ACTG 1P12 Lecture Notes - Lecture 2: Income Statement, Fixed Cost, Variable Cost

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redmosquito980

16 Apr 2018

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Chapter 2 - cost concepts and cost behavior analysis. Manufacturing costs: manufacturing consists of activities to convert raw materials into finished goods. In contrast, a merchandising firm sells goods in the form in which they were bought. Cost: an economic resource sacrificed or forgone to achieve a specific objective. The product: direct materials, direct labor, manufacturing overhead. Raw materials that can be physically and directly traced (associated) with the finished product: ex. Labor that can be physically and directly associated (traced) with converting the raw materials into finished goods: ex. Manufacturing overhead: costs that are indirectly associated with the manufacture of the finished product, cannot be traced directly to specific units produced, ex. Indirect labor and indirect materials, depreciation on equipment. Wages paid to employees who are not directly involved in production of work: ex. Materials used to support the production process: ex. Lubricants and cleaning supplies used in the automobile assembly plant.

Related Questions

1.) When products held in inventory are sold:

A.)Cost of Goods Sold is credited.

B.)Work in Process Inventory is credited.

C.)Finished Goods Inventory is credited.

D.)Finished Goods Inventory is debited.

2.)Since manufacturing costs (direct materials, direct labor,and overhead) are incurred in the process of manufacturing units ofproduct, these costs are credited t

A.)	The Direct Materials Inventory, Direct Labor, and ManufacturingOverhead accounts respectively.
B.)	Liability accounts.
C.)	The Work in Process Inventory account.
D.)	The Cost of Goods Sold account.

3.)Management accounting systems are designed to assistorganizations in the performance of all of the following functionsexcept:

A.)	The assignment of decision-making authority over companyassets.
B.)	Planning and decision-making.
C.)	Monitoring, evaluating, and rewarding performance.
D.)	The preparation of income tax returns.

4.)In a schedule of cost of finished goods manufactured, thefigure for total manufacturing costs:

	A.) May be less than the cost of direct materials used.
	B.) May be less than the direct labor costs assigned toproduction.
	C.) May be less than the manufacturing overhead applied toproduction.
	D.) May be less than the cost of finished goodsmanufactured.

5.) When a manufacturing company purchases raw materials orcomponent parts to be used in manufacturing finished goods, thesecosts are initially debited to:

	A.) Expense accounts.
	B.) Raw Materials Inventory.
	C.) Finished Goods Inventory.
	D.) Manufacturing Overhead.

6.) The wages paid to employees working directly on a company'sproducts would be shown as a:

	A.) Credit to Direct Labor.
	B.) Debit to Direct Labor.
	C.) Credit to Work in Process.
	D.) Debit to Manufacturing Overhead.

7.) Amounts credited to the Work in Process inventory accountmay best be described as:

	A.) The cost of finished goods manufactured.
	B.) Total manufacturing costs charged to production.
	C.) The cost of goods sold.
	D.) Direct materials purchased, direct labor costs paid, andpayments for items classified as manufacturing overhead.

chocolatetiger413

The Pacific Manufacturing Company operates a job-ordercosting system and applies overhead cost to jobs on the basis ofdirect labor cost. Its predetermined overhead rate was based on acost formula that estimated $113,100 of manufacturing overhead foran estimated allocation base of $87,000 direct labor dollars. Thecompany has provided the following data:

Inventories Beginning Ending

Raw materials $ 27,000 $ 10,000

Work in process $ 49,000 $ 36,000

Finished goods $ 74,000 $ 55,000

The following actual costs were incurred during theyear:

Purchase of raw materials (all direct) $ 131,000

Direct labor cost $ 83,000

Actual manufacturing overhead costs:

Insurance, factory $ 8,700

Depreciation of equipment $ 18,000

Indirect labor $ 27,200

Property taxes $ 8,700

Maintenance $ 15,000

Rent, building $ 34,000

________________________________________

Compute the predetermined overhead rate for theyear.

Predetermined overhead rate %

Compute the amount of underapplied or overapplied overheadfor the year. (Input the amount as a positive value.)

overhead $

Prepare a schedule of cost of goods manufactured for theyear. Assume all raw materials are used in production as directmaterials. (Input all amounts as positive values.)

Pacific Manufacturing Company

Schedule of Cost of Goods Manufactured

Direct materials:

Total raw materials available

Raw materials used in production $

Total manufacturing cost

Cost of goods manufactured $

Compute the unadjusted cost of goods sold for the year. (Donot include any underapplied or overapplied overhead in your costof goods sold figure.

Unadjusted cost of goods sold $

Job 137 was started and completed during the year. What pricewould have been charged to the customer if the job required $3,600in materials and $4,000 in direct labor cost, and the companypriced its jobs at 50% above the job%u2019s cost according to theaccounting system?

Price to customer $

Direct labor made up $8,500 of the $36,000 ending Work inProcess inventory balance. Supply the information missingbelow:

Direct materials $

Direct labor 8,500

Manufacturing overhead

Work in process inventory $ 36,000

**how to compute price to customer?

beigekoala601

The Pacific Manufacturing Company operates a job-order costingsystem and applies overhead cost to jobs on the basis of directlabor cost. Its predetermined overhead rate was based on a costformula that estimated $113,100 of manufacturing overhead for anestimated allocation base of $87,000 direct labor dollars. Thecompany has provided the following data:

Inventories Beginning Ending

Raw materials $ 27,000 $ 10,000

Work in process $ 49,000 $ 36,000

Finished goods $ 74,000 $ 55,000

The following actual costs were incurred during the year:

Purchase of raw materials (all direct) $ 131,000

Direct labor cost $ 83,000

Actual manufacturing overhead costs:

Insurance, factory $ 8,700

Depreciation of equipment $ 18,000

Indirect labor $ 27,200

Property taxes $ 8,700

Maintenance $ 15,000

Rent, building $ 34,000

________________________________________

Compute the predetermined overhead rate for the year.

Predetermined overhead rate %

Compute the amount of underapplied or overapplied overhead forthe year. (Input the amount as a positive value.)

overhead $

Prepare a schedule of cost of goods manufactured for the year.Assume all raw materials are used in production as directmaterials. (Input all amounts as positive values.)

Pacific Manufacturing Company

Schedule of Cost of Goods Manufactured

Direct materials:

Total raw materials available

Raw materials used in production $

Total manufacturing cost

Cost of goods manufactured $

Compute the unadjusted cost of goods sold for the year. (Do notinclude any underapplied or overapplied overhead in your cost ofgoods sold figure.

Unadjusted cost of goods sold $

Price to customer $

Direct labor made up $8,500 of the $36,000 ending Work inProcess inventory balance. Supply the information missingbelow:

Direct materials $

Direct labor 8,500

Manufacturing overhead

Work in process inventory $ 36,000

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ACTG 1P12 Lecture Notes - Lecture 2: Income Statement, Fixed Cost, Variable Cost

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