed depends on the number of batches run rather than on the number of units in the batch. example: equipment setups, purchase ordering, inspection, material handling

Product-level activities

Activities that relate to specific products that must be carried out regardless of how many units are produced and sold or batches run. examples: product design, engineering changes

Cool Covers makes protective cases for smartphones. Currently, the firm produces eight models, each of which is redesigned once per year. All eight models are produced on the same equipment, but this equipment needs extensive recalibration and re-engineering each time the firm starts a new production run. Based on this information, which type of overhead costing system is the best fit for Cool Covers? Traditional costing system using setup hours as the basis for allocation. Traditional costing system using design hours as the basis for allocation. Activity-based costing system using multiple bases for allocation. Traditional costing system using machine hours as the basis for allocation

Activity-based costing system using multiple bases for allocation.

Veronica R. is working with the controller of her company on the year-end financial statements. Earlier in the year, the company had an intern working in the accounting department. While the intern did a great job, she failed to leave any notes regarding her work. Veronica and the controller can see that $785,025 of manufacturing overhead has been applied throughout the year. Further, they can see that the company has incurred $82,573 of direct labor costs and $85,413 of direct materials. The company's pay rate for direct labor is $14.20 per hour. If the intern applied overhead based on direct labor hours, what rate did she use to apply overhead (if necessary, round your answer)? There is not enough information provided. $130.51/DLH $135/DLH $9.51/DLH

Direct labor hours = ($82,573/$14.20) = 5,815.Predetermined overhead rate = Applied overhead/direct labor hours = $785,025/5,815 = $135/DLH.

financial accounting (last semester)

EXTERNAL USERS (stockers, creditors, and regulators) financial statements, quarterly and annually general purpose pertains to business as a whole, follow GAAP audited by CPA

Last month, Carla Corp's Polishing Department had 5,800 units in beginning Work in Process Inventory that were 70% complete. These units had $24,012 of materials cost and $24,766 of conversion cost. All materials are added at the beginning of the process and conversion costs are added uniformly throughout the process. Over the course of the month, 12,200 units were completed and transferred to Finished Goods Inventory. At the end of the month, there were 4,900 units that were 60% complete in ending Work in Process Inventory. The unit materials cost was $5.00 and the unit conversion cost was $4.00 for the month. What was the total cost of Work in Process ending inventory? $97,282 $48,778 $109,800 $36,260

Ending inventory materials cost = 4,900 x 100% x $5.00 = $24,500. Ending inventory conversion cost = 4,900 x 60% x $4.00 = $11,760. Total cost of ending inventory = $24,500 + $11,760 = $36,260.

Beck Incorporated's Packaging Department had a unit materials cost of $0.85 and a unit conversion cost of $0.50. Last month, the department transferred out 298,000 units and had 42,000 units in ending work in process inventory that were 60% complete. If all materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process, what is the total cost of the department's ending work in process inventory? $56,700 $48,300 $44,100 $34,020

Ending work in process inventory cost for materials = 42,000 x 100% x $0.85 = $35,700. Ending work in process cost for conversion = 42,000 x 60% x $0.50= $12,600. Total cost for ending work in process inventory = is $35,700 + $12,600 = $48,300.

Sweetums Syrup adds all direct materials at the beginning of its manufacturing process and incurs conversion costs uniformly throughout the process. At the beginning of last month, Sweetums had no units in its Work In Process beginning inventory. Over the course of the month, the company began production of 150,000 units; at month's end, 90,000 of those units were finished and transferred out, while the remaining 60,000 units were 90% complete with respect to conversion. What were Sweetums' equivalent units of production for conversion costs for the month? 135,000 equivalent units 144,000 equivalent units 141,000 equivalent units 150,000 equivalent units

Equivalent units of production for conversion = (90,000 x 100%) + (60,000 x 90%) = 144,000

Predetermined Overhead Rate calculation

Estimated total manufacturing overhead cost for the coming period / Estimated total units in the allocation base for the coming period

Overhead Applied

Predetermined overhead rate x actual activity

Raw Material Used in Production

Raw Materials Beginning + Raw Materials Purchased = Raw Materials Available for Use - Raw Material Ending

Cost of goods manufactured schedule

Raw Materials Beginning + Raw Materials Purchased = Raw Materials Available for Use - Raw Material Ending = Raw Material Used in Production + Indirect Materials Used + Direct Materials Used + Direct Labor + Applied Manufacturing OH = Total Manufacturing cost + Work in process Beg - Work in process End = Cost of Goods Manufactured

Direct Materials

Raw materials: basic materials and parts used in manufacturing process. Raw materials that can be physically and directly associated with the finished product during the manufacturing process are classified as direct materials

A company uses one machine exclusively for product A and another exclusively for product B. The depreciation on these machines is pooled with depreciation on all other machines, which are used for all products, including A and B. The resulting total depreciation is allocated across all products based on machine hours used. This practice of pooling dedicated machines' depreciation with other machines and allocating it overall products indicates that the company is using a(n) ________ costing system. direct full activity-based traditional

The company is using traditional costing because they are totaling the depreciation on all machines and then allocating the depreciation to the machines. If the company was using ABC, product A would only have the depreciation from the one machine used exclusively to produce product A.

