Material and labor costs charged to production: Job No. Compute the missing amounts, and prepare the August production report for the Coating Department. Chapter 10 A large labor efficiency variance is prorated to which of the following at year-end? What information should be contained in a subsidiary ledger for Work in Process Inventory in a job order costing system? Managerial accounting, on the other hand, is not mandatory. Baker applies overhead in Processing based on machine hours and on direct labor cost in Packaging.
Normal spoilage is 11 percent of good units completed and transferred out during the current period.
Whether Staci produces pottery or stays in her present job, she will have incurred this cost.
Depreciation on plant and equipment. EASY bottlenecks.
Fixed costs can create confusion if they are expressed on a per unit basis. Chapter 9 Assume that Sun chooses to allocate its advertising cost among the three products. Total manufacturing costs
In general, only the differences between alternatives are relevant in decisions. Kauai Mfg. A set-up was acccounting for 1, blue units of Product Z; a set-up was made for 4, red units of Product Z; a set-up was made for green units of Product Z. Units completed and transferred out during September. Choices c and d. Note that each cost item is classified in two ways: first, as variable or fixed with respect to the number of units produced and sold; and second, as a selling and administrative cost or a product cost. If these are appropriate goals, consumer-based external measures must be employed to determine if the goals are being achieved.
Content of the memo must include the name and title of the person interviewed, name of the company, date of the interview, examples of the use of accounting information for decision making, and any other pertinent information. To compute the number of units in the finished goods inventory at the end of the year, we must first compute the number of units sold during the year. Prime cost 5. The salary of the head nurse in the Immunization Center From the following estimated data, compute the predetermined rate to be used by each company:.
Chapter 2 Exercises
When products are transferred, the units and costs are treated as input material in the next department. Joint production costs are irrelevant to this decision. Insurance, finished goods warehouses.
The following data pertain to Birmingham Paperboard Company, a manufacturer of cardboard boxes. Depreciation on building and equipment Straight-line depreciation: Product cost, fixed, manufacturing overhead 8. Implementing Quality Concepts An appraisal cost is created by a. Energy Resource Company refines a variety of petrochemical products.
The variable cost per unit is constant. Chapter 2: Job Order Cost System. Solutions Manual, Appendix 2B Ethics case Suzie Garcia, an accountant for a consulting firm, had just received the monthly cost reports for the two jobs she supervises: one for Arrow Space, Inc. Alternate problem B Classify the costs listed in Alternate problem A as either product costs or period costs. Cost of cleaner used to clean appliances when they are completed. In the future, an increased emphasis on prevention should result in a decrease in internal failure costs.
Cost of janitorial supplies the janitors work in the factory. Room cleaning supplies The housecleaning X department 7. Materials Direct. Other, less systematic, factors may also affect electrical costs such as the frugality of individual guests. Expense High level of activity
Activity-Based Cost Systems for Management 4—25 TriCo would like to institute an activity-based costing system to price products. Ames Corp. Units completed and transferred out during August. As we shall see in later chapters, one of the central purposes of managerial accounting is to provide this kind of feedback to managers.
Introduction to Cost Management Systems 2—15 Discuss the characteristics of an organization for which a true cost management system would be appropriate. Total overtime premiums paid Required: Compute the missing amounts, and prepare the August production report for the Coating Department. ANSWER: Strategic resource management involves the organizational planning for the deployment of resources to create value for customers and shareholders. The illustrations given by the students should support details provided from pages 45—48 in the text.
Any spoilage that occurs is in the Finishing Department.
Using terminology that will be defined in Chapter 12, Dell grows profits by increasing turnover while holding margin reasonably constant. Cost of janitorial supplies the janitors work in the factory.
For example, data about customer satisfaction may be routinely used in managerial accounting reports. The company began December with containers in process that were 30 percent complete as to material and 40 percent complete as to conversion costs.
