Acct 2302 Exam 1

Manufacturing overhead was estimated to be $250,000 for the year along with 20,000 direct labor hours. Actual manufacturing overhead was $225,000 and actual direct labor hours were 19,000. The predetermined overhead rate per direct labor hour would be:

$250,000 / 20,000 = $12.50.

Robin Company has the following balances for the current month: DM used $23,000 Direct labor$19,800 Sales salaries$8,750 Indirect labor$1,500 Production manager's salary$6,210 Marketing costs$9,560 Factory lease$4,475 What are Robin's conversion costs?

$31,985 = $19,800 + $1,500 + $6,210 + $4,475. Direct labor and manufacturing overhead are conversion costs, which include the indirect labor, the production manager's salary, the factory lease, and direct labor. These items total $31,985.

Manufacturing overhead was estimated to be $372,600 for the year along with 20,700 direct labor hours. Actual manufacturing overhead was $415,300, and actual labor hours were 21,800. The amount debited to the Manufacturing Overhead account would be:

$415,300.

Manufacturing overhead was estimated to be $375,000 for the year along with 25,000 direct labor hours. Actual manufacturing overhead was $368,750 and actual direct labor hours were 26,000. The amount of manufacturing overhead applied to production would be:

($375,000 / 25,000 = $15.00) Multiply the predetermined manufacturing overhead rate ($15.00) by the actual number of direct labor hours (26,000) to calculate applied manufacturing overhead. ($15.00 × 26,000 = $390,000)

Given the following, compute the conversion cost per equivalent unit using the weighted-average method. Conversion costs in beginning inventory $5,000. Conversion costs added in the current period $40,000. A total of 1,000 units were completed and transferred out during the period. The 500 units in ending inventory are 50% complete

(5,000+40,000)/(1,000+500x50%) = 36

cost per equivalent unit

(Beginning Inventory + Current Costs)/Equivalent Units

Which of the following statements are true?

-Costs are treated differently in different situations. -There are many different ways to categorize costs.

Equivalent units of production are needed to

-Determine the cost of partially completed units -Properly prepare GAAP-based financial statements

Which of the following statements are true regarding process costing production reports?

-Managers can use production reports to monitor and control production costs. -Production reports are used to determine how much cost to transfer from one process to the next. -Production reports provide information accountants need to record manufacturing costs into the accounting system.

Basic functions of management

-Planning -Implementing -controlling part of a continuous or ongoing cycle called the plan-implement-control cycle

Which of the following statements are true?

-The distinction between product and period costs has more to do with financial accounting than managerial accounting. -Classifying a cost a product or period can impact reported profitability.

Which of the following are similarities between job order costing and process costing?

-The flow of costs through the inventory accounts is basically the same for both costing systems. -The purpose is to assign direct materials, direct labor, and manufacturing overhead to products. The same basic inventory accounts are used for both costing system

Which of the following statements are true?

-When materials are purchased they are recorded in the Raw materials inventory account. -Raw materials inventory represents the cost of materials not yet used in production.

Cost transferred from Work in Process (WIP) Inventory to Finished Goods (FG) Inventory ______.

-cost of goods completed -cost of goods manufactured - remain in FG Inventory until goods are sold

companies with strong ethical cultures

-have higher productivity than those without such cultures -have higher levels of customer satisfaction

The total cost of Work in Process Inventory ______.

-is divided between ending inventory and costs transferred to the next process or Finished Goods -includes beginning Work in Process plus current costs

Categories of manufacturing costs include ______.

-manufacturing overhead -direct labor -direct materials

A journal entry that debits Manufacturing overhead and credits Accounts payable could be made to record ______.

-rent expense on factory equipment -factory utilities expense

1. Identifying five college campuses to serve as test markets. 2.Setting the goal of $1 million in annual sales by the year 2018. 3.Hiring workers for the manufacturing facility. 4.Overseeing the production and shipment of The Campus Cart. 5.Preparing one-, three-, and five-year budgets that detail the necessary resources and costs that will be incurred to meet the projected sales forecasts. 6.Deciding which new markets to expand into based on the first year's sales results. 7.Implementing a bonus system to reward employees for meeting sales and production goals. 8.Deciding to spend more advertising dollars in regions where sales were slower than expected.

1-planning 2-planning 3-implementing 4-implementing 5-planning 6-control 7-implementing 8-control

Weighted-Average method five steps

1. Reconcile the number of physical units 2. convert physical units into equivalent units 3. Calculate cost per equivalent unit 4. Reconcile the total cost of Work in Process Inventory 5. Prepare a production report

Given 100 units in beginning inventory, 1500 units started, and 200 units in ending inventory, the number of units completed equals

100+1500=?+200 1600=200 =1400

cost objects include

Activities anything for which cost data is desired.

