ACCT 002 Lecture Notes - Lecture 3: Income Statement, Direct Labor Cost

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blackpig616

15 Aug 2020

School

College of The Sequoias

Department

Accounting (ACCT)

Course

ACCT 002

Professor

cooper

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Document Summary

The total product cost equals the sum of direct materials, direct labour, and manufacturing overhead: Total product cost = direct materials cost + The unit product cost equals total product cost divided by the number of units produced: Per-unit cost = total product cost number of units produced. Product costs of direct materials, direct labour, and manufacturing overhead can be grouped into prime cost and conversion cost: Prime cost is the sum of direct materials cost and direct labor cost. Prime cost = direct materials + direct labour. Conversion cost is the sum of direct labour cost and manufacturing overhead cost. Conversion cost = direct labour + manufacturing overhead. Costs of production are assets that are carried in inventories until the goods are sold. Other costs, such as period costs, are not carried in inventory. Period costs are all costs that are not product costs (i. e. , all areas of the value chain except for production).

Related Questions

Dozier Company produced and sold 1,000 units during its first month of operations. It reported the following costs and expenses for the month:

Variable manufacturing overhead

20,200

Fixed manufacturing overhead

31,900

Total manufacturing overhead

52,100

Variable selling expense

14,600

Fixed selling expense

23,200

Total selling expense

37,800

Variable administrative expense

5,300

Fixed administrative expense

27,600

Total administrative expense

32,900

3. With respect to cost classifications for manufacturers:

a. What is the total manufacturing cost?

b. What is the total nonmanufacturing cost?

c. What is the total conversion cost and prime cost?


3a.	Total manufacturing cost
3b.	Total nonmanufacturing cost
3c.	Total conversion cost
	Total prime cost

tancricket142

Looking to achieve the highest grade possible, please see below. Please indicate if this answer is correct. IF I have left a calcuation out, please include.

Thank you,

The Big Bus Company manufactures two products, Product 1 and Product 2. Product 2 was developed as an attempt to enter a market closely related to that of Product 1. Product 2 is the more complex of the two products, requiring three hours of direct labour time per unit to manufacture compared to one and one-half hours of direct labour time for Product 1. Product 2 is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct labour-hours. The company estimated it would incur a total of $396,000 in manufacturing overhead costs and produce 5,500 units of Product 2 and 22,000 units of Product 1 during the current year. Unit costs for materials and direct labour are:

			Product 1	Product 2
	Direct Labour		$7	$15
	Direct material		$9	$20


Required:

a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. (5 marks)

			Product 1	Product 2	Total		Allocation
Direct Labour hour / unit			1.5	3			396,000 / 49,500
units produced			22,000	5,500			8
total labour hour			33,000	16,500	49,500
overhead/unit			12	24			overhead/unit is calculated by direct LH x 8

		Product 1	Product 2
Direct material		9	20
Direct labour		7	15
overhead/unit		16	35
cost/unit		32	70





b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: (5 marks)


					Expected Activity
		Activity Costs Pools		Estimated Overhead Costs	Product 1	Product 2	Total
		Machine set-ups required		$170,000	700	1,000	1,700
		Purchase orders issued		37,000	300	200	500
		Machine-hours required		91,000	4,000	9,000	13,000
		Maintenance requests issued		98,000	400	600	1,000
				$396,000


	Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year.

			Total Cost	Product A	Product B
	Machine Setups		170,000	70,000	100,000
	purchase order		37,000	22,200	14,800
	machine hours		91,000	28,000	63,000
	maintenance requests		98,000	39,200	58,800
	Total		396,000	159,400	236,600
				22,000	5,500
	overhead /cost			7..25	43..02

			product 1	product 2
	Direct Labour		9	20
	direct material		7	15
	overhead / unit		7..25	43.02.
	Unit/ cost		23..25	78.020.

EXERCISE 2-9 Cost Terminology for Manufacturers [LO2-2, LO2-3] Arden Company reported the following costs and expenses for the most recent month: Direct materials ......... Direct labor ... Manufacturing overhead ..... Selling expenses ....... Administrative expenses . . . . . ... $80,000 $42,000 $19,000 $22,000 $35,000 Required: 1. What is the total amount of product costs? 2. What is the total amount of period costs? 3. What is the total amount of conversion costs? 4. What is the total amount of prime costs?

ACCT 002 Lecture Notes - Lecture 3: Income Statement, Direct Labor Cost

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