ACC 406 Lecture Notes - Lecture 1: Fixed Cost, Variable Cost, Income Statement

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plumbuffalo42

18 Apr 2017

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Cost: resources used to actualize a specific object. Object: cost object or cost objective (a product or service for which costs are measured and assigned. Refers to value forgone to achieve a purpose. In specific refers to economic resources paid for goods and services. Direct costs: costs that are easily traced to a cost object: i. e. purchase cost of fresh fruits and vegetables. Indirect costs: costs that can"t be traced to an object: ex. Manufacturing companies have 3 inventor accounts to account for costs: raw material inventory, work in process, finished goods inventory. In manufacturing accounting there are 3 cost components: direct materials: those inputs that physically turn into output. Materials that are part of the final product and are directly traced to the goods being produced: ex. Paper to produce books: direct labour: wages for employees who convert direct materials into products, ex.

Related Questions

Wallis Company manufactures only one product and uses a standard cost system. The company uses a predetermined plantwide overhead rate that relies on direct labor-hours as the allocation base. All of the company's manufacturing overhead costs are fixedâit does not incur any variable manufacturing overhead costs. The predetermined overhead rate is based on a cost formula that estimated $2,899,000 of fixed manufacturing overhead for an estimated allocation base of 289,900 direct labor-hours. Wallis does not maintain any beginning or ending work in process inventory.

The companyâs beginning balance sheet is as follows:

Wallis Company
Balance Sheet
1/1/XX
(dollars in thousands)
Assets
Cash	$	850
Raw materials inventory		300
Finished goods inventory		420
Property, plant, and equipment, net		10,000
Total assets	$	11,570
Liabilities and Equity
Retained earnings	$	11,570
Total liabilities and equity	$	11,570

The companyâs standard cost card for its only product is as follows:

Inputs	(1) Standard Quantity or Hours	(2) Standard Price or Rate			Standard Cost (1) Ã (2)
Direct materials	2 pounds	$	33.00	per pound	$	66.00
Direct labor	3.00 hours	$	15.00	per hour		45.00
Fixed manufacturing overhead	3.00 hours	$	10.00	per hour		30.00
Total standard cost per unit					$	141.00

During the year Wallis completed the following transactions:

Purchased (with cash) 237,500 pounds of raw material at a price of $31.00 per pound.

Added 218,750 pounds of raw material to work in process to produce 96,500 units.

Assigned direct labor costs to work in process. The direct laborers (who were paid in cash) worked 248,000 hours at an average cost of $16.00 per hour to manufacture 96,500 units.

Applied fixed overhead to work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed to manufacture 96,500 units. Actual fixed overhead costs for the year were $2,747,500. Of this total, $1,355,000 related to items such as insurance, utilities, and salaried indirect laborers that were all paid in cash and $1,392,500 related to depreciation of equipment.

Transferred 96,500 units from work in process to finished goods.

Sold (for cash) 93,500 units to customers at a price of $170 per unit.

Transferred the standard cost associated with the 93,500 units sold from finished goods to cost of goods sold.

Paid $2,127,500 of selling and administrative expenses.

Closed all standard cost variances to cost of goods sold.

Required:

1. Compute all direct materials, direct labor, and fixed overhead variances for the year.

2. Record transactions a through i for Wallis Company.

3. Compute the ending balances for Wallis Companyâs balance sheet.

4. Prepare Wallis Companyâs income statement for the year.

Compute all direct materials, direct labor, and fixed overhead variances for the year. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)


Materials price variance
Materials quantity variance
Labor rate variance
Labor efficiency variance
Budget variance
Volume variance

Record transactions a through i for Wallis Company.

Compute the ending balances for Wallis Companyâs balance sheet.

(Unfavorable variances and decreases in balance sheet accounts should be entered with a minus sign. Enter your dollars in thousands.)

Show less

Wallis Company

Transaction Analysis

For the Year Ended 12/31/XX

(dollars in thousands)

Materials Price Variance

Material Quantity Variance

Labor Rate Variance

Labor Efficiency Variance

Fixed Overhead Budget Variance

Fixed Overhead Volume Variance

Retained Earnings

1/1

12/31

Prepare Wallis Companyâs income statement for the year. (Enter your dollars in thousands. Round your answers to the nearest whole dollar amount.)