Actual amount of indirect manufacturing costs incurred during the period

Actual Manufacturing Overhead

An out-of-pocket cost involves which of the following?

An actual outlay of cash.

Indirect manufacturing costs that have been assigned to a specific unit or job using a predetermined overhead rate.

Applied manufacturing overhead

Cost per equivalent unit=

Beginning inventory + Current costs/equivalent units

Which of the following relationships is correct?

Beginning units in inventory + units started = units completed + ending units in inventory

Which of the following statements is correct?

Companies often provide products and services that have both common and unique characteristics, so they may use a blend of job order and process costing.

Which of the following describes the Control function within the management cycle?

Comparing actual to budgeted results and taking corrective action

Total production cost assigned to goods that were produced during the period.

Cost of Goods Manufactured

Total manufacturing cost of jobs or units sold during the period.

Cost of Goods Sold

When the product is sold the manufacturing cost are transferred

Cost of Goods Sold

Which of the following represents the cost of the jobs sold during the period?

Cost of Goods Sold

Which of the following is an example of the variety of big data?

Data collected from YouTube videos

The journal entry to record depreciation on office equipment debits ______.

Depreciation Expense and credits Accumulated Depreciation

Conversion Cost=

Direct Labor + Manufacturing Overhead

Manufacturing costs include

Direct Labor, Direct Materials, Manufacturing Overhead

Materials that can be directly and conveniently traced to a specific unit or job.

Direct Materials

Under the weighted average method of process costing, the cost per equivalent unit is calculated for which of the following categories?

Direct materials and conversion costs

Predetermined overhead rate (POHR)=

Estimated total manufacturing overhead cost/ estimated total cost driver

The process costing production report can be prepared using either the weighted-average method or the last-in, first-out (LIFO) method.

False

Controlling

Final step in the management process. Managers keep track of how they are doing and whether any actions must be taken to adjust the plan. - Key role in helping managers measure and monitor the companys performance

Costs of all units completed and ready for sale at any given point in time.

Finished Goods

Brody Corp. uses a process costing system in which direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. Beginning inventory for January consisted of 1,150 units that were 60% completed. 9,500 units were started into the process during January. On January 31, the inventory consisted of 450 units that were 80% completed. What would be the equivalent units for direct materials cost using the weighted average method?

First calculate completed units to be 10,200. 1,150 + 9,500 − 450 = 10,200 Both completed units and ending inventory are 100% complete with respect to direct materials, so the equivalent units for direct materials cost is the sum of 100% of the completed units plus 100% of the ending inventory. (10,200 × 100%) + (450 × 100%) = 10,650

Which of the following functions of management involves arranging for the necessary resources to carry out the plan?

Implementing

Which of the following functions of management involves providing motivation to achieve results?

Implementing

Materials that cannot be directly or conveniently traced to a specific unit or job.

Indirect Materials

For a cost to be relevant, it must meet which of the following criteria?

It must differ between the decision alternatives and it must be incurred in the future rather than in the past.

When manufacturing overhead is applied to production, which of the following accounts is credited?

Manufacturing Overhead

A company was assessed property taxes of $1,000 on its manufacturing facility. The journal entry to record this is debit ______.

Manufacturing Overhead $1,000 and credit Property Taxes Payable $1,000

The journal entry to record $20,000 in depreciation on factory equipment is debit ______.

Manufacturing Overhead $20,000 and credit Accumulated Depreciation $20,000

If a company uses a predetermined overhead rate, which of the following statements is correct?

Manufacturing Overhead will be debited for actual overhead.

Which of the following would be used to record the factory supervisor's salary?

Manufacturing Overhead would be debited.

All costs other than direct materials and direct labor that are incurred to produce a product are called indirect costs or

Manufacturing overhead

Types of organization

Manufacturing, merchandising and service

as materials are issued out of Raw Materials Inventory what form is filled out to indicate for which job/jobs the materials will be used for?

Materials Requisition Form

What document specifies the type and quantity of direct materials used on a specific job?

Materials requisition form

Jenkins Company used a predetermined overhead rate using estimated overhead of $412,800 and 8,600 estimated direct labor hours. Assume the only inventory balance is an ending Finished Goods Inventory balance of $19,900. What was adjusted cost of goods sold?

Predetermined overhead rate = $412,800 / 8,600 = $48. Applied manufacturing overhead = $48 × 9,500 = $456,000. Cost of goods manufactured = $297,600 + $245,400 + $456,000 + $0 − $0 = $999,000. Unadjusted cost of goods sold = $0 + $999,000 − $19,900 = $979,100. Overapplied overhead = $456,000 − $435,000 = $21,000. Adjusted cost of goods sold = $979,100 − $21,000 = $958,100.

Applied Manufacturing Overhead=

Predetermined overhead rate x actual cost driver

Manufacturing overhead is applied to each job using which formula?

