ACCT 001 Lecture Notes - Lecture 22: Income Statement

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graycricket860

18 Sep 2020

School

College of The Sequoias

Department

Accounting (ACCT)

Course

ACCT 001

Professor

cooper

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Document Summary

Classification of cost relates to the way an organisation sets out its income statement. If the cost is related to inventory or manufacturing of goods sold. If the cost is related to selling or administration of the inventory sold components of the costs not a component of the cost. Manufacturing cost costs incurred in the process of converting raw materials into finished goods: classified as direct or indirect costs. Direct manufacturing costs can be traced directly to a cost object: cost of raw (direct) materials. Can be easily associated and traced to finished product ina convenient and cost-effective way: cost of direct labour. Directly traceable to the product in a convenient and cost effective way. Involved with the physical transformation of raw materials into the finished goods. Other overhead costs: cost of indirect materials. Necessary for production but do not become part of the finished production e. g. lubricating oil for machine.

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

Required information

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

Sierra Company manufactures woven blankets and accounts for product costs using process costing. Data below are for one of its processing departments. The following information is available regarding its May inventories

	Beginning Inventory		Ending Inventory
Raw materials inventory	$	65,000	$	77,000
Work in process inventory		441,500		555,000
Finished goods inventory		632,000		517,000

The following additional information describes the company's production activities for May.


Raw materials purchases (on credit)	$	250,000
Factory wages cost (paid in cash)		1,562,000
Other overhead cost (Other Accounts credited)		38,000
Materials used
Direct	$	158,000
Indirect		80,000
Labor used
Direct	$	800,000
Indirect		762,000
Overhead rate as a percent of direct labor		110	%
Sales (on credit)	$	3,500,000

The predetermined overhead rate was computed at the beginning of the year as 110% of direct labor cost.

1. Compute the cost of products transferred from production to finished goods and cost of goods sold.

Raw Materials (RM)	Work in Process (WIP)






Factory Wages Payable	Finished Goods (FG)





Factory Overhead	Income Statement (Partial)


		$0


	Cost of goods transferred
	Cost of goods sold

ceriseplatypus220

Problem 2

Smith Carlson Corporation provided the following list of costdata to its manufacturing operations for the month of October20X5.

Beginning raw materials inventory	2,416,000
Raw materials purchased (net)	5,863,750
Ending raw materials inventory	2,045,500
Direct labor costs	805,750
Indirect materials	313,750
Indirect labor	222,250
Factory utilities and maintenance	1,140,000
Factory depreciation	141,500
Other factory relatedoverhead	61,000
Beginning work in process	1,942,500
Ending work in process	1,792,500

Arrange the cost data into a statement of cost of goodsmanufactures.

If Smith Carlson Corporation cost of goods sold for the monthwas $10,000,000, how much was the increase or decrease in finishedgoods inventory for the month of October

WORKSHEET #2

SMITH CARLSON CORPORATION
SCHEDULE OF COST OF GOODS MANUFACTURED
For the month ending October 31, 20X5

Direct materials:
	$ -
	-
	$ -
	-
Raw materials transferred to production		$ -
Direct labor		-
Factory overhead
	$ -
	-
	-
	-
	-	-
Total manufacturing costs		$ -
		-
		$ -
		-
Cost of goods manufactured		$ -

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ACCT 001 Lecture Notes - Lecture 22: Income Statement

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