Fukui Electronics manufactures flat screen TVs. In October, they finished manufacturing 82 TVs, started and completed another 175 TVs, and started manufacturing an additional 34 TVs. How would the cost information for manufacturing these TVs be displayed on the company's financial statements? The cost information would be displayed on the income statement under work in process and on the balance sheet under cost of goods manufactured. The cost information would be displayed on the income statement under cost of goods sold and on the balance sheet under inventory. The cost information would be displayed on the income statement under current assets and on the balance sheet under expenses. The cost information would be displayed on the income statement under net income and on the balance sheet under liabilities.

The cost information would be displayed on the income statement under cost of goods sold and on the balance sheet under inventory. The costs required to manufacture the TVs would appear on the income statement as cost of goods manufactured in the cost of goods sold section. In addition, the 34 TVs that have started but are not yet complete would appear on the balance sheet under work in process inventory, and any unsold completed TVs would appear on the balance sheet under finished goods inventory.

How is the cost of goods manufactured schedule related to the income statement? The income statement is used to calculate finished goods inventory and work in process inventory, which are then transferred to the cost of goods manufactured schedule to calculate cost of goods sold. The income statement is used to calculate the cost of goods sold, which is then transferred to the cost of goods manufactured schedule to help calculate the cost of goods manufactured. The cost of goods manufactured schedule is used to calculate the cost of goods sold, which is then placed on the income statement to calculate company expenses. The cost of goods manufactured that is calculated on the cost of goods manufactured schedule is placed on the income statement under the cost of goods sold section.

The cost of goods manufactured that is calculated on the cost of goods manufactured schedule is placed on the income statement under the cost of goods sold section. Cost of goods manufactured is a component of the income statement because information from the cost of goods manufactured schedule feeds into the cost of goods sold section of the income statement.

What if the applied MOH is different from the actual MOH?

The difference between the overhead cost applied to Work in Process and the actual overhead costs of a period is referred to as either underapplied or overapplied overhead.

Job Order Cost Flow

The flow of costs parallels the physical flow of the materials as they are converted into finished goods

Which of the following would not be recorded as a debit in the Work in Process account of the second department in a two-stage production process? Materials used Manufacturing overhead allocated Labor costs assigned Cost of products transferred out

The manufacturing overhead allocated, labor costs assigned, and materials used will all be debited to Work in Process with a credit to the respective account. However, the cost of products transferred out results in a credit to the Work in Process account.

During its most recent period, Raymond Manufacturing expected Job No. 59 to cost $600,000 of overhead, $1,000,000 of materials, and $400,000 in labor. Raymond applied overhead based on direct labor cost. Actual production required an overhead cost of $590,000, $1,140,000 in materials used, and $440,000 in labor. All of the goods were completed. How much is the amount of over- or underapplied overhead? $10,000 overapplied $70,000 underapplied $10,000 underapplied $70,000 overapplied

The predetermined overhead rate is calculated as $600,000/$400,000 = 150%. Overhead applied is $440,000 x 150% = $660,000. Since overhead incurred was $590,000, overhead is overapplied by $70,000.

Villani Foods recently implemented activity-based costing. What could have been a motivating factor for this change? They identified constraints that were limiting the company's profitability. They decided to pursue the triple bottom line rather than just focusing on profits. They changed from a manual production process to an automated production process. They implemented a new enterprise resource planning system.

They changed from a manual production process to an automated production process. When manufacturing processes are automated, activity-based costing can enhance control over overhead costs and allow better allocation based on what resources are consumed by the production of different products.

Chico's Clockworks uses job order costing for its custom clock-making business. Job GF1260 is a custom-made grandfather clock. Chico's job cost sheet for Job GF1260 shows a total cost of $4,265, including direct labor of 50 hours at $20 per hour. Overhead is applied at 100% of direct labor cost. What is the direct materials cost for Job GF1260? $2,265 $3,455 $1,000 $2,895

Total manufacturing cost = direct materials + direct labor + manufacturing overhead; $4,265 = Direct materials + ($20 x 50 hours) + ($20 x 50 hours); $4,265 = Direct materials + $1,000 + $1,000; direct materials = $2,265.

