ACCT 2230 Chapter Notes - Chapter 3: Xml, Subledger, Cost Driver

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olivewoodchuck632

7 Mar 2016

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Absorption costing - a costing method that includes all manufacturing costs direct materials, direct labour, and both variable and fixed overhead as part of the cost of a finished unit of product; synonymous with full costing. The essential purpose of any costing system is to accumulate costs for managerial use. Process costing system - a costing system used in those manufacturing situations where a single, homogenous product (such as cement or oil) flows in a continuous stream out of the production process. Since each unit is indistinguishable from one another, they are all assigned the same average cost. Job-order costing system - a costing system used in situations where many different products, jobs, or services are produced each period. Costs are traced and allocated to jobs where the costs of the job are divided by the number of units in the job to arrive at an average cost per unit.

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Identify each statement as true or false. If false, indicate howto correct the statement.

1. Process cost systems are used to apply costs to similarproducts that are mass-produced in a continuous fashion.
2. A process cost system is used when each finished unit isindistinguishable from another.
3. Companies that produce soft drinks, motion pictures, andcomputers chips would all use process cost accounting.
4. In a process cost system, costs are tracked by individualjobs.
5. Job order costing and process costing track differentmanufacturing costs elements.
6. Both job order costing and process costing account for directmaterials, direct labor, and manufacturing overhead.
7. Costs flow through the accounts in the same basic way for bothjob order costing and process costing.
8. In a process cost system, only one work in process account isused.
9. In a process cost system, costs are summarized in a job costsheet.
10. In a process cost system, the unit cost is total manufacturingcosts for the period divided by the units produced during theperiod.

byzantiumpanda529

Outback, Ltd., manufactures tactical LED flashlights in Melbourne, Australia. The firm uses an absorption-costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding planned and actual operations for 20x4 follow:

	Budgeted Costs

	Per Unit		Total		Actual Costs
Direct material	$	12.20	$	1,634,800	$	1,512,800
Direct labor		9.30		1,246,200		1,153,200
Variable manufacturing overhead		4.30		576,200		533,200
Fixed manufacturing overhead		4.50		603,000		613,000
Variable selling expenses		7.50		1,005,000		877,500
Fixed selling expenses		7.80		1,045,200		1,045,200
Variable administrative expenses		2.80		375,200		327,600
Fixed administrative expenses		2.80		375,200		384,200

Total	$	51.20	$	6,860,800	$	6,446,700

	Planned Activity	Actual Activity
Sales in units	134,000	117,000
Production in units	134,000	124,000
Beginning finished-goods inventory in units	43,000	43,000

The budgeted per-unit cost figures were based on the company producing and selling 134,000 units in 20x4. Outback uses a predetermined overhead rate for applying manufacturing overhead to its product. A total manufacturing overhead rate of $8.80 per unit was employed for absorption costing purposes in 20x4. Any overapplied or underapplied manufacturing overhead is closed to the Cost of Goods Sold account at the end of the year. The 20x4 beginning finished-goods inventory for absorption costing purposes was valued at the 20x3 budgeted unit manufacturing cost, which was the same as the 20x4 budgeted unit manufacturing cost. There are no work-in-process inventories at either the beginning or the end of the year. The planned and actual unit selling price for 20x4 was $72.00 per unit.

Required:

1.	Compute the value of Outbackâs 20x4 ending finished-goods inventory under absorption costing. (Do not round intermediate calculations.)

2.	Compute the value of Outbackâs 20x4 ending finished-goods inventory under variable costing. (Do not round intermediate calculations.)

3.	Compute the difference between Outbackâs 20x4 reported operating income calculated under absorption costing and calculated under variable costing. (Do not round intermediate calculations.)

peachwolf325

Listed below are seven technical accounting terms introduced oremphasized in this chapter.

Job Order costing

Overhead application rate

Overapplied overhead

Activity-based costing

Cost driver

Cost of finished goods manufactured

Job cost sheet

Each of the following statements may (or may not) describe thsestechinial terms. For each statment, indicate the term described, oramswer "None" if the statement does not correctly describe any ofthe terms.

a. An activity base that can b etraced directly to unitsproduced and can be used as a denominator in computing an overheadapplication rate.

b. The total of all direct lavor, direct materials andmanufacturing overhead transferred from work in process to finishedgoods.

c. A means of assigning indirect product costs to work inprocess during the period.

d. A debit balance remaining in the Manufacturing Overheadaccount at teh end of the period.

e. The type of cost accounting system likely to be used by aconstruction company.

f. The type of cost accounting method likely to be used foroverhead costs.

carmineplatypus255

ACCT 2230 Chapter Notes - Chapter 3: Xml, Subledger, Cost Driver

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