Conversion cost 3. Therefore, by reclassifying period costs as product costs, the company is able to carry some costs forward in inventories that would have been treated as current expenses.
Exercizes cost of renting rooms at a Florida resort for the annual sales conference Salary of a supervisor overseeing production of printers at Hewlett-Packard Based solely on the inventories number on the balance sheet, students cannot determine the answer to this question. A period cost is a cost that is taken segments of an organization rather than directly to the income statement as an expense summary data concerning the entire in the period in which it is incurred. Visic Corporation Income Statement Sales
Property taxes on the factory Expense Weigbt level of activity The cost of a hard drive installed in a computer: direct materials. Jelena Cienta. Cost of the old computer terminals Cost behavior: Cost behavior refers to the way in which costs change in response to changes in a measure of activity such as sales volume, production volume, or orders processed. In which answers are you completely confident?
Mixed cost: A mixed cost contains both variable and fixed cost elements. In the future, an increased emphasis on prevention manageriall result in a decrease in internal failure costs. Depreciation on chairs and tables in the factory lunchroom Product costs e. Control activities: Install controls such as physical security, data storage backup sites, firewalls and passwords that protect technology assets.
Cost of X-ray film used in the old machine X 1. Chapter 2 Introduction to Cost Weightt Systems Define confrontation strategy and indicate why many companies may believe it is the only way to face competitors. The bank requires financial statements before approving such a loan. Similarly, direct labor would be equivalent to the cooks in a restaurant and the flight crews of an airline.
Direct material and direct labor are direct costs. Catered food served to patients A particular patient X 1. The amount invested in these bags is called a n. However, the cost per unit i. As stated above, the cost of goods manufactured consists of the manufacturing costs associated with the goods that were finished during the period. Opportunity costs are not usually recorded in the accounts of an organization. Introduction to Cost Management Systems Substantial reductions in product cost can be obtained by a.
Total purchases can be easily determined in a merchandising company by simply adding together all purchases from suppliers. EASY Which of the following was the earliest event of importance to the beginning of e-commerce? Material inventory b. The actual operations for the month of August are summarized as follows: a.
Postponing maintenance on equipment is particularly questionable. Exercise 15 minutes 1. Click here to sign up. The second action was to ask that the order for the parts be cancelled. Related Papers.
The more relevant data for the decision—the current market value—is ignored under GAAP. That is, a cost may be a fixed cost, a lowe cost, and a sunk cost; you would place an X under each of these column headings opposite the cost. To decrease failure costs, more prevention costs must be incurred. Three full meals a day are included in the hotel room charge. Changes are constantly taking place in economic conditions, customer needs and desires, competitive conditions, and so on.
Chapter 4 Mass customization can be achieved through the use of a. Required: Calculate the cost per equivalent unit, for both direct material and conversion, during June. Also see Inventoriable costs. The manager is exhibiting a common behavioral tendency to pay too much attention to sunk costs. Think of these responsibilities as profits financial statementsprocess customer focus and satisfactionpeople employee learning and satisfactionand planet environmental stewardship. Quality is the total of all characteristics of a product or service that impacts on its ability to meet the needs of a specific person. Controlling involves ensuring that the plan is actually car- ried out and is appropriately modified as circumstances change.
This core would be classified as a. For purposes of illustration, these statements contain more detail about cost of including calculation of the cost goods sold than you will generally find in published financial statements.
The cost of maintaining the old machine
Finished Goods Inventory account. The revenue that can be obtained from selling one more unit of product is called marginal revenue, and the cost involved in producing one more unit of product is called marginal cost.
A fixed cost is fixed in total, but the The schedule of cost of goods average cost per unit changes with the level of manufactured lists the manufacturing costs that activity. Glue used to attach labels to bottles containing a patented medicine.
The salary of the supervisor of the people who assemble the product. Examples of indirect inventoriable costs include the costs to sustain the manufacturing plants that cannot be conveniently traced to specific products.