Wallis Company
Income Statement
For the Year Ended 12/31/XX
(dollars in thousands)


Total variance adjustments

		0

		$0

plumrat281

1. Use the following information for the Quick Study below. [The following information applies to the questions displayed below.] The following refers to units processed by an ice cream maker in July. Gallons of Product Percent of Conversion Added Beginning work in process 408,000 35 % Goods started 796,000 100 Goods completed 856,000 100 Ending work in process 348,000 65 QS 3-8 Weighted average: Computing equivalent units of production LO C2 Compute the total equivalent units of production with respect to conversion for July using the weighted-average method. 2. QS 3-9A FIFO: Computing equivalent units LO C4 Compute the total equivalent units of production with respect to conversion for July using the FIFO method. 3. Use the following information for the Quick Study below. [The following information applies to the questions displayed below.] The Carlberg Company has two manufacturing departments, assembly and painting. The assembly department started 10,300 units during November. The following production activity unit and cost information refers to the assembly departmentâs November production activities. Assembly Department Units Percent of Direct Materials Added Percent of Conversion Added Beginning work in process 3,000 60 % 40 % Units transferred out 10,000 100 % 100 % Ending work in process 3,300 80 % 30 % Beginning work in process inventoryâAssembly dept $ 2,696 (includes $896 for direct materials and $1,800 for conversion) Costs added during the month: Direct materials $ 13,008 Conversion $ 14,685 QS 3-10 Weighted average: Equivalent units of production LO C2 Required: Calculate the assembly departmentâs equivalent units of production for materials and for conversion for November. Use the weighted-average method. 4. QS 3-11 Weighted average: Cost per EUP LO C2 Required: Calculate the assembly departmentâs cost per equivalent unit of production for materials and for conversion for November. Use the weighted-average method. 5. QS 3-12 Weighted average: Assigning costs to output LO C3 Required: Assign costs to the assembly departmentâs outputâspecifically, the units transferred out to the painting department and the units that remain in process in the assembly department at month-end. Use the weighted-average method. (Do not round intermediate calculations.) 6. QS 3-13 Weighted average: Journal entry to transfer costs LO P4 Required: Prepare the November 30 journal entry to record the transfer of units (and costs) from the assembly department to the painting department. Use the weighted-average method. 8. QS 3-14A FIFO: Equivalent units of production LO C4 Required: Calculate the assembly departmentâs equivalent units of production for materials and for conversion for November. Use the FIFO method. 9. QS 3-15A FIFO: Cost per EUP LO C4 Required: Calculate the assembly departmentâs cost per equivalent unit of production for materials and for conversion for November. Use the FIFO method. 10. QS 3-16A FIFO: Assigning costs to output LO C4 Required: Assign costs to the assembly departmentâs outputâspecifically, the units transferred out to the painting department and the units that remain in process in the assembly department at month-end. Use the FIFO method. (Do not round intermediate calculations.) 11. QS 3-17A FIFO: Journal entry to transfer costs LO P4 Required: Prepare the November 30 journal entry to record the transfer of units (and costs) from the assembly department to the painting department. Use the FIFO method. 12. Use the following information for the Quick Study below. [The following information applies to the questions displayed below.] The Plastic Flowerpots Company has two manufacturing departments, molding and packaging. At the beginning of the month, the molding department has 2,100 units in inventory, 70% complete as to materials. During the month, the molding department started 18,500 units. At the end of the month, the molding department had 3,150 units in ending inventory, 80% complete as to materials. Units completed in the molding department are transferred into the packaging department. Cost information for the molding department for the month follows: Beginning work in process inventory (direct materials) $ 1,300 Direct materials added during the month 28,900 QS 3-18 Weighted average: Computing equivalent units and cost per EUP (direct materials) LO C2, C3 Using the weighted-average method, compute the molding departmentâs (a) equivalent units of production for materials and (b) cost per equivalent unit of production for materials for the month. (Round "cost per equivalent unit of production" to 2 decimal places.) 12. QS 3-19 Weighted average: Assigning costs to output LO C3 Using the weighted-average method, assign direct materials costs to the molding departmentâs outputâspecifically, the units transferred out to the packaging department and the units that remain in process in the molding department at month-end. (Do not round intermediate calculations.) 13. QS 3-20 Transfer of costs; ending WIP balances LO C3 Azule Co. manufactures in two sequential processes, cutting and binding. The two departments report the information below for a recent month. Cutting Binding Beginning work in process Transferred in from cutting dept. $ 1,700 Direct materials $ 1,170 2,286 Conversion 3,650 3,750 Costs added during March Direct materials $ 12,140 $ 9,208 Conversion 19,350 20,075 Transferred in from cutting dept. 22,240 Transferred to finished goods 43,000 Determine the ending balances in the Work in Process Inventory accounts of each department. 14. Use the following information for the Quick Study below. [The following information applies to the questions displayed below.] BOGO Inc. has two sequential processing departments, roasting and mixing. At the beginning of the month, the roasting department has 2,720 units in inventory, 70% complete as to materials. During the month, the roasting department started 20,400 units. At the end of the month, the roasting department had 4,200 units in ending inventory, 80% complete as to materials. Cost information for the roasting department for the month is as follows: Beginning work in process inventory (direct materials) $ 3,970 Direct materials added during the month 39,900 QS 3-21A FIFO: Computing equivalent units and cost per EUP (direct materials) LO C4 Using the FIFO method, compute the roasting departmentâs (a) equivalent units of production for materials and (b) cost per equivalent unit of production for materials for the month. 15. QS 3-22A FIFO: Assigning costs to output LO C4 Using the FIFO method, assign direct materials costs to the roasting departmentâs outputâspecifically, the units transferred out to the mixing department and the units that remain in process in the roasting department at month-end. (Do not round intermediate calculations.) 16. QS 3-23 Recording costs of materials LO P1 Hotwax makes surfboard wax in a single operation. This period, Hotwax purchased $78,000 in raw materials. Its production department requisitioned $57,500 of those materials for use in production. Prepare journal entries to record its purchase of raw materials and direct materials. 17. QS 3-24 Recording costs of labor LO P2 Prepare journal entries to record the following production activities for Hotwax. Incurred direct labor of $235,000 (credit Factory Payroll Payable). Incurred indirect labor of $19,500 (credit Factory Payroll Payable). Total factory payroll of $254,500 was paid in cash. 18. QS 3-25 Recording costs of factory overhead LO P1, P3 Prepare journal entries to record the following production activities for Hotwax. Requisitioned $12,900 of indirect materials for use in production of surfboard wax. Incurred $172,000 overhead costs (credit Other accounts). Applied overhead at the rate of 150% of direct labor costs. Direct labor costs were $185,000. 19. QS 3-26 Recording transfer of costs to finished goods LO P4 Hotwax completed products costing $390,000 and transferred them to finished goods. Prepare its journal entry to record the transfer of units from production to finished goods inventory.

