ACC 200 Lecture Notes - Lecture 3: Cost Driver, Fixed Cost, Variable Cost

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purplewater-buffalo170

17 Nov 2017

School

NCSU

Department

Accounting

Course

ACC 200

Professor

Christopher Tague Mc Kittrick

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Document Summary

Cost behavior is the foundation upon which managerial accounting is built. Describes whether a cost changes when the level of output changes. Costs can be variable, fixed, or mixed. A cost that does not change in total as output changes is a fixed cost. A variable cost, on the other hand, increases in total with an increase in output and decreases in total with a decrease in output. Knowing how costs change as output changes is essential to planning, controlling, and decision making. Fixed and variable costs only have meaning when related to some output measure. A cost driver is a causal factor that measures the output of the activity that leads (or causes) costs to change. Identifying and managing drivers helps managers better predict and control costs. Relevant range is the range of output over which the assumed cost relationship is valid for the normal operations of a firm.

Related Questions

Question 1.1. X&P Companyâs formula forits Cost of Goods Sold is given as Beginning Finished GoodsInventory plus Cost of Goods Manufactured minus Ending FinishedGoods Inventory. S = Cost of Goods Sold, B = Beginning FinishedGoods Inventory, M = Cost of Goods Manufactured, and E = EndingFinished Goods Inventory. If S = $900,000 and B = 15% of S, whichof the following is the Beginning Finished Goods Inventory amount?(Points : 1)

A. $135,000
B. $140,000
C. $145,000
D. $150,000

Question 2.2. ABC Companyâs formula for itsTotal Costs is Total Fixed Costs plus Total Variable Costs. T =Total Costs, F = Total Fixed Costs, V = Total Variable Costs, v =Variable Cost per Unit of Production, and q = Quantity ofProduction Units. If Variable Cost per Unit of Production is $50Total Fixed Costs is $200,000, and Total Variable Costs is $80,000,which of the following is the production level? (Points : 1)

A. 800 units
B. 1,000 units
C. $1,600 units
D. $2,400 units

Question 3.3. N&T Companyâs formula forits Cost of Goods Sold is given as Beginning Finished GoodsInventory plus Cost of Goods Manufactured minus Ending FinishedGoods Inventory. S = Cost of Goods Sold, B = Beginning FinishedGoods Inventory, M = Cost of Goods Manufactured, and E = EndingFinished Goods Inventory. If S = $1,200,000, B = 14% of S, and M =90% of S, which of the following is the Ending Finished GoodsInventory amount? (Points : 1)

A. $48,000
B. $72,000
C. $96,000
D. $120,000

Question 4.4. ABC Companyâs formula for itsTotal Costs is Total Fixed Costs plus Total Variable Costs. If T =Total Costs, F = Total Fixed Costs, V = Total Variable Costs, v =Variable Cost per Unit of Production, and q = Quantity ofProduction Units, which of the following derives the Total Costsequation at 800 production level? (Points : 1)

A. T = F â 800v
B. T = F/800v
C. T = F + 800v
D. T = 800v/F

Question 5.5. ABC Companyâs formula for itsTotal Costs is Total Fixed Costs plus Total Variable Costs. If T =Total Costs, F = Total Fixed Costs, and V = Total Variable Costs,which of the following derives the Total Costs equation? (Points :1)

A. T = F - V
B. T = F + V
C. T = F/V
D. T = V/F

Question 6.6. ABC Companyâs formula for itsCost of Goods Sold is given as Beginning Finished Goods Inventoryplus Cost of Goods Manufactured minus Ending Finished GoodsInventory. S = Cost of Goods Sold, B = Beginning Finished GoodsInventory, M = Cost of Goods Manufactured, and E = Ending FinishedGoods Inventory. If S = $800,000, B = $50,000, and E = $40,000,which of the following derives the Cost of Goods Manufactured?(Points : 1)

A. $800,000 = $40,000 â $50,000 + M
B. $800,000 = $40,000 + $50,000 + M
C. $800,000 = $50,000 - $40,000 + M
D. $800,000 = $40,000 - $50,000 â M

Question 7.7. ABC Companyâs formula for itsTotal Costs is Total Fixed Costs plus Total Variable Costs. T =Total Costs, F = Total Fixed Costs, V = Total Variable Costs, v =Variable Cost per Unit of Production, and q = Quantity ofProduction Units. If Variable Cost per Unit of Production is $50,which of the following is the Total Variable Costs amount at 800production level? (Points : 1)

A. $750
B. $800
C. $39,500
D. $40,000

Question 8.8. ABC Companyâs formula for itsCost of Goods Sold is given as Beginning Finished Goods Inventoryplus Cost of Goods Manufactured minus Ending Finished GoodsInventory. If S = Cost of Goods Sold, B = Beginning Finished GoodsInventory, M = Cost of Goods Manufactured, and E = Ending FinishedGoods Inventory, which of the following derives the Cost of GoodsSold equation? (Points : 1)

A. S = E + M â B
B. S = B + M â E
C. S = B - M â E
D. S = E + M + B

Question 9.9. Which of the following is adistinguishing feature of managerial accounting? (Points : 1)

A. External users
B. General-purpose reports
C. Very detailed reports
D. Quarterly and annual reports

Question 10.10. Which of the followingdescribes the managerial function of controlling? (Points : 1)

A. The managerial function of controlling is performed by investorsof a company.
B. The managerial function of controlling reports the companyâsearnings potential to creditors.
C. The managerial function of controlling is concerned mainly withoperating a manufacturing segment.
D. The managerial function of controlling includes the evaluationof the performance of a companyâs department.

periwinklebeetle86

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

Required information

[The following information applies to the questions displayed below.]

Sierra Company manufactures woven blankets and accounts for product costs using process costing. Data below are for one of its processing departments. The following information is available regarding its May inventories

	Beginning Inventory		Ending Inventory
Raw materials inventory	$	65,000	$	77,000
Work in process inventory		441,500		555,000
Finished goods inventory		632,000		517,000

The following additional information describes the company's production activities for May.


Raw materials purchases (on credit)	$	250,000
Factory wages cost (paid in cash)		1,562,000
Other overhead cost (Other Accounts credited)		38,000
Materials used
Direct	$	158,000
Indirect		80,000
Labor used
Direct	$	800,000
Indirect		762,000
Overhead rate as a percent of direct labor		110	%
Sales (on credit)	$	3,500,000

The predetermined overhead rate was computed at the beginning of the year as 110% of direct labor cost.

1. Compute the cost of products transferred from production to finished goods and cost of goods sold.

Raw Materials (RM)	Work in Process (WIP)






Factory Wages Payable	Finished Goods (FG)





Factory Overhead	Income Statement (Partial)


		$0


	Cost of goods transferred
	Cost of goods sold

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ACC 200 Lecture Notes - Lecture 3: Cost Driver, Fixed Cost, Variable Cost

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