Accounting Chapter 15
direct labor (DL)
The wages of employees who convert raw materials into finished products
An example of a period cost is a. depreciation on factory equipment b. advertising expense c. indirect materials d. property taxes on plant facilities
b. advertising expense
Given the following data: Work in process, beginning $14,000 Work in process, ending 20,000 Direct labor costs 4,000 Cost of goods manufactured 8,000 Factory overhead 8,000 Direct materials used is
2000
Work in process inventory on December 31 of the current year is $44,000. Work in process inventory increased by 60% during the year. Cost of goods manufactured amounts to $275,000. The total manufacturing costs incurred in the current year are
291,500
Compute conversion costs given the following data: direct materials, $390,100; direct labor, $205,900; factory overhead, $187,500 and selling expenses, $47,700.
393,400
2 types of period cost expenses
selling and administrative expenses
examples of direct material
tires of a car, wood to make a guitar
examples of direct labor
wages of workers putting tires on car, wages of workers making wood into guitar
when are direct labor and direct materials expensed?
when the goods are sold
Which of the following would be least likely to be considered a managerial accounting report? a. statement of cost of goods manufactured b. report to analyze potential efficiencies and savings for the purchase of new production equipment c. statement of stockholders' equity d. schedule of total manufacturing costs incurred
c. statement of stockholders' equity
In order to be useful to managers, managerial accounting reports should possess all of the following characteristics except a. be prepared to report information for any unit of the business to support decision making b. provide objective measures of past operations and subjective estimates about future decisions c. be provided at any time management needs information d. be prepared in accordance with generally accepted accounting principles
d. be prepared in accordance with generally accepted accounting principles
2 types of direct product cost
direct material, direct labor
what are prime costs?
direct materials and direct labor
other indirect costs examples
factory depreciation, insurance on factory buildings
what is indirect labor and indirect materials classified as?
factory overhead and product costs
other indirect costs
factory overhead that is not IM or IL
indirect material examples
gloves for workers, service parts for factory equipment
where do product costs appear?
income statement and balance sheet
three types of indirect costs
indirect material (IM), indirect labor (IL), other
2 types of product cost
indirect, direct
what is the primary criterion for the preparation of managerial accounting reports?
manager needs
The cost of goods sold for Michaels Manufacturing in the current year was $233,000. The January 1 finished goods inventory balance was $31,600, and the December 31 finished goods inventory balance was $24,200. Cost of goods manufactured during the period was
225,600
At the beginning of the current year, Grant Company's work in process inventory account had a balance of $30,000. During the year, $68,000 of direct materials were used in production, and $66,000 of direct labor costs were incurred. Factory overhead for the year amounted to $90,000. Cost of goods manufactured is $230,000. The balance in work in process inventory on December 31 is
24,000
Work in process inventory on December 31 is $42,000. Work in process inventory decreased by 40% during the year. Total manufacturing costs incurred amount to $260,000. The cost of goods manufactured is
288,000
work in process inventory =
Beginning Work in Process Inventory + Direct Materials Used + Direct Labor Incurred + Factory Overhead - Cost of Goods Manufactured
direct materials used =
Cost of Goods Manufactured - Work in Process, Beginning + Work in Process, Ending - Direct Labor Costs - Factory Overhead
classify each cost: factory supervisors salaries
product - OH - IL
classify each cost: Oil used to lubricate sewing machines
product - OH - IM
classify each cost: factory janitorial supplies
product - OH - IM
classify each cost: Repairs and maintenance costs for sewing machines
product - OH - IM or IL
classify each cost: Property taxes on factory building and equipment
product - OH - other
classify each cost: depreciation on sewing machines
product - OH - other
Insurance expense incurred on a factory building would be treated as a
product cost
what are direct labor and direct materials?
product costs
what's the primary goal of managerial accounting?
provide info to managers
indirect material (IM)
related to production but not part of the product
if managerial accounting reports are going to help managers what are the three characteristics they should have?
report info for decision making, provide objective measures of past operations and subjective estimates about future decisions, be provided at any time
examples of indirect labor
salaries of production supervisors, wages of factory janitors
indirect labor (IL)
salaries of workers contributing to production but not directly working on the product.
examples of administrative expense
office supplies expense, accountants salary expense
indirect costs (OH)
other production costs
classify each cost: Research and development costs
period
classify each cost: Salaries of distribution center personnel
period
classify each cost: Travel costs of media relations employees
period
classify each cost: Utility costs for office building
period
classify each cost: advertising expense
period
classify each cost: chiefs financial officer's salary
period
classify each cost: depreciation on office equipment
period
classify each cost: sales commissions
period
classify each cost: Wages of sewing machine operators
product - DL
classify each cost: fabric used during production
product - DM
classify each cost: Salaries of production quality control supervisors
product - OH - IL
period cost
not directly related to making product
Total Manufacturing Costs =
costs of goods manufactured - beginning work in process inventory + ending work in process inventory
direct product cost
can be traced to specific product
conversion cost equation
conversion cost = direct labor cost + factory overhead
product cost
cost of product
direct material (DM)
cost of raw materials converted into product
examples of selling expenses
marketing expense, delivery expense