amethystotter419

I'll rate posting for sec times just do last parts likecost and balance sheet ( account balance and cost incurred ) that'sit ready question carefully then answer all last partthanks

Charles Maxwell is starting a cheesecake bakery, Able BakerCharlie Company, to produce and sell different flavored cheesecakesto restaurants and the general public. He has just begun his studyof accounting, and is a bit confused about the many types ofreports he has read about and how they will help him run hisbusiness. He asks you to help him clarify what the differencesbetween managerial accounting and financial accounting are. Heâsalso wondering how to set up his inventory, how to classify thecosts of his business, and how to fill in some missinginformation.

	Required:
1.	Choose whether thecharacteristics on the Managerial vs. Financial panel are mostoften associated with managerial accounting or financialaccounting.
2.	Charles has provided some ofthe costs he expects to incur on the Cost Classification panel.Decide on the classifications that could be applied to each ofthese costs using the table provided. The cost object in each caseis the cheesecake.
3.	Charles found some sampleincome statements and balance sheets on the Internet, and askedwhich of them might be most appropriate for a manufacturingbusiness like his. Review income statements A and B on the IncomeStatements panel, and balance sheets C and D on the Balance Sheetspanel. Determine which income statement and balance sheet would bemost appropriate for a manufacturing business like Able BakerCharlie. Then, on the Financial Statements panel, denote whichincome statement and balance sheet would be most appropriate for amanufacturing business.
4.	At the end of February, afterthe second month of operations of Able Baker Charlie Company,Charles shows you the data heâs collected, but he was unable tofigure out some of the amounts. On the Costs and Balances panel,determine the missing amounts. Note: It may behelpful to use T accounts to map the flow of the amounts throughthe manufacturing accounts and solve for the missing dollarvalues.

Managerial vs. Financial

Choose whether the following characteristics are most oftenassociated with managerial accounting or financial accounting.

	Managerial Accounting	Financial Accounting
Primarily used for internal decision making
Generally Accepted Accounting Principles (GAAP) must beused
Prepared statements usually pertain to the company as a wholerather than individual departments or products
Information provided will often be subjective, such asestimated future results
Often prepared on an as-needed basis rather than at fixedintervals
Use principles of the Sustainability Accounting Standards Board(SASB) to provide sustainability information to external financialstatement users
Consideration of sustainability practices to contribute to thecompanyâs long-term success
Using eco-efficiency measures to reduce expenses

Cost Classification

Charles has provided some of the costs he expects to incur asfollows. Decide on the classifications that could be applied toeach of these costs using the table provided. The cost object ineach case is the cheesecake.

