Managerial Accounting

The costs of direct materials are classified as

Manufacturing cost, prime cost and not a conversion cost

Is the cost of electricity for running production equipment classified as a conversion cost, period cost or both?

Neither

Gross Margin

sales minus cost of goods sold

Direct Labor

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

Prime Cost

direct materials cost plus direct labor cost

types of product costs

direct materials, direct labor, manufacturing overhead

How do I find direct materials cost

Beginning raw materials inventory + Raw materials purchases - Ending raw materials - Indirect materials = Direct Materials Cost

How to find the predetermined overhead rate

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base (don't include direct materials or direct labor) only include what has to do with the physical manufactoring of the product ex: sales salaries wouldn't be included

Property taxes on a companys factory building would be classified as

Product Cost

Indirect Labor

The labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced to particular products.

The journal entry to record the application of Manufacturing Overhead to Work in Process would include:

Work in Process $ 69,000 Manufacturing Overhead $ 69,000

fixed cost

a cost that does not change, no matter how much of a good is produced

variable cost

a cost that rises or falls depending on how much is produced

Manufactoring Overhead includes

all manufactoring costs except direct labor and direct materials

period cost

costs that are taken directly to the income statement as expenses in the period in which they are incurred or accrued

Conversion Cost

direct labor cost plus manufacturing overhead cost

direct materials

raw materials that become an integral part of the product and that can be conveniently traced directly to it

indirect materials

raw materials that do not physically become part of the finished product or for which it is impractical to trace to the finished product because their physical association with the finished product is too small.