ACCT 002 Lecture Notes - Lecture 23: Income Statement, Business Process, Fixed Cost

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blackpig616

19 Aug 2020

School

College of The Sequoias

Department

Accounting (ACCT)

Course

ACCT 002

Professor

cooper

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Document Summary

Product costs: all costs incurred to make a product, including direct materials, direct labor and manufacturing overhead. Those costs represent the value of the inventory on the balance sheet. Note that they are expensed through cost of goods sold in the period the related products are sold, not in the period those costs are incurred---matching principle. They are expensed on the income statement in the period in which they are incurred. Which of the following costs would be considered a period rather than a product cost in a manufacturing company: manufacturing equipment depreciation, property taxes on corporate headquarters, direct materials costs, electrical costs to light the production facility. Variable cost: a cost that varies, in total, in direct proportion to changes in the level of activity. A good example of a variable cost is direct materials. Please note that a variable cost is constant if expressed on a per unit basis.

Related Questions

VII. Because the costs of direct labor andoverhead are often incurred ____________ throughout the productionprocess, they may, for the sake of convenience, be combined whencalculating equivalent units; these combined costs are called_____________ costs.

VIII. Cost flow in a process cost report that usesthe FIFO costing method follows the logical _____________ flow ofproductionâthat is, the costs assigned to the first materialsprocessed are the first costs transferred when those materials flowto the next process, department, or work cell.

IX. Preparation of a process cost reportusing _____________:

A. Step 1 entails computing the totalnumber of ___________ units to be accounted for during theperiod.

B. Step 2 entails computing ____________units of production for the period for direct materials andconversion costs.

C. In Step 3, all direct ___________ and____________ costs for the period and the previous period are addedto arrive at total costs.

D. In Step 4, the ___________ perequivalent unit for both direct materials and conversion costs iscomputed by dividing current period costs by their respectiveequivalent units.

E. In Step 5, costs are____________ to the units completed and transferred out during theperiod, as well as to the ending work in process inventory.

ivoryjackal318

Your Company is a manufacturing facility that produces highendboots. The actual manufacturing overhead cost for the previous yearwas $750,000 and the total direct labor hours incurred were 40,000hours. The estimated manufacturing overhead cost for the currentyear are $780,000 and the estimated direct labor hours are 39,000.Overhead is applied using direct labor hours as the activity.
Salaries and wages are run on a single payroll. Of the total 70% isdirect labor, 20% are period costs and 15% are indirectlabor.
15% of the materials used in production are classiied as indirectmaterials. The wage rate is $25 per direct labor hour. over orunderapplied overhead is closed to cost of goods sold. Below is alist of costs and other information related to the currentyear:

a. building and equipment depreciation - 100%manufacturing
180,000

b. raw material inventory 1-1-2015
250,000
c. raw material purchases
1,000,000
d. raw material inventory 12-31-15
50,000
e. delivery costs - inished goods
10,000
f. inished good inventory 1-1-15
220,000
g. inished goods inventory 12-31-15
225,000
h. insurance costs; 80% production the balance period costs
60,000
i. property taxes ; 80% production the balance period costs
40,000
j. maintenance costs; all production
35,000
k. utilities; 90% production the balance period costs
100,000
l. interest expense - period cost
20,000
m. salaries and wages
1,400,000
n. other manufacturing costs
80,000
o. work-in-process inventory 1-1-15
70,000
p. work-in-proces inventory 12-31-15
75,000
q. sales revenue
3,500,000
r. sales commissions 2% of sales dollars s. legal fees all periodcost
25,000

5. compute the prime costs

6. compute the conversion costs.

7. if 40% of the manufacturing overhead costs are variable whatis the total variable costs?

8. if 75,000 units were produced what was the cost per unit?What was the variable cost per unit? the fixed cost perunit?

9. if 100,000 units were produced what would be the fixed costper unit?

redhound320

Determine whether each statement is true or false.

A. Freight costs incurred in shipping products to customers isproperly referred to as a product rather than period cost of theselling company.

B. Period costs include all selling and administrative costs,both variable and fixed.

C. The salary of a manufacturing quality control inspector wouldtypically be accounted for as manufacturing overhead.

D. A retail merchandising company's cost of goods sold typicallyincludes part of store utility costs.

E. A manufacturing company's cost of goods sold includes onlyproduct costs.

F. The basis used to apply manufacturing overhead in a job ordercost system based on a predetermined overhead rate should be ameasurable activity which correlates with or drives overheadcosts.

G. Managerial accounting is governed by rules issued by theAICPA

H. If sales price and fixed costs remain constant while variablecosts per unit increase, the number of units needed to be sold toreach the break-even point increases.

I. Unrecoverable past costs are always irrelevant in evaluatingfuture business decision alternatives.

amethystgnu755

ACCT 002 Lecture Notes - Lecture 23: Income Statement, Business Process, Fixed Cost

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