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ACCT 203 Lecture Notes - Lecture 8: Finished Good, Cost Accounting, European Cooperation In Science And Technology

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27 Jul 2016
School
George Mason University
Department
Accounting
Course
ACCT 203
Professor
Harley

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Document Summary

A cost accounting system collects costs and assigns them to products and services. It is critical that managers know now much it actually costs to make a product or deliver a service in order to determine how to price it. When a manufacturer customizes a product for a particular customer it is generally done on a job order production process. This is opposed to mass production or assembly line production where products are homogeneous and generally not distinguishable until the final process (i. e. cars are mass produced and the final step is usually the color). First step is to estimate the costs to complete the job. Next you negotiate a sale price to the customer. Third is scheduling the manufacturer of the product. Finally the manufacturer will place its own orders for raw materials and supplies if needed. This is a separate record maintained for each job.

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Related Questions

I. The basic parts of a joborder costing system are the:

A. Cost______________ and _________________ procedures.

B. ____________________ documents.

C. Accountsthat a company uses when it incurs costs for direct ____________,direct ________________, and ___________________.

II. Accounting for materialsrequires three types of entries.

A. With the ______________ of materials,debit Materials Inventory and credit Accounts Payable.

B. With the _______________ of directmaterials to ________________, debit Work in Process Inventory andcredit Materials Inventory.

C. With the transfer of__________________ materials to production, debit Overhead andcredit Materials Inventory.

III. Accounting for labor requirestwo types of entries.

A. For payroll costs incurred for_____________ labor, debit Work in Process Inventory and creditPayroll Payable.

B. For payroll costs incurred for_______________ labor, debit Overhead and credit PayrollPayable.

IV. Accounting for other overhead requires twotypes of entries.

A. Other overhead includes plant____________, property _____________, insurance, and_______________.

B. To record _____________ overhead costs,debit Overhead and credit Cash or Accumulated Depreciation.

C. To record _____________ overheadcosts, debit Work in Process Inventory and credit Overhead.

D. The actual (debits) and estimated(credits) overhead costs are ________________ at the end of theperiod to determine the accuracy of overhead costrecognition.

V. To recordthe transfer of ________________ units, debit Finished GoodsInventory and credit Work in Process Inventory.

VI. When a companyuses a perpetual inventory system, two accounting entries are madewhen products are sold.

A. To record the sold product’s________________, debit Accounts Receivable (or Cash) and creditSales.

B. To record the sold product’sassociated ____________, debit Cost of Goods Sold and creditFinished Goods Inventory.

VII. Each job in production has a job order_________________.

A. Hasspace for direct materials, direct labor, and overhead costs.

B. Includesthe job order number, product specifications, customer name, dateof order, projected completion date, and a cost summary.

C. Forincomplete jobs, they make up the _______________ ledger for theWork in Process Inventory account.

D. When ajob is completed, the costs are totaled on the_____________________.

1. Unit cost is computed to_____________ items in inventory.

2. Product ___________Cost = Total Costs for Job ÷ Number of Good Units Produced

VIII. Job order costing systems are also used in______________ organizations.

A. Job ordercost cards track ________________ contracts.

IX. Overhead costs are allocated in foursteps.

A. Step 1: _____________ the overheadrate.

1. A ________________ overheadrate is calculated as estimated overhead costs divided by estimatedcost driver activity.

B. Step 2:______________ the overhead rate.

1. Costs are assigned by multiplyingthe actual cost _____________ activity by the predeterminedoverhead rate.

C. Step 3:Record ________________ overhead costs

D. Step 4:_________________ applied and actual overhead amounts

1. Ifover- or underapplied amounts are minimal, credit or debit_________________.

2. Ifover- or underapplied amounts are material, adjustments should bemade to the inventory accounts affected.

X. The__________________ approach to applying overhead costs is to use asingle plantwide rate.

XI. The moreaccurate _____________________ approach to applying overhead costscreates many smaller activity pools and establishes separate ratesfor each pool.

1.) On January 31, Village Bank had 500,000 shares of $3 parvalue common stock outstanding. On that date, the company declareda 10% stock dividend when the market price of the stock was $62 pershare. The immediate effect of this dividend upon Village Bankwas:

A.)A reduction in cash of $3,794,500.

B.) A reduction in retained earnings of $3,100,000.

C.) A reduction in retained earnings of $150,000.

D.) A liability to the stockholders of $150,000.

2.) Mayfair Corporation has outstanding 70,000 shares of $1 parvalue common stock as well as 20,000 shares of 7%, $100 par valuecumulative preferred stock. At the beginning of the year, thebalance in retained earnings was $800,000, and one year's dividendswere in arrears. Net income for the current year is $580,000.Compute the balance in retained earnings at the end of the year ifMayfair Corporation pays a dividend of $3 per share on its commonstock this year.

A.)

$1,080,000.

B.)

$1,670,000.

C.)

$890,000.

D.)

$310,000.

3.) During the years 2009 through 2011, Powers, Inc., reportedthe following amounts of net income (dollars in thousands):

Relative to the prior year, the percentage change in netincome:

A.)

Was the same in 2010 and 2011.

B.)

Was larger in 2011 than in 2010.

C.)

Was smaller in 2011 than in 2010.

D.)

Cannot be determined without knowing how many shares of stockwere outstanding.

4.) Hines Cannery issued capital stock in 2009 for $700,000.During 2009 the company paid dividends of $250,000. What is theeffect of these events in Hines' statement of cash flows for2009?

A.)

$700,000 cash provided by investing activities, and $250,000cash disbursed for financing activities.

B.)