Predetermined overhead rate × actual value of the cost driver for the job

Sarbanes-Oxley (SOX) Act of 2002

Primarily aimed at renewing investor confidence in the external financial reporting system focuses on three factors that affect the accounting reporting environment: opportunity, incentives and character -Many implications for managers

Which of the following is true about product and period costs?

Product costs are usually manufacturing costs, and period costs are usually nonmanufacturing costs.

Implementing

Putting plan into action. also called operational decisions -Managers must lead, direct and motivate others to achieve the objectives set in the planning stage (who should i purchase supplies form? when do I need them?)

Cost of materials purchased from suppliers that have not yet been used in production.

Raw Materials Inventory

The journal entry to record the purchase of materials debits ______.

Raw Materials Inventory

When materials are purchased they are first recorded in the ______ account.

Raw Materials Inventory

A company purchases $40,000 of direct materials and $30,000 of indirect materials on account. The journal entry to record this transaction is debit ______.

Raw Materials Inventory $70,000 and credit Accounts Payable $70,000

Which of the following is not a characteristic of managerial accounting?

Reports are prepared according to GAAP.

Which of the following does not describe the Implementing function within the management cycle?

Setting short- and long-term objectives

Which of the following changes introduced by the Sarbanes-Oxley Act is not one intended to encourage good character?

Stiffer fines and prison terms

How could a firm using the weighted average method of process costing calculate how many units were started during a period?

Subtract beginning units in inventory from units completed, then add ending units in inventory.

When using process costing, direct labor costs are often combined with manufacturing overhead into a single cost category.

True

Which of the following statements are true?

Under the weighted-average method, beginning inventory costs are treated just like costs added during the current period. Costs that move from one process to another are called transferred-in costs.

Cost of units or jobs that are incomplete at any given point in time.

Work in Process Inventory

When units are completed, the cost associated with the job is credited to which account?

Work in Process Inventory

Which of the following would be used to record the labor cost that is traceable to a specific job?

Work in Process Inventory would be debited.

When a job is completed, which account is credited?

Work in process Inventory

Job Order Costing

a costing system used in situations where many different products, jobs, or services are produced each period

when using process costing,

a separate production report is prepared for each process

The Cost of Goods Manufactured Report includes all of the following except:

actual manufacturing overhead.

A journal entry that debits Finished Goods Inventory and credits Work in Process records the ______.

administrative salaries

A cost object is:

an item for which managers are trying to determine the cost.

Applied manufacturing overhead costs are credited to the Manufacturing Overhead account ______.

as the cost are applied to jobs

Service firms:

assign indirect costs to individual clients or accounts based on an allocation base such as billable hours.

The basic formula for process costing is

average unit cost = total manufacturing cost/total units produced

Predetermined overhead rates are ______.

based on some secondary allocation measure

When is the predetermined overhead rate calculated?

before the period begins

Because service firms tend to be labor-intensive, the primary driver used to assign cost is

billable hours

The control function is:

comparing actual with budgeted results and taking corrective action when needed.

Many organizations are building sustainable business practices into their strategies by issuing:

corporate social responsibility reports.

when making a decision

cost control is a critical concern for most organizations

The total cost transferred out of Work in Process inventory into Finished Goods inventory is ______.

cost of goods manufactured

When overhead is underapplied, a _____ must be made to the Manufacturing overhead account to eliminate the balance.

credit

The first step in assigning manufacturing overhead costs using a predetermined overhead rate is to ______

determine the cost driver

Underapplied or overapplied overhead is the ______.

difference between overhead applied to jobs and actual overhead

labor costs that can easily and conveniently traced to specific products are _____costs

direct labor

Conversion costs consist of:

direct labor and manufacturing overhead.

Prime costs are defined as:

direct labor plus direct materials

which of the following is not a manufacturing cost category

direct materials direct labor manufacturing overhead

When materials are requisitioned into production, ______.

direct materials are recorded on the job cost sheet -direct materials are recorded in Work in Process

A journal entry that involves Manufacturing overhead and Cost of goods sold is recorded to ______.

dispose of underapplied or overapplied overhead

Equivalent units of production under the weighted-average method equal ______.

equivalent units in ending work in process plus units transferred out

Physical units multiplied by the percentage of completion yields:

equivalent units.

