ACCT 2230 Lecture Notes - Lecture 5: Cost Driver, European Cooperation In Science And Technology, Enterprise Resource Planning

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13 Jan 2018

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Absorption costing: a costing method that includes all manufacturing costs- direct materials, direct labour, and both variable and fixed overhead- as a part of the cost of a finished unit of product (also called full costing). Process costing system: a costing system used in those manufacturing situations where a single, homogeneous product (orange juice concentration, cement, or oil) flows in a continuous stream out of the production process. Accumulates costs in a particular operation or department for an entire period (month, quarter, year) and then unit product cost= total manufacturing cost/total units produced. Each unit is assigned the same average cost. Results in a broad average unit cost figure that applies to homogeneous units. Just-order costing system: a costing system used in situations where many different product, jobs, or services are produced each period. The essential difference for service organizations is the lack of raw materials in the cost of their services.

Related Questions

Identify each statement as true or false. If false, indicate howto correct the statement.

1. Process cost systems are used to apply costs to similarproducts that are mass-produced in a continuous fashion.
2. A process cost system is used when each finished unit isindistinguishable from another.
3. Companies that produce soft drinks, motion pictures, andcomputers chips would all use process cost accounting.
4. In a process cost system, costs are tracked by individualjobs.
5. Job order costing and process costing track differentmanufacturing costs elements.
6. Both job order costing and process costing account for directmaterials, direct labor, and manufacturing overhead.
7. Costs flow through the accounts in the same basic way for bothjob order costing and process costing.
8. In a process cost system, only one work in process account isused.
9. In a process cost system, costs are summarized in a job costsheet.
10. In a process cost system, the unit cost is total manufacturingcosts for the period divided by the units produced during theperiod.

byzantiumpanda529

Outback, Ltd., manufactures tactical LED flashlights in Melbourne, Australia. The firm uses an absorption-costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding planned and actual operations for 20x4 follow:

	Budgeted Costs

	Per Unit		Total		Actual Costs
Direct material	$	12.20	$	1,634,800	$	1,512,800
Direct labor		9.30		1,246,200		1,153,200
Variable manufacturing overhead		4.30		576,200		533,200
Fixed manufacturing overhead		4.50		603,000		613,000
Variable selling expenses		7.50		1,005,000		877,500
Fixed selling expenses		7.80		1,045,200		1,045,200
Variable administrative expenses		2.80		375,200		327,600
Fixed administrative expenses		2.80		375,200		384,200

Total	$	51.20	$	6,860,800	$	6,446,700

	Planned Activity	Actual Activity
Sales in units	134,000	117,000
Production in units	134,000	124,000
Beginning finished-goods inventory in units	43,000	43,000

The budgeted per-unit cost figures were based on the company producing and selling 134,000 units in 20x4. Outback uses a predetermined overhead rate for applying manufacturing overhead to its product. A total manufacturing overhead rate of $8.80 per unit was employed for absorption costing purposes in 20x4. Any overapplied or underapplied manufacturing overhead is closed to the Cost of Goods Sold account at the end of the year. The 20x4 beginning finished-goods inventory for absorption costing purposes was valued at the 20x3 budgeted unit manufacturing cost, which was the same as the 20x4 budgeted unit manufacturing cost. There are no work-in-process inventories at either the beginning or the end of the year. The planned and actual unit selling price for 20x4 was $72.00 per unit.

Required:

1.	Compute the value of Outbackâs 20x4 ending finished-goods inventory under absorption costing. (Do not round intermediate calculations.)

2.	Compute the value of Outbackâs 20x4 ending finished-goods inventory under variable costing. (Do not round intermediate calculations.)

3.	Compute the difference between Outbackâs 20x4 reported operating income calculated under absorption costing and calculated under variable costing. (Do not round intermediate calculations.)

peachwolf325

PROBLEM 6-22 Prepare and Reconcile Variable Costing Statements (L06-1, L06-2, L06-3] Denton Company manufactures and sells a single product. Cost data for the product are given below: Variable costs per unit: Direct materials ..., Direct labor ...... Variable manufacturing overhead .......... Variable selling and administrative ........ Total variable cost per unit .............. Fixed costs per month: Fixed manufacturing overhead ............ Fixed selling and administrative ... Total fixed cost per month ............... ""31 $315,000 245,000 $560,000 The product sells for $60 per unit. Production and sales data for July and August, the first two months of operations, follow: Units Produced Units Sold July ....... ..... August ....... 17,500 17,500 15,000 20,000 The company's Accounting Department has prepared absorption costing income statements for July and August as presented below: ........ Sales ...... Cost of goods sold .... Gross margin Selling and administrative expenses . . . . . . . . . . Net operating income .......... ......... July $900,000 600,000 300,000 290,000 $ 10,000 August $1,200,000 800,000 400,000 305,000 $ 95,000 Required: 1. Determine the unit product cost under: a. Absorption costing. b. Variable costing. 2. Prepare contribution format variable costing income statements for July and August 3. Reconcile the variable costing and absorption costing net operating income figures. 4. The company's Accounting Department has determined the company's break-even point to be 16,000 units per month, computed as follows: Fixed cost per month $560,000 16,000 units Unit contribution margin $35 per unit "I'm confused," said the president. "The accounting people say that our break-even point is 16,000 units per month, but we sold only 15,000 units in July, and the income statement they prepared shows a $10,000 profit for that month. Either the income statement is wrong or the break-even point is wrong." Prepare a brief memo for the president, explaining what happened on the July absorption costing income statement.

ACCT 2230 Lecture Notes - Lecture 5: Cost Driver, European Cooperation In Science And Technology, Enterprise Resource Planning

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