ACCT 1201 Chapter Notes - Chapter 7: Carrying Cost, Income Statement, Cash Flow Statement

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lilacmule890

22 Mar 2016

School

Northeastern University

Department

Accounting

Course

ACCT 1201

Professor

Ganesh Krishnamoorthy

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Document Summary

The accounting system plays three roles in the inventory management process. The system must provide accurate information for preparation of periodic financial statements and tax returns. It must provide up-to-date information on inventory quantities and costs to facilitate ordering and manufacturing decisions. The system must provide measures to protect these assets. (cid:1) (cid:1) (cid:1) Nature of inventory and cost of goods sold. Inventory is tangible property that is held for sale in the normal course of business or used to produce goods or services for sale: merchandise inventory goods held for resale in the normal course of business. The goods are usually acquired in a finished condition: raw materials inventory items acquired for processing into finished goods. These items are included in raw materials inventory until that are used at which point they become part of work in process inventory: work in process inventory goods in the process of being manufactured but not yet complete.

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

3.Lean Accounting Com-Tel Inc. manufactures and assembles twomodels of smartphones-the Tiger Model and the Lion Model. Theprocess consists of a lean cell for each product. The data thatfollow concern only the Lion Model lean cell. For the year, Com-TelInc. budgeted these costs for the Lion Model production cell:Conversion Cost Categories Budget Labor $114,000 Supplies 43,200Utilities 15,600 Total $172,800 Com-Tel plans 2,400 hours ofproduction for the Lion Model cell for the year. The materials costis $61 per unit. Each assembly requires 20 minutes of cell assemblytime. There was no May 1 inventory for either Raw and In ProcessInventory or Finished Goods Inventory. The following summary eventstook place in the Lion Model cell during May: a.Electronic partswere purchased to produce 8,150 Lion Model assemblies in May.b.Conversion costs were applied for 7,750 units of production inMay. c.7,600 units were completed and transferred to finished goodsin May. d.7,370 units were shipped to customers at a price of $288per unit. If required, round your answers to the nearest cent.Required: 1. Determine the budgeted cell conversion cost per hour.$ per hour 2. Determine the budgeted cell conversion cost per unit.$ per unit 3. Journalize the summary transactions (a) through (d).a. Raw and In Process Inventory Accounts Payable b. Raw and InProcess Inventory Conversion Costs c. Finished Goods Inventory Rawand In Process Inventory d. Sale Accounts Receivable Sales d. CostCost of Goods Sold Finished Goods Inventory 4. Determine the endingbalance in Raw and In Process Inventory and Finished GoodsInventory. Raw and In Process Inventory $ Finished Goods Inventory$ 5. Lean accounting is different from traditional accountingbecause it is more simplified and uses minimal control. As aresult, the number of transactions are reduced . In many leanoperations, purchased materials are charged to a âraw and inprocess inventoryâ account . Direct labor is frequently included asa conversion cost of the cell . Often, nonfinancial performancemeasures, such as lead time or quality measures , are used tomonitor performance. 4. 5. Previous Next

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Lean Accounting

Com-Tel Inc. manufactures and assembles two models ofsmartphones-the Tiger Model and the Lion Model. The processconsists of a lean cell for each product. The data that followconcern only the Lion Model lean cell.

For the year, Com-Tel Inc. budgeted these costs for the LionModel production cell:

Conversion Cost Categories		Budget
Labor		$71,300
Supplies		27,000
Utilities		9,700
Total		$108,000

Com-Tel plans 2,000 hours of production for the Lion Model cellfor the year. The materials cost is $46 per unit. Each assemblyrequires 15 minutes of cell assembly time. There was no May 1inventory for either Raw and In Process Inventory or Finished GoodsInventory.

The following summary events took place in the Lion Model cellduring May:

Electronic parts were purchased to produce 6,800 Lion Modelassemblies in May.

Conversion costs were applied for 6,450 units of production inMay.

6,320 units were completed and transferred to finished goods inMay.

6,130 units were shipped to customers at a price of $216 perunit.

If required, round your answers to the nearest cent.

Required:

1. Determine the budgeted cell conversion costper hour.
$ per hour

2. Determine the budgeted cell conversion costper unit.
$ per unit

3. Journalize the summary transactions (a)through (d).



b.

c.

d. Sale

d. Cost

4. Determine the ending balance in Raw and InProcess Inventory and Finished Goods Inventory.

Raw and In Process Inventory	$
Finished Goods Inventory	$

5. Lean accounting is different fromtraditional accounting because it is more (complex or simplied?)and uses ( maximum or minimal?? control. As aresult, the number of transactions are (increased or reduced?? . Inmany lean operations, purchased materials are charged to a (raw andin process inventory account or materials and indirect laboraccount?? . Direct labor is frequently (included as a conversioncost of the cell or disregarded in the cost allocation process?? .Often, nonfinancial performance measures, such as , are used tomonitor performance.

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ACCT 1201 Chapter Notes - Chapter 7: Carrying Cost, Income Statement, Cash Flow Statement

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