Cost	Product	Period	Direct	Direct	Factory	Selling	Administrative	Direct	Indirect	Prime	Conversion
Cost	Cost	Cost	Materials	Labor	Overhead	Expense	Expense	Cost	Cost	Cost	Cost
Eggs used to make cheesecakes
Bakerâs wages
Delivery driver wages
Depreciation of office computers
Power to run the cheesecake ovens
Presidentâs salary
Sales commissions
Factory supervisor salary

Financial Statements

Charles found some sample income statements and balance sheetson the Internet, and asked which of them might be most appropriatefor a manufacturing business like his. Review income statements Aand B on the Income Statements panel, and balance sheets C and D onthe Balance Sheets panel. Determine which income statement andbalance sheet would be most appropriate for a manufacturingbusiness like Able Baker Charlie Company.

Which income statement is most appropriate for a manufacturingbusiness?

Income statement A

Income statement B

Which balance sheet is most appropriate for a manufacturingbusiness?

Balance sheet C

Balance sheet D

Income Statements

Income Statement A (scroll down for Income StatementB):

Sample Company A

Income Statement

For the Year Ended December 31, 20Y8

1	Sales		$42,000.00
2	Beginning finished goods inventory	$5,250.00
3	Plus cost of goods manufactured	6,400.00
4	Cost of finished goods available for sale	$11,650.00
5	Less ending finished goods inventory	400.00
6	Cost of goods sold		11,250.00
7	Gross profit		$30,750.00
8	Operating expenses:
9	Selling expenses	$6,400.00
10	Administrative expenses	5,250.00
11	Total operating expenses		11,650.00
12	Net income		$19,100.00

Income Statement B:

Sample Company B

Income Statement

For the Year Ended December 31, 20Y8

1	Sales		$42,000.00
2	Beginning merchandise inventory	$5,250.00
3	Plus net purchases	6,400.00
4	Merchandise available for sale	$11,650.00
5	Less ending merchandise inventory	400.00
6	Cost of merchandise sold		11,250.00
7	Gross profit		$30,750.00
8	Operating expenses:
9	Selling expenses	$6,400.00
10	Administrative expenses	5,250.00
11	Total operating expenses		11,650.00
12	Net income		$19,100.00

Balance Sheets

Balance Sheet C (scroll down for Balance SheetD):

Sample Company C

Balance Sheet

December 31, 20Y8

1	Assets
2	Cash		$20,800.00
3	Accounts receivable (net)		10,000.00
4	Merchandise inventory		6,000.00
5	Supplies		2,100.00
6	Land		17,000.00
7	Total assets		$55,900.00
8	Liabilities
9	Accounts payable		$17,800.00
10	Stockholdersâ Equity
11	Common stock	$19,000.00
12	Retained earnings	19,100.00
13	Total stockholdersâ equity		38,100.00
14	Total liabilities and stockholdersâ equity		$55,900.00

Balance Sheet D:

Sample Company D

Balance Sheet

December 31, 20Y8

1	Assets
2	Cash		$20,800.00
3	Accounts receivable (net)		10,000.00
4	Inventories:
5	Finished goods	$2,000.00
6	Work in process	1,500.00
7	Materials	2,500.00	6,000.00
8	Supplies		2,100.00
9	Land		17,000.00
10	Total assets		$55,900.00
11	Liabilities
12	Accounts payable		$17,800.00
13	Stockholdersâ Equity
14	Common stock	$19,000.00
15	Retained earnings	19,100.00
16	Total stockholdersâ equity		38,100.00
17	Total liabilities and stockholdersâ equity		$55,900.00

Costs and Balances

At the end of February, after the second month of operationsof Able Baker Charlie Company, Charles shows you the data heâscollected, but he was unable to figure out some of the amounts.Review the following data and fill in the missing amounts on thechart for Able Baker Charlie Company. Note: It maybe helpful to use T accounts to map the flow of the amounts throughthe manufacturing accounts and solve for the missing dollar values.It may also be helpful to review the steps for determining the costof materials used, total manufacturing cost incurred, and cost ofgoods manufactured.

Data forFebruary
Decrease in materialsinventory	$3,300
Materials inventory on Feb. 28	50% of materials inventory on Jan.31
Direct materials purchased	$12,600
Direct materials used	3 times the direct laborincurred
Total manufacturing costs incurredin period	$29,400
Total manufacturing costs incurredin period	70% of Cost of GoodsManufactured
Total manufacturing costs incurredin period	$7,000 less than Cost of GoodsSold

Account	Account Balances		Costs Incurred
Account	Jan.31	Feb.28	Costs Incurred
Materials Inventory			DirectMaterials Used
Work inProcess Inventory	$27,000		DirectLabor Incurred
FinishedGoods Inventory		$16,000	FactoryOverhead Incurred
			Cost ofGoods Sold

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ACC 406 Lecture Notes - Lecture 1: Fixed Cost, Variable Cost, Income Statement

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