ACC 212 Lecture Notes - Lecture 1: Fixed Cost, Opportunity Cost, Sunk Costs

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apricotwoodchuck413

13 Sep 2017

School

University of Miami

Department

Accounting Business Administration

Course

ACC 212

Professor

collins

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Document Summary

Summary of types of cost classifications: financial reporting, predicting cost behavior, assigning costs to costs objects, e(cid:454): trip ho(cid:373)e to new york; do(cid:374)"t (cid:272)are a(cid:271)out flights to new jerse(cid:455, making business decisions. Assigning costs to cost objects: direct costs, costs that can be easily and conveniently traced to a unit of product or other cost object, ex: direct material and direct labor; making the desk. Indirect costs: costs that cannot be easily and conveniently traced to a unit of product or other cost object, manufacturing overhead, common costs. Product costs are costs associated with making product ready to sell; inventoriable cost (assets on balance sheet); when products are sold go to income statement as cogs. Period costs: not product costs, selling costs, administrative costs, straight to income statement as expenses. Product vs. period check: which are period costs: manufacturing equipment depreciation, property taxes on corporate headquarters, direct material costs, electrical costs to light production facility, sales commissions.

Related Questions

Multiple Choice Questions

1. A cost center is a unit of a business that incurs costs butdoes not directly generate revenues. Which of the following woulddefinitely not be considered a cost center?
A. Accounting department.
B. Purchasing department.
C. Research department
D. Advertising department.
E. All of these could be considered cost centers.

2. A unit of a business that not only incurs costs, but alsogenerates revenues, is called a:
A. Performance center.
B. Profit center.
C. Cost center.
D. Responsibility center.
E. Expense center.

3. Regardless of the system used in departmental costanalysis:
A. Direct costs are allocated, indirect costs are not.
B. Indirect costs are allocated, direct costs are not.
C. Both direct and indirect costs are allocated.
D. Neither direct nor indirect costs are allocated.
E. Total departmental costs will always be the same.

4. An accounting system that provides information thatmanagement can use to evaluate the profitability and/or costeffectiveness of a department's activities is a:
A. Departmental accounting system.
B. Cost accounting system.
C. Service accounting system.
D. Revenue accounting system.
E. Standard accounting system.

5. Expenses that are easily traced and assigned to a specificdepartment because they are incurred for the sole benefit of thatdepartment are called:
A. Direct expenses.
B. Indirect expenses.
C. Controllable expenses.
D. Uncontrollable expenses.
E. Fixed expenses.

6. Costs that the manager has the power to determine or at leaststrongly influence are called:
A. Uncontrollable costs.
B. Controllable costs.
C. Joint costs.
D. Direct costs.
E. Indirect costs.

7. Responsibility account performance reports:
A. Become more detailed at higher levels of management.
B. Become less detailed at higher levels of management.
C. Are equally detailed at all levels of management.
D. Are useful in any format.
E. Are irrelevant.

8. Which of the following is an example of a performance measureof internal business processes which would be found in a balancedscorecard?
A. Product defect rates
B. Number of new customers
C. Employee satisfaction
D. Return on Investment
E. Sales growth

9. Which of the following is an example of a performance measureof the customer perspective which would be found in a balancedscorecard?
A. Product defect rates
B. Number of new customers
C. Employee satisfaction
D. Return on Investment
E. Sales growth

burgundybadger233

Multiple Choice Questions

2. A unit of a business that not only incurs costs, but alsogenerates revenues, is called a:
A. Performance center.
B. Profit center.
C. Cost center.
D. Responsibility center.
E. Expense center.

6. Costs that the manager has the power to determine or at leaststrongly influence are called:
A. Uncontrollable costs.
B. Controllable costs.
C. Joint costs.
D. Direct costs.
E. Indirect costs.

lemonrhinoceros823

When overhead costs are incurred they are recorded in an Accounttitled Manufacturing Overhead Control Account. The account isdebited for each overhead expense billed and an appropriate accountsuch as Cash or Accounts Payable is credited. Since overhead costscannot be traced directly to a cost object or to a Job, the totalannual overhead cost for the coming year are estimated at the endof the preceeding year and a formula is used to estimate the amountof overhead that should be charged to each job or product. Theamount charged to jobs or products is credited to the MOH accountand debited to the Work In Process Account. This estimated amountis a surrogate for the actual overhead costs that are incurredduring the year. At the end of the accounting period, the estimatedamounts charged to all jobs or products may be higher or lower thanthe actual overhead costs incurred during the year. This situationgives rise to the phenomenon of Under /Over applied overhead. Sinceoverhead expenses are just like ordinary expenses except for thefact that they are incorporated in the cost of product, then theMOH account is like any other temporary account and therefore itmust be closed at the end of the accounting period.

Applied overhead is calculated using the following formula:Predetermined Overhead Application Rate (POHAR) x Actualconsumption of the Activity Base. For example, if the POHAR is $10per direct labor hour consumed by a product and the productconsumes 5 direct labor hours, then Applied Overhead would be: 10 X5 = $50. Under/ Over applied overhead is calculated as: ActualOverhead costs - Applied Overhead. If Actual is greater thanapplied then Overhead is described as under applied and if theApplied is greater than Actual then it is described as overapplied.

Assignment: The estimated overhead costs of Abel Furniture were$2,200,000 and the estimated basis used for charging overhead toproduction is direct labor hours estimated at 500,000. The actualoverhead incurred during the year was $2,800,000 and the amountcharged to production was $2,400,000. Calculate the amount ofUnder/Over applied overhead and close the balance to Cost of Goodssold.

ceruleangoat931

ACC 212 Lecture Notes - Lecture 1: Fixed Cost, Opportunity Cost, Sunk Costs

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