A job cost sheet will record the direct materials and direct labor used by the job but not the manufacturing overhead applied.

false

Job-order costing can only be used in manufacturing firms

false

Process costing often combines direct materials and direct labor into a single category called conversion costs.

false

Source documents are used to assign all manufacturing costs to jobs.

false

The cost of each individual unit is tracked to products under both job order and process costing.

false

The key difference between a process costing production report prepared using one of the two acceptable methods is how they deal with any units and costs that are in ending Work in Process Inventory.

false

The production report contains information about the number of physical units and equivalent units, but not their costs.

false

The total amount of cost assigned to jobs that were completed during the year is the cost of goods sold.

false

The total cost of Work in Process incurred in one department during the period must be allocated between costs transferred to the next department and costs transferred to Finished Goods.

false

Variable costs are always direct costs.

false

Virtually all accounting and business problems have clear right or wrong answers.

false

When a job is completed, its costs are transferred into ______.

finished goods

Planning

future-oriented part of the management cycle. -first step -establish goals/objectives along with the tactics that will be used to achieve those goals -who, what, when, where, how

Computing equivalent units is especially important for:

goods that take a long time to produce, such as airplanes.

process costing

homogeneous products mass production

the difference between product costs and period costs determine

how and when the cost will be matched

if cost data will be used for decision making, it is important to consider

how cost will behave or change

Decisions such as deciding how many employees to hire, salary schedules, and training policies are made during the ______ phase of the management process.

implementation

Financial accounting

information is aimed at external users or those outside the organization such as investors, creditors and regulators

Managerial accounting

information is aimed at internal users or those working inside the organization, such as business owners, managers and employees

what is the key difference between financial accounting and managerial accounting

intended user of the information

a _________cost will not influence a decision

irrelevant

Cost object

item we want to know the cost of; cost to buy and operate car, vacation.

manufacturing costs can be divided into three categories: direct materials, direct

labor and manufacturing overhead

Overhead costs are underapplied if the amount applied to Work in Process is:

less than actual overhead incurred.

The most common method for disposing of over or underapplied overhead is to:

make a direct adjustment to Cost of Goods Sold.

Companies that use job-order costing ______.

make unique products

Managerial accounting, as compared to financial accounting, is primarily intended to facilitate:

making decisions with timely, relevant information.

Throughout the Plan-Implement-Control cycle

managers must make a variety of decisions, and the managerial accounting system must provide information to help them make those decisions

Cost of goods ___________ is the total cost of jobs completed during the period

manufactured

Actual manufacturing overhead consists of all ______.

manufacturing costs other than direct labor and direct materials

Factory labor charges that cannot be easily traced to a job are treated as ______.

manufacturing overhead

when classifying cost________ costs relate to making a product and ________ costs relate to delivering and selling product

manufacturing, nonmanufacturing

Labor costs ______.

may be direct or indirect are recorded in basically the same way as material costs

The distinction between manufacturing and nonmanufacturing costs applies ______.

only to companies that make a physical product

The difference between overhead applied to jobs and actual overhead is ______.

overapplied or underapplied overhead

An equivalent unit is a measure used to convert _______ completed units into the equivalent of a full unit

partially

a relevant cost

potential to influence a decision -occur in the future -differ between the various alternatives the manager is considering

Information about the number of units and costs that flow through a manufacturing process during an accounting period is provided on the

production report

the foundation of a process costing system is the

production report

costs objects can be

products, customers or jobs

Service companies

provide a service to customers or clients (expedia, southwest)

the production repot

provides information to record manufacturing costs in the accounting system

Manufacturing firms

purchase raw materials from suppliers and convert them into finished products (apple ipods, ford cars and trucks)

All materials that will be used in future production are first recorded in the __________ inventory account

raw materials

Materials requisition forms are used to ______.

record the cost of raw materials in the accounting system control the flow of materials from inventory into production

Ethics

refers to the standards of conduct for judging right from wrong, honest from dishonest, and fair from unfair.

variable cost

remain constant per unit and vary in total

Merchandising companies

sell the goods that manufacturers produce (sams)

Nonmanufacturing costs increase ______.

the Selling, General & Administrative expense accounts

Cost per equivalent unit is kept separate for direct materials and conversion costs because:

the equivalent units are different for the two categories.

When actual manufacturing overhead costs are incurred, ______.

the manufacturing overhead cost is debited

"Ethics" refers to all of the following except:

the standards of conduct for judging opportunity from incentives.

a direct labor ________________is a document used to record how long workers spend on each job and task

time ticket

Average unit cost=

total cost/total units produced

Direct costs are ______ to products, and overhead costs are ______.

traced; applied

Financial accounting information is reported for the company as a whole.

true

Process costing averages the total cost of the process over the number of units produced.

true

Some firms operate as more than one type of organization: manufacturer, merchandiser and/or service company.

true

cost control is a critical concern for most organizations

true

Physical units

units in beginning inventory + units started= Units completed+ units in ending inventory

Process costing

used by companies that produce homogeneous products or services, or those that are produced through a series of standardized processes.

cost that remain constant on a per unit basis are called

variable

The term "Big data" refers to the:

variety, volume, and velocity of the data.

Data that is received as events are occurring is an example of:

velocity

The major difference between job order and process costing is ______.

whether the products produced are similar or different