ACC 406 Lecture Notes - Lecture 4: Total Absorption Costing, Pro Rata, Bid Price

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18 Apr 2017

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Homework: p5-29, p5-30: a set of accounting procedures by using accounts to accumulate cost in and distribute cost out. Product costing system: a costing system in which the product itself is the cost object. Job order costing system: a major example of product costing system. Fixed overhead is included/applied to/absorbed by product units i. e. cost of goods manufactured = Direct material + direct labour + total overhead the total overhead means both total variable overhead and total fixed overhead. When company excludes fixed overhead cost from product costs, and expensed in the accounting period cost of good manufactured = dm +dl. Need overhead rate= overhead cost / activity volume. Actual overhead rate= overhead cost / activity volume. Most people feel this method is better because it is more objective, reliable, based on real information used by financial accounting. Predetermined means it is estimated and not actual. Estimate that the expected overhead cost is ,200.

Related Questions

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

(TCO A) Wages paid to an assembly line worker in a factory are a(Points : 6) Prime Cost YES.....Conversion Cost YES. Prime CostYES.....Conversion Cost NO. Prime Cost NO....Conversion Cost NO.Prime Cost NO.....Conversion Cost YES. Question 2. 2. (TCO A) Thecosts of staffing and operating the accounting department atCentral Hospital would be considered by the department of surgeryto be (Points : 6) indirect costs. sunk costs. incremental costs.direct costs. Question 3. 3. (TCO A) The cost of lubricants used togrease a production machine in a manufacturing company is anexample of a(n) (Points : 6) period cost. direct material cost.indirect manufacturing cost. direct product cost. None of the aboveQuestion 4. 4. (TCO C) When the activity level is expected toincrease within the relevant range, what effects would beanticipated with respect to each of the following? (Points : 6)Fixed costs per unit decrease and variable costs per unit do notchange. Fixed costs per unit increase and variable costs per unitdo not change. Fixed costs per unit do not change and variablecosts per unit do not change. Fixed costs per unit do not changeand variable costs per unit increase. Question 5. 5. (TCO B) EmcoCompany uses direct labor cost as a basis for computing itspredetermined overhead rate. In computing the predeterminedoverhead rate for last year, the company included in direct laborcost a portion of indirect labor. The effect of thismisclassification will be to (Points : 6) overstate thepredetermined overhead rate. understate the predetermined overheadrate. have no effect on the predetermined overhead rate. Thiscannot be determined from the information given. Question 6. 6.(TCO B) Under a job-order costing system, the product beingmanufactured (Points : 6) is homogeneous. passes from onemanufacturing department to the next before being completed. can becustom manufactured. has a unit cost that is easy to calculate bydividing total production costs by the units produced. Question 7.7. (TCO B) The weighted-average method of process costing differsfrom the FIFO method of process costing in that theweighted-average method (Points : 6) can be used under anycost-flow assumption. does not require the use of predeterminedoverhead rates. keeps costs in the beginning inventory separatefrom current period costs. does not consider the degree ofcompletion of units in the beginning work-in-process inventory whencomputing equivalent units of production. Question 8. 8. (TCO C)The contribution margin ratio always decreases when the (Points :6) fixed expenses increase. fixed expenses decrease. variableexpenses as a percentage of net sales increase. variable expensesas a percentage of net sales decrease. Question 9. 9. (TCO C) Whichof the following would not affect the break-even point? (Points :6) Variable expense per unit Number of units sold Total fixedexpenses Selling price per unit Question 10. 10. (TCO D) In anincome statement prepared using the variable costing method, fixedmanufacturing overhead would (Points : 6) not be used. be used inthe computation of the contribution margin. be used in thecomputation of net operating income but not in the computation ofthe contribution margin. be treated the same as variablemanufacturing overhead.

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ACC 406 Lecture Notes - Lecture 4: Total Absorption Costing, Pro Rata, Bid Price

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