ACCT-241 Chapter Notes - Chapter 2: Indirect Costs, Fixed Cost, Income Statement

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fuchsiacamel933

17 Jan 2016

School

American University

Department

Accounting And Taxation

Course

ACCT-241

Professor

harr

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Document Summary

Costs can be easily traced to the finished product. Labor costs easily traced to individual units of production. All costs other than direct labor and direct materials. Indirect labor and materials, maintenance and repairs, heat, light, taxes, depreciation and insurance. Incurred to secure customer orders and deliver the finished product. Attach to units of products as the goods are purchased/made. Moved to cost of goods sold (expense) when they are sold. Not included as part of the cost of goods. Expensed on the income statement in the period. How cost reacts to change in the level of activity. Relative proportion of variable, fixed and mixed costs. Varies in direct proportion to changes in the level of activity. Variable with respect to activity base (cost driver) Measure of whatever causes the incurrence of a variable cost. Constant regardless of changes in the level of activity. Annual decisions to spend on certain fixed cost items.

Related Questions

The Ryde and Rowe Inc. had the following account balances as ofJanuary 1:

Direct Materials Inventory . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . $ 89,200

Work in Process Inventory . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 178,400

Finished Goods Inventory . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 253,600

Manufacturing Overhead . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . â0â

During the month of January, all of the following occurred:

1. Direct labor costs were $442,000 for 18,000hours worked.

2. Direct materials costing $335,750 andindirect materials costing $13,500 were purchased.

3. Sales commissions of $216,500 were earned bythe sales force.

4. $326,000 worth of direct materials were usedin production.

5. Advertising costs of $36,300 wereincurred.

6. Factory supervisors earned salaries of$22,000.

7. Indirect labor costs for the month were$23,000.

8. Monthly depreciation on factory equipmentwas $24,500.

9. Utilities expense of $17,800 was incurred inthe factory.

10. Equipment with manufacturing costs of$970,100 were transferred to finished goods.

11. Monthly insurance costs for the factorywere $4,200.

12. $5,000 in property taxes on the factorywere incurred and paid.

13. Equipment with manufacturing costs of$1,089,000 were sold for $1,550,000.

Instructions

a. If Ryde and Rowe assigns manufacturingoverhead of $84,400, what will be the balances in the DirectMaterials, Work in Process, and Finished Goods Inventory accountsat the end of January?

b. As of January 31, what will be the balancein the Manufacturing Overhead account?

c. What was Ryde and Roweâs operating incomefor January?

ambergoat258

The Ryde and Rowe Inc. had the following account balances as ofJanuary 1:

Direct Materials Inventory . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . $ 89,200

Work in Process Inventory . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 178,400

Finished Goods Inventory . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 253,600

Manufacturing Overhead . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . â0â

During the month of January, all of the following occurred:

1. Direct labor costs were $442,000 for 18,000hours worked.

2. Direct materials costing $335,750 andindirect materials costing $13,500 were purchased.

3. Sales commissions of $216,500 were earned bythe sales force.

4. $326,000 worth of direct materials were usedin production.

5. Advertising costs of $36,300 wereincurred.

6. Factory supervisors earned salaries of$22,000.

7. Indirect labor costs for the month were$23,000.

8. Monthly depreciation on factory equipmentwas $24,500.

9. Utilities expense of $17,800 was incurred inthe factory.

10. Equipment with manufacturing costs of$970,100 were transferred to finished goods.

11. Monthly insurance costs for the factorywere $4,200.

12. $5,000 in property taxes on the factorywere incurred and paid.

13. Equipment with manufacturing costs of$1,089,000 were sold for $1,550,000.

Instructions

a. If Ryde and Rowe assigns manufacturingoverhead of $84,400, what will be the balances in the DirectMaterials, Work in Process, and Finished Goods Inventory accountsat the end of January?

b. As of January 31, what will be the balancein the Manufacturing Overhead account?

c. What was Ryde and Roweâs operating incomefor January?

lemonbeetle805

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.

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

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.

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.

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ACCT-241 Chapter Notes - Chapter 2: Indirect Costs, Fixed Cost, Income Statement

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