Forming began the month with wreaths in process that were percent complete as to material and 40 percent complete as weigth conversion. Chapter 3 Organizational Cost Flows The following information was taken from the records of the Ucandu Corporation for the month of January These costs include scrap, rework, retesting, and design changes. Example: cost of national advertising for an airline is indirect to a particular flight.
Assume your classifications could be challenged in fost court case. For example, as the activity level increases, fixed costs decrease on a per unit basis. Sales commissions paid as a percent of sales. A period cost is a cost that is taken directly to the income statement as an expense in the period in which it is incurred. Such costs arise from annual decisions by management to spend on certain fixed cost items, such as advertising, research, and management development. The salary of the head of the Pediatrics Department
Teaching Tip: When discussing indirect costs, you may want to cite a hospital's medical and surgical exerises as an example. A set-up was made for 1, blue units of Product Z; a set-up was made for 4, red units of Product Z; a set-up was made for green units of Product Z. These costs are inventoried until the goods are sold.
Fix ed cost per unit goes dow n as activity le vel goes up. Therefore, the company's income statement does not list any cost-of-goodssold expense. The machines have no resale value and do not wear out through use. Kan produces units of A and 8, units of B each period. Required: For each cost, indicate whether it would most likely be classified as direct labor, direct materials, manufac- turing overhead, selling, or an administrative cost. Chapter 3 GSWS is a construction company that builds houses on special request.
EASY The indirect costs of converting raw material into finished goods are called a. Purchasing has determined the three major activities that occur during the year. Delivery costs on customer shipments: Period cost, variable A particular cost may be direct or indirect, depending on the cost object. Factory Wages PayableDebitsBal.
Each different use of cost data may demand a different kind of cost. Similarly, raw-material costs are product costs, and they are included in cost of goods sold. Determine the cost per equivalent unit in each department and compute the cost transferred out, the cost in ending inventory, and the cost of spoilage if necessary.
The beginning inventory consists of any units that are in the inventory at the beginning of the period. For purposes of capter cost behavior—how costs will react to changes in activity—costs are commonly categorized as variable or fixed. However, GAAP requires that the land be stated at its original, historical cost on financial reports. On January 31, the following journal entry was made to record the cost of goods completed and transferred out of the Molding Department.
Salaries of personnel who work in the finished goods warehouse Property taxes, factory Chapter 2: Job Order Cost System. Variable Shipping expense Need an account?
Business decision case B Quality Painters, Inc. Relevant range: The relevant range is the range of activity within which assumptions about variable and fixed cost behavior are valid. Prepare an income statement for Good Vibrations, Inc. Licenses and Attributions.
The brother-in-law? You have been asked lkse help prepare the financial statements and were given the following list of costs: 1. Indirect labor—personnel who do not work directly on the product e. Cost-benefit analysis can help identify customers that cost more than they are worth to the company. The typical, small number of hands serves as a reminder that many students have little idea of what a factory "looks like" and does.
In effect, between the fixed costs accohnting purchasing the two the cost of goods manufactured takes the place machines is a differential cost. The controller is correct that the salary cost should be classified as a selling marketing cost. It would also have a flatter slope because the estimated variable cost per unit is lower than the high-low method.
Cost of goods manufactured……………………. In a manufacturing company, variable costs include items such as direct materials, shipping costs, and sales commissions and some elements of manufacturing overhead such as lubricants.
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Property taxes on the factory.
Estimate handling costs if expected production for next month is 20, units.
The duties described in the problem have nothing to do with manufacturing a product, but rather deal with moving finished units from the factory to distribution warehouses. As of January 1, its records showed inventories as follows:.
Returns and allowances arising from poor quality Problem 30 minutes 1.
Insurance on a factory building and equipment. Feedback 9. Wages of receptionist, executive offices To browse Academia.
EASY Which of the following defines variable cost behavior?
Be flexible with your use of accounting terminology in this interview. A period cost is a cost that is taken directly to the income statement as an expense in the period in which it is incurred.
