AFM102 Lecture Notes - Lecture 2: Matching Principle, Marginal Cost, Employee Benefits

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OC2146671

12 Jan 2018

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM102

Professor

Catherine Wong

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Document Summary

Idle time is not directly included in product cost. Indirect materials, indirect labour, maintenance, depreciation, repairs, etc. Supervisors are necessary for the production of products but their wages do not get tied down to one particular product: time it takes to determine manager"s time to each product is not worth the benefit. Classification of manufacturing labour costs: overtime premiums the extra hourly wage rate paid to workers who must work more than normal time. Initially assigned to the balance sheet to the inventory account (inventorial costs) and then is transferred to expenses (cogs) when the goods are sold. Finished goods inventory complete units of product that have not yet been sold to customers: the income statement, basic equation for inventory accounts, beginning balance + additions to inventory = ending balance + withdrawals from inventory. Finished goods inventory is credited for the cost of the items.

Related Questions

Explain why conversion costs below are listed as direct costs asif you are responding to an employee memo.

Specifically: a new assistant production manager whose priorexperience is with a company that produced goods to order emailsyou questioning some cost classifications on an internal report. Hespecifically wants to know why some costs of materials that do notactually become part of the finished product, including some laborcosts not directly associated with producing the product areclassified as direct costs.

Your company engages in continuous production of homogeneousproducts that go through various production processes.

1.A key difference between managerial and financial accounting is that

Managerial is only historical data and financial is only future data

Managerial users are typically internal and financial users typically external

Managerial is highly regulated and financial is not

Financial uses much more economic data than managerial
--------------------
2.An example of a period cost in accounting would be

		Materials to make a product
		A factory supervisorÃ¢ s wages
		Brochures used to sell the product
		Depreciation of manufacturing equipment

---------------------

3.Major inventory accounts in a manufacturing environment typically include all of the following except

Raw materials

Work in progress

Office supplies

Finished goods

------------------------

4.When a business is able to simultaneously reduce inventory holding costs and increase customer satisfaction by making products available exactly when a customer wants them, it is likely using

Seasonal control

Just in time inventory management

Factors of production planning

Supply chain distribution
----------------

5.An example of a direct product cost would be

		Prepaid rent of the retail store
		Health insurance costs for sales teams
		Product parts
		The factory janitorial staffÃ¢ s wages

6.An example of manufacturing overhead (indirect product costs) may be all of the following except

		Equipment depreciation
		Plant electric costs
		Materials to make a product
		A factory supervisorÃ¢ s wages

tanferret348

Problem 15-1A Production costs computed and recorded; reports prepared LO C2, P1, P2, P3, P4

[The following information applies to the questions displayed below.]

Marcelino Co.'s March 31 inventory of raw materials is $82,000. Raw materials purchases in April are $580,000, and factory payroll cost in April is $381,000. Overhead costs incurred in April are: indirect materials, $59,000; indirect labor, $25,000; factory rent, $31,000; factory utilities, $24,000; and factory equipment depreciation, $58,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $650,000 cash in April. Costs of the three jobs worked on in April follow.

	Job 306			Job 307			Job 308
Balances on March 31
Direct materials		$	28,000		$	36,000
Direct labor			24,000			15,000
Applied overhead			12,000			7,500
Costs during April
Direct materials			139,000			205,000		$	100,000
Direct labor			103,000			152,000			101,000
Applied overhead			?			?			?
Status on April 30	Finished (sold)			Finished (unsold)				In process

rev: 03_15_2018_QC_CS-121813

Problem 15-1A Part 1

Required:
1. Determine the total of each production cost incurred for April (direct labor, direct materials, and applied overhead), and the total cost assigned to each job (including the balances from March 31).

	Job 306	Job 307	Job 308	April Total
From March
Direct Materials	$28,000	$36,000		$64,000
Direct Labor	24,000	15,000		39,000
Applied overhead	12,000	7,500		19,500
Beginning goods in process
For April
Direct Materials	139,000	205,000	100,000	444,000
Direct Labor	103,000	152,000	101,000	356,000
Applied overhead
Total costs added in April
Total costs (April 30)
Status on April 30	Finished (sold)	Finished (unsold)	In process
April 30 cost included in:

Problem 15-1A Part 2

Materials purchases (on credit).
Direct materials used in production.
Direct labor paid and assigned to Work in Process Inventory.
Indirect labor paid and assigned to Factory Overhead.
Overhead costs applied to Work in Process Inventory.
Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash.)
Transfer of Jobs 306 and 307 to Finished Goods Inventory.
Cost of goods sold for Job 306.
Revenue from the sale of Job 306.
Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)

2. Prepare journal entries for the month of April to record the above transactions.

Problem 15-1A Part 3

3. Prepare a schedule of cost of goods manufactured.

MARCELINO COMPANY
Schedule of Cost of Goods Manufactured
For Month Ended April 30
Total manufacturing costs
Total cost of work in process
Cost of goods manufactured

crimsonturtle112

AFM102 Lecture Notes - Lecture 2: Matching Principle, Marginal Cost, Employee Benefits

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