ACC 406 Chapter Notes - Chapter 1: Management Accounting, Finished Good, Variable Cost

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lavenderelephant377

13 Sep 2012

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Cost means resources used to actualize a specific object (cost objective) In general, cost refers to value forgone to achieve a purpose. In specific, cost refers to economics resources paid for goods and services. Manufacturing companies have 3 inventory accounts: raw material inventory account, work in process inventory account, finished goods inventory account. In manufacturing accounting, there are 3 cost components: direct materials. These inputs physically become part of the product. Wages paid for those employees who convert direct materials into product. Wages paid to assembly line workers: overhead: includes all other cost associated with the process (except for direct loss. Factory rent, factory utilities repair and maintenance, insurance, indirect materials, indirect labour. Equation 1-5 can be represented by the cost of good manufactured statement. Equation 6-7 can be represented in cost of goods sold section on the income statement. Cost of goods sold: actual cost versus estimated cost.

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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

When production costs are debited to Work in Process Inventory,which accounts will be credited?

A) Raw Materials Inventory, Factory Labor, and Finished GoodsInventory B) Accounts Payable, Factory Wages Payable, andAccumulated Depreciation C) Raw Materials Inventory, Factory Labor,and Manufacturing Overhead

The Bags and Luggage Company had the following account balances asof January 1:


Direct Materials Inventory	$	8,700
Work in Process Inventory		76,500
Finished Goods Inventory		53,000
Manufacturing Overhead		- 0 -

During the month of January, all of the following occurred:

1.	Direct labor costs were $41000 for 1,800 hoursworked.
2.	Direct materials costing $29,000 and indirect materials costing$4,000 were purchased.
3.	Sales commissions of $17,000 were earned by the sales force.
4.	$23,000 worth of direct materials were used in production.
5.	Advertising costs of $6,300 were incurred.
6.	Factory supervisors earned salaries of $12,904.
7.	Indirect labor costs for the month were $3,000.
8.	Monthly depreciation on factory equipment was $4,500.
9.	Utilities expense of $6226 was incurred in the factory.
10.	Luggage with manufacturing costs of $69,000 were transferred tofinished goods.
11.	Monthly insurance costs for the factory were $4,200.
12.	$5,000 in property taxes on the factory were incurred andpaid.
13.	Luggage with manufacturing costs of $89162 were sold for$162112

a.	Assume IfBags and Luggage assigns manufacturing overhead of $34,400, whatwill be the balances in the Direct Materials, Work in Process, andFinished Goods Inventory accounts at the end of January?


Direct materials inventory	$
Work in process inventory	$
Finished goods inventory	$

b.	As of January31, what will be the balance in the Manufacturing Overheadaccount?

Manufacturing overhead

c.	What was Bagsand Luggage's operating income for January?

Operating income

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ACC 406 Chapter Notes - Chapter 1: Management Accounting, Finished Good, Variable Cost

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