A department adds all the direct materials to a process at the beginning of the process and incurs conversion costs uniformly throughout the process. For the month of January, there were no units in the beginning Work In Process inventory; 90,000 units were started into production; and there were 20,000 units that were 40% complete with respect to conversion in Work In Process ending inventory at the end of January. What were the equivalent units of production for materials for the month of January? 98,000 equivalent units 82,000 equivalent units 70,000 equivalent units 90,000 equivalent units

Total physical units = 0 + 90,000 = 90,000. Transferred physical units = 90,000 - 20,000 = 70,000. Equivalent units of production for materials = (70,000 x 100%) + (20,000 x 100%) = 90,000.

equivalent units of production formula

Units Completed and Transferred Out + Equivalent Units of Ending Work in Process =Equivalent Units of Production physical units x percentage of completion

Manufacturing costs are assigned to the _ account.

Work in Process (WIP) Inventory

Direct Labor

Work of factory employees that can be physically and directly associated with converting raw materials into finished goods.

The Montgomery Company produces bicycle helmets. During the most recent period, a materials requisition slip showed that direct materials requested were $33,000 and indirect materials requested were $4,500. The entry to record the transfer of materials from the storeroom is a debit to Work in Process Inventory, a credit to Manufacturing Overhead, and a credit to Raw Materials Inventory a debit to Raw Materials Inventory, a debit to Manufacturing Overhead, and a credit to Work in Process Inventory. a debit to Raw Materials Inventory, a credit to Work in Process Inventory, and a credit to Manufacturing Overhead. a debit to Work in Process Inventory, a debit to Manufacturing Overhead, and a credit to Raw Materials Inventory.

a debit to Work in Process Inventory, a debit to Manufacturing Overhead, and a credit to Raw Materials Inventory. The direct materials requested would result in a debit to Work in Process Inventory and a credit to Raw Materials Inventory while the indirect materials requested would result in a debit to Manufacturing Overhead and a credit to Raw Materials Inventory.

Allocation of factory overhead under activity-based costing is likely to result in a lower unit product cost for low-volume, complex products. a higher unit product cost for high-volume, simple products. a greater profit margin for all products. a higher unit product cost for low-volume, complex products.

a lower unit product cost for low-volume, complex products. a higher unit product cost for high-volume, simple products. a greater profit margin for all products. a higher unit product cost for low-volume, complex products.

just in time inventory system

a system designed to ensure that materials or supplies arrive at a facility just when they are needed so that storage and holding costs are minimized

Activity-based costing (ABC)

a technique to assign product costs based on links between activities that drive costs and the production of specific products

Which of the following describes the process for determining the average cost per product unit when using job order costing? accumulate all job costs; subtract indirect job costs; divide by number of units produced accumulate direct job costs; divide by number of units produced; add indirect costs accumulate all job costs; multiply by number of units produced accumulate all job costs; divide by number of units produced

accumulate all job costs; divide by number of units produced

value-added activities

activities for which the customer is willing to pay because these activities add value to the final product or service

Unit-level activities

activities performed for each unit of production example: drilling, cutting, assembling, sewing

Non-Value-Added Activities

activities that neither enhance the customer's image of the product or service nor provide a competitive advantage; also known as waste activities

Receivables

amounts due from individuals and companies that are expected to be collected in cash, debit

If a company wants to evaluate all aspects of a business in order to increase business value, which methods could they use? lean manufacturing or just-in-time inventory enterprise resource planning or total quality management total quality management or a balanced scorecard lean manufacturing or a balanced scorecard

lean manufacturing or a balanced scorecard Both lean manufacturing and the balanced scorecard focus on evaluating all aspects of a business in order to increase business value. Lean manufacturing focuses on reviewing all business processes in an effort to increase productivity and eliminate waste, while the balanced scorecard focuses on both financial and nonfinancial aspects to evaluate the company.

cost drivers for unit level activities

machine hours, direct labor hours or cost

Indirect materials - charged to ___ account

manufacturing overhead

work in process inventory

materials inventory that is currently in the process of being converted into finished goods

Period Costs

non-production costs and are usually more associated with activities linked to a time period than with completed products selling expenses, administrative expenses

examples of cost drivers for facility level activities

number of employees managed square footage

examples of cost drivers for product level activities

number of product designs, number of changes

examples of cost drivers for batch level activities

number of setups or setup time number of purchase orders number of inspections number of material moves

Actual MOH < applied MOH

overrapplied

Completion percentages are not considered for an analysis of __ ___; they are necessary only for ____ ___ calculations.

physical units; equivalent unit

One of the key objectives of the production manager at the Mueller Company, which manufactures bicycles, is to add value to the business. Which management function is the manager fulfilling? Planning Controlling Directing Decision-making

planning The planning function allows management to establish company's goals, and plans for achieving them.

Applied manufacturing overhead formula

predetermined overhead rate x actual cost driver