$700,000 cash provided by financing activities, and $250,000cash disbursed for investing activities.

C.)

$700,000 cash provided by financing activities, and $250,000cash disbursed for operating activities.

D.)

$450,000 net cash provided by financing activities

5.) Direct labor costs in a paint factory would include wages ofemployees who:

A.)

Supervise heavy equipment operators.

B.)

Operate paint-mixing machines.

C.)

Develop highly secret formulas for new products.

D.)

Paint the interior of the factory every two years.

6.) Which of the following is a characteristic of manufacturingoverhead in a job order cost system?

A.)

It is indirectly traceable to specific jobs or units.

B.)

It includes the cost of all labor relating to manufacturingoperations.

C.)

It is assigned to units produced by means of an overheadapplication rate.

D.)

It includes the cost of direct materials used and of indirectlabor.

7.) A job order cost system traces direct materials cost to aparticular job by means of:

A.)

Materials requisitions.

B.)

A production budget.

C.)

The Materials Inventory controlling account.

D.)

A debit to the job cost sheet for the job.

8.) Which of the following costing systems would always use jobcost sheets?

A.)

Job order costing.

B.)

Process costing.

C.)

Activity-based costing.

D.)

All three systems.

9.) Edwards Auto Body uses a job order cost system. Overhead isapplied to jobs on the basis of direct labor hours. During thecurrent period, Job No. 337 was charged $425 in direct materials,$475 in direct labor, and $190 in overhead. If direct labor costsan average of $16 per hour, the company's overhead application rateis:

A.)

$7.27 per direct labor hour.

B.)

$6.40 per direct labor hour.

C.)

$17.50 per direct labor hour.

D.)

$40 per direct labor hour.

10.) Marty's Metal Shop uses a job order cost system. It appliesoverhead to jobs at a rate of 175% of direct labor costs. Job No.2617 required $800 in direct labor costs. The job was initiallybudgeted to require $850 in direct labor costs. Overhead applied toJob No. 2617 during the period amounted to:

A.)

$850.

B.)

$1,400.

C.)

$1,275.

D.)

Some other amount.

11.) In a job cost system, the Work-in-Process Inventorycontrolling account may be reconciled to the total of the:

A.)

Employee time cards.

B.)

Materials requisitions.

C.)

Work-in-Process Inventory records for each department orprocess.

D.)

Job cost sheets.

12.) For the month of December, its first month of operations,the Radcliffe Corporation completed and transferred 800 units ofproduct costing $80,000 to produce to Finished Goods Inventory. IfRadcliffe sold 650 units during the same month, how much was costof goods sold for the same period?

A.)

$80,000.

B.)

$8,000.

C.)

$6,500.

D.)

$65,000.

13.) The computation of equivalent full units is generally notnecessary when:

A.)

Beginning work-in-process inventories are significantly largerthan ending work-in-process inventories.

B.)

Beginning and ending work-in-process inventories differ onlyslightly.

C.)

The number of units in ending work-in-process exceeds the numberof units completed and transferred to finished goods during theperiod.

D.)

Per-unit costs become distorted as a result of not computingequivalent full units of production.

14.) During July, the equivalent full units of direct materialsadded to the product worked on by Department A amounted to a totalof 90,000 applied as follows: beginning inventory, 20,000 units;units started and completed in July, 60,000 units; and endinginventory, 10,000 units. Assuming that the cost of direct materialsrequisitioned by the department in July was $135,000; the amount ofthe materials cost to be assigned to the ending inventory wouldbe:

A.)

$16,875.

B.)

$54,000.

C.)

$15,000.

D.)

$18,000.

Flow of Costs and Income Statement

Technology Accessories Inc. is a designer, manufacturer, and distributor of accessories for consumer electronic products. Early in 2016, the company began production of a leather cover for tablet computers, called the iLeather. The cover is made of stitched leather with a velvet interior and fits snuggly around most tablet computers. In January, $750,000 was spent on developing marketing and advertising materials. For the first six months of 2016, the company spent $1,400,000 promoting the iLeather. The product was ready for manufacture on January 21, 2016.

Technology Accessories Inc. uses a job order cost system to accumulate costs for the iLeather. Direct materials unit costs for the iLeather are as follows:

Leather $10.00
Velvet 5.00
Packaging 0.40
Total $15.40

The actual production process for the iLeather is fairly straightforward. First, leather is brought to a cutting and stitching machine. The machine cuts the leather and stitches an exterior edge into the product. The machine requires one hour per 125 iLeathers.

After the iLeather is cut and stitched, it is brought to assembly, where assembly personnel affix the velvet interior and pack the iLeather for shipping. The direct labor cost for this work is $0.50 per unit.

The completed packages are then sold to retail outlets through a sales force. The sales force is compensated by a 20% commission on the wholesale price for all sales.

Total completed production was 500,000 units during the year. Other information is as follows:

Number of iLeather units sold in 2016 460,000
Wholesale price per unit $40

Factory overhead cost is applied to jobs at the rate of $1,250 per machine hour. There were an additional 22,000 cut and stitched iLeathers waiting to be assembled on December 31, 2016.

In your computations, if required, round interim per unit costs to two decimal places.

Required:

1. Prepare an annual income statement for the iLeather product.

Technology Accessories Inc.
Income Statement
For the Year Ended December 31, 2016
Sales $
Cost of Goods Sold
Gross Profit $
Selling Expenses:
Salespersons Commissions $
Advertising Design
Advertising Expenses
Total Selling Expenses
Income from Operations $

2. Determine the balances in the finished goods and work in process inventories for the iLeather product on December 31, 2016.

Finished Goods $
Work in Process $