AFM102 Lecture 2: AFM 102 Week 2 Chapter 2

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azurebee57

15 Jan 2017

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM102

Professor

Jie Joyce Tian

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Document Summary

Week 2 chapter 2: cost terms, concepts, and classifications. Materials that go into the final product: direct materials. Those materials that become an integral part of a finished product and can be conveniently traced to it: indirect materials. Small items of material that may become an integral part of a finished product but whose costs of tracing exceed the benefits. Those factory labour costs that can be traced easily to individual units of product: indirect labour. Labour costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced directly to particular products. All costs associated with manufacturing except direct materials and direct labour. Examples: indirect materials, indirect labour, maintenance and repairs on production equipment, heat and light, property taxes, depreciation, and insurance on manufacturing facilities. Conversion cost = direct labour cost + manufacturing overhead cost. Prime cost = direct materials cost + direct labour cost.

Related Questions

1. Process costing is normally used when:

a. large numbers of different products are manufactured

b. large numbers of nearly identical products aremanufactured

c. small numbers of nearly identical products aremanufactured

d. the fixed costs of manufacturing exceed the variable cost ofmanufacturing

2. Manufacturing overhead:

a. consists of direct material and direct labour costs

b. is easily traced to jobs

c. should not be assigned to individual jobs because it bears noobvious relationship to them

d. is a heterogeneous pool of indirect production costs that caninclude gas and electricity costs and depreciation

orchidelk884

Kubin Companyâs relevant range of production is 25,000 to 33,500 units. When it produces and sells 29,250 units, its average costs per unit are as follows:

	Average Cost per Unit
Direct materials	$	8.50
Direct labor	$	5.50
Variable manufacturing overhead	$	3.00
Fixed manufacturing overhead	$	6.50
Fixed selling expense	$	5.00
Fixed administrative expense	$	4.00
Sales commissions	$	2.50
Variable administrative expense	$	2.00

Required:

2. Assume the cost object is the Manufacturing Department and that its total output is 29,250 units.

a. How much total manufacturing cost is directly traceable to the Manufacturing Department?

b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?

2. Assume the cost object is the Manufacturing Department and that its total output is 29,250 units.

a. How much total manufacturing cost is directly traceable to the Manufacturing Department? (Round per unit values to 2 decimal places.)

b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?

Show less


2a.	Direct materials per unit	$8.50
	Direct labor per unit	5.50
	Variable manufacturing overhead per unit	3.00
	Fixed manufacturing overhead per unit	6.50
	Total manufacturing cost per unit	$23.50
	Number of units sold	29,250
	Total direct costs	$687,375

2b.	Total indirect costs

3. Assume the cost object is the companyâs various sales representatives. Furthermore, assume that the company spent $117,000 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representativesâ compensation.

a. When the company sells 29,250 units, what is the total direct selling expense that can be readily traced to individual sales representatives?

b. When the company sells 29,250 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

a. When the company sells 29,250 units, what is the total direct selling expense that can be readily traced to individual sales representatives? (Round per unit value to 2 decimal places.)

b. When the company sells 29,250 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

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3a.	Sales commissions per unit
	Number of units sold
	Total sales commission
	Fixed portion of sales representativesâ compensation
	Total direct selling expense

3b.	The total indirect selling expense

harlequinsardine998

1. Sydney's Barbecue reported the following information:

Sydney's Barbecue
Period Ending December 31, 20XX

Manufacturing costs	$5,400,000
Units manufactured	$54,000
Beginning inventory in Units	$ 0

Note: 45,600 units sold during year at $300 per unit

What is the amount of ending finished goods inventory for theperiod ending December 31, 20XX?

	$860,000
	$830,000
	$840,000
	$850,000
	$820,000

2.Net income reported under absorption costing will exceed netincome reported under variable costing for a given period if

production equals sales for thatperiod.

variable overhead exceeds fixedoverhead for that period.

production exceeds sales for thatperiod.

sales exceed production for that period.

A company manufactures wallets. Last month's costs were aslisted below:

Direct materials	$246,000
Direct labor	$175,000
Manufacturing Overhead	$73,000

What were the conversion costs for the month?

$248,000

$494,000

$421,000

$246,000

4. Which of the following are classified as manufacturingoverhead?

Indirect labor and indirectmaterials

Direct materials and directlabor

Factory rent and direct labor

All materials

5.Baxter Company produces Frisbees using a three-step sequentialprocess that includes molding, coloring, and finishing. At whatstage would the sets be allocated Manufacturing Overhead?

When the Frisbees are in WIPInventory-Coloring

When the Frisbees are in WIPInventory-Finishing

When the Frisbees are in WIPInventory-Molding

All of the above

6.Which method are managers using when they use their judgmentto classify costs as variable, fixed, or mixed?

Low-high method

Regression analysis

Account analysis

High-low method

7.Which of the following is not a way in which management canuse job cost information?

Determining the balance in rawmaterials inventory

Preparing the financialstatements

Assessing and comparing theprofitability of each product type

Using the cost information in determining the bid price forcustom orders

8.A factory janitor's wages would be classified as _________when determining the cost of a manufactured product.

an indirect cost

a period cost

a direct cost

none of the above

Tall Timbers reports the following data for its first year ofoperation:

Work in process inventory, beginning	$ 0
Work in process inventory, ending	$50,200
Manufacturing overhead	$25,400
Direct materials used	$7,700
Direct Labor	$60,000
Finished goods inventory, beginning	$ 0
Finished goods inventory, ending	$20,000
Cost of goods manufactured	$42,900

What is the cost of goods sold?

$22,900

$76,000

$73,100

$42,900

10.

A deodorant manufacturer offers the following information:

WIP Inventory, January 1	0 units
Units started	33,600 units
Units completed and transferred out	11,200 units
WIP Inventory, December 31	22,400 units
Direct materials	$276,480
Direct labor	$585,000
Manufacturing Overhead	$328,920

The units in ending WIP Inventory were 60% complete formaterials and 40% complete for conversion costs.

On December 31, what are the total equivalent units for directmaterials?

47,040

33,600

20,160

24,640

11. How is the cost of indirect materials used in the factoryrecorded?

Credit to Raw Materials Inventoryaccount

Credit to Manufacturing Overheadaccount

Credit to Direct Materials Expenseaccount

Credit to Work-in-Process Inventory account

12. XYZ uses job costing. Actual manufacturing overhead for theperiod is $20,300 while allocated manufacturing overhead is$18,200. What entry will close the manufacturing overheadbalance?

	Debit the Cost of Goods Soldaccount and credit the Finished Goods Inventory account for$2,100.
	Debit the Manufacturing Overheadaccount and credit the Work-in-Process account for $2,100.
	Debit the Cost of Goods Soldaccount and credit the Manufacturing Overhead account for$2,100.
	Debit the Manufacturing Overhead account and credit the Cost ofGoods Sold account for $2,100.

AFM102 Lecture 2: AFM 102 Week 2 Chapter 2

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