ACCT 203 Lecture Notes - Lecture 14: Sunk Costs

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brownduck883

22 May 2018

School

George Mason University

Department

Accounting

Course

ACCT 203

Professor

Harley

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GMU ACCOUNTING 203 Lecture 14

A direct cost is a cost that is:

A)Identifiable as controllable.

B)Recorded as part of manufacturing overhead.

C)Fixed with respect to the volume of activity.

D)Traceable to a cost object

E)Sunk with respect to a cost object

D)Traceable to a cost object

Labor costs that are clearly associated with specific units or batches of product

because the labor is used to convert raw materials into finished products called

are:

Sunk labor.

Direct labor.

Indirect labor.

Finished labor.

Supervisory labor.

Direct Labor

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Document Summary

A direct cost is a cost that is: C)fixed with respect to the volume of activity. Labor costs that are clearly associated with specific units or batches of product because the labor is used to convert raw materials into finished products called are: Costs that are incurred as part of the manufacturing process but are not clearly associated with specific units of product or batches of production, including all manufacturing costs other than direct material and direct labor costs, are called: Materials that are used in support of the production process but that do not become a part of the product and are not clearly identified with units or batches of product are called: The three major cost components of a manufactured product are: D)indirect labor, indirect materials, and miscellaneous factory expenses. A)payroll taxes on the wages of supervisory factory workers.

Related Questions

Kubin Companyâs relevant range of production is 21,000 to 25,000 units. When it produces and sells 23,000 units, its average costs per unit are as follows:

	Average Cost per Unit
Direct materials	$	8.10
Direct labor	$	5.10
Variable manufacturing overhead	$	2.60
Fixed manufacturing overhead	$	6.10
Fixed selling expense	$	4.60
Fixed administrative expense	$	3.60
Sales commissions	$	2.10
Variable administrative expense	$	1.60

2. Assume the cost object is the Manufacturing Department and that its total output is 23,000 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?


2a.	Direct materials per unit
	Direct labor per unit
	Variable manufacturing overhead per unit
	Fixed manufacturing overhead per unit
	Total manufacturing cost per unit	$0.00
	Number of units sold
	Total direct costs	$0

2b.	Total indirect costs

beigemallard451

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

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

ACCT 203 Lecture Notes - Lecture 14: Sunk Costs

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