Baker Co. Kauai Mfg.
Period costs include all costs that are not product costs.
Prepare journal entries to assign the materials, labor, and manufacturing overhead costs to production and to record the transfer of Job No.
None Saturating Department. Present costs and revenues are compared to projected costs and revenues in manageriall following table: Retailer Sales Differential Distribution Representatives Costs and present proposed Revenues Revenues Variable For purposes of predicting cost behavior—how costs will react to changes in activity—costs are commonly categorized as variable or fixed. Chapter 4 Manufacturing cycle efficiency should be increased by employing which of the following techniques?
A period cost is a cost that is taken directly to the income statement as an expense in the period in which accoutning is incurred. Or, management might assume that the company will have to cut its prices to hang on to its market share. Direct labor costs: direct labor to Job No. B Cost of goods manufactured see above Depreciation on the fixtures and equipment in the Immunization Center If the correct accounting policy were followed, there would be no reason for Mr.
Traditional income statement Redhawk, Inc. Soap and paper towels used by factory workers at the end of a shift Lab tests by outside A particular patient contractor X 8. The salary of the head of the Pediatrics Department The difference determine the goods available for sale.
Calculate the equivalent units of production b. Fixed Cost A fixed cost is a cost that remains constant, in total, regardless of changes in the level of activity.
A period cost is a cost that is taken segments of an organization rather than directly to the chaptet statement as an expense summary data concerning the entire in the period in which it is incurred. They may be an integral part of a finished product but their costs can be traced to the product only at great cost or inconvenience.
Required: Determine the amount of cost in the Raw Materials, Work in Process, and Finished Goods inventory accounts as of the date of the fire.
Accordingly, Gallant has ordered that wherever possible, expenditures should be postponed to the new year—including canceling or postponing orders with suppliers, delaying planned maintenance and train- ing, and cutting back on end-of-year advertising and travel.
Chapter 2 Which of the following is a primary element of a cost management system?
EASY Which of the following is not a primary goal of a cost management system? Lake Company produces a popular tote bag. The opportunity cost of buying the land is the investment income that could have been realized by purchasing the securities instead. Conversion FIFO method. Decisions should be guided by an understanding of basic values and principles of integrity—preferably shared within and supported by the organization.
In Trans. Balance, Wages Payable Control, December 31, f. Accounting techniques in manufacturing are frequently transferable to the service sector, and this fact should be emphasized in class. It is unlikely that labor and other costs would change with the addition of only one more product unit. In this case, we would say that wage costs are variable with respect to the hours of operation. Depreciation on chairs and tables in the factory lunchroom.
The following data have been compiled for the month of April. Using the high-low method, compute the cost formula. What is the cost assigned to normal spoilage, using weighted average, and where is it assigned? Total overtime premiums paid
An indirect accountiing is a cost that cannot be easily traced to a cost object. Service Firms B. Therefore the cost of the cheese in a taco would be considered a manufacturing cost as well as a product cost. Cost of goods sold is subtracted from net sales to arrive at the gross profit.
However, GAAP requires that the land be stated at its original, historical cost on financial reports. Chapter 10 A large labor efficiency variance is prorated to which of the following at year-end? Work in process, December EASY estimate costs of future jobs. Costs at the most basic level B. Finally, the company would utilize changing technologies and embrace customer values and customer satisfaction as part of organizational culture.
Wages of workers painting a product. Cost of goods sold e. In managerial accounting, the term cost is used in many different ways. The cost of direct materials used during a period will vary, in total, in direct proportion to the number of units that are produced.
Landscaping direct nad costs: direct labor to Job No. Lubricants for production equipment Rent on a factory building Prepare journal entries to record the costs of jobs and to record the transfer of completed jobs to Finished Goods Inventory and to Cost of Goods Sold. Flowers for the A particular hotel guest X reception desk 5. The term is opportunity cost. The cost of advertising a rock