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ADMS 2510 Chapter Notes - Chapter 2: Fixed Cost, Variable Cost, Opportunity Cost

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greenmarten497
16 Apr 2018
School
York University
Department
Administrative Studies
Course
ADMS 2510
Professor
Roberto Umana

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ADMS 2510 Full Course Notes
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Document Summary

Conversion cost= direct labour + manufacturing overhead cost. Prime cost= direct materials + direct labour cost. 3 broad categories: direct materials- materials that become an essential part of a finished product and can be conveniently traced to it. Also called touch labour because the direct labour workers typically touch the product while it is being made. Indirect labour- the labour costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced directly to particular products: manufacturing overhead- all costs associated with manufacturing except direct materials and direct labour. Direct cost- all direct materials and direct labour. Indirect cost- all indirect materials and indirect labour. Idle time- ti(cid:373)e (cid:374)ot spe(cid:374)t o(cid:374) productio(cid:374) acti(cid:448)ities. Exa(cid:373)ple: if 3 hours of a productio(cid:374) (cid:449)orker"s ti(cid:373)e are idle a(cid:374)d each hour cost. , then of idle time cost usually would be charged to overhead if management felt that the cost was a general cost of all production.

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Related Questions

1. Process costing is normally used when:

a. large numbers of different products are manufactured

b. large numbers of nearly identical products aremanufactured

c. small numbers of nearly identical products aremanufactured

d. the fixed costs of manufacturing exceed the variable cost ofmanufacturing

2. Manufacturing overhead:

a. consists of direct material and direct labour costs

b. is easily traced to jobs

c. should not be assigned to individual jobs because it bears noobvious relationship to them

d. is a heterogeneous pool of indirect production costs that caninclude gas and electricity costs and depreciation

1. ABC generally causes the least amount of cost distortionamong products because indirect costs are allocated to the productsbased on

types of activities used by theproduct.
the extent to which the activitiesare used.
both A and B.

none of the above.

2.

Chicago Steel's operating activities for the year are listedbelow:

Beginning inventory

$1,000,800
Ending inventory

$350,500
Purchases

$750,300
Sales revenue

$1,500,400
Operating expenses

$700,200

What is the cost of goods sold for the year?

$1,751,100
$1,400,600
$750,100

$50,100

3.

The following is selected financial data from Turtle BayManufacturing for the most recent year:

Ending raw materials inventory

$21,200
Ending work in process inventory

$44,900
Ending finished goods inventory

$53,200
Amount of underallocated manufacturing overhead

$5,100
Cost of goods sold for year

$85,500
Cost of raw materials purchased during year

$45,700
Cost of direct materials requisitioned during year

$44,300
Cost of indirect materials requisitioned during year

$7,200
Cost of goods completed during year

$120,200
Manufacturing overhead allocated

$60,400
Manufacturing overhead % of direct labor cost

135%

What is the beginning raw materials inventory?

$27,000
$51,500
$19,800

$5,800

4. Which of the following is not an activity inan ABC system that determines the cost of a manufacturedproduct?

Materials handling
Inspecting
Machining

Accounting

5. Which type of company utilizes managerialaccounting?

Manufacturers
Service
Retailers

All of the above

6. On a traditional income statement, all manufacturing-relatedcosts, whether fixed or variable, are listed

above the gross profit line.
below the operating incomeline.
above the sales line.

above the contribution margin line.

7. In a process costing system, direct labor and manufacturingoverhead are normally

incurred evenly throughout theprocess.
incurred at the end of theprocess.
incurred in full at the beginningof the process.

not recorded.

8. Manufacturing overhead costs for a productinclude

operating expenses.
indirect manufacturing costs.
direct material.

prime costs.

9.

Here are selected basic data for Wilson Company:

Estimated manufacturing overhead

$243,750

 Factory utilities

$30,900
Estimated labor hours

35,000

 Indirect labor

$22,600
Actual direct labor hours

36,000

 Sales commissions

$54,600
Estimated direct labor cost

$325,000

 Factory rent

$47,800
Actual direct labor cost

$320,000

 Factory property taxes

$28,700
Factory depreciation

$65,600

 Indirect materials

$33,300

If the company allocates overhead based on direct labor cost,what are the total actual manufacturing overhead costs?

$173,000
$283,500
$228,900

$260,900

10. ERP stands for

Enterprise Resource Planning.
Enclosed Resource Placement.
Edwin R. Perry, the man thatcreated the first system.
Entity Replacement Product.

Kubin Company’s relevant range of production is 25,000 to 33,500 units. When it produces and sells 29,250 units, its average costs per unit are as follows:

Average Cost per Unit
Direct materials $ 8.50
Direct labor $ 5.50
Variable manufacturing overhead $ 3.00
Fixed manufacturing overhead $ 6.50
Fixed selling expense $ 5.00
Fixed administrative expense $ 4.00
Sales commissions $ 2.50
Variable administrative expense $ 2.00

Required:

2. Assume the cost object is the Manufacturing Department and that its total output is 29,250 units.

a. How much total manufacturing cost is directly traceable to the Manufacturing Department?

b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?

2. Assume the cost object is the Manufacturing Department and that its total output is 29,250 units.

a. How much total manufacturing cost is directly traceable to the Manufacturing Department? (Round per unit values to 2 decimal places.)

b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?

Show less
2a. Direct materials per unit $8.50
Direct labor per unit 5.50
Variable manufacturing overhead per unit 3.00
Fixed manufacturing overhead per unit 6.50
Total manufacturing cost per unit $23.50
Number of units sold 29,250
Total direct costs $687,375
2b. Total indirect costs

3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $117,000 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives’ compensation.

a. When the company sells 29,250 units, what is the total direct selling expense that can be readily traced to individual sales representatives?

b. When the company sells 29,250 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $117,000 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives’ compensation.

a. When the company sells 29,250 units, what is the total direct selling expense that can be readily traced to individual sales representatives? (Round per unit value to 2 decimal places.)

b. When the company sells 29,250 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

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3a. Sales commissions per unit
Number of units sold
Total sales commission
Fixed portion of sales representatives’ compensation
Total direct selling expense
3b. The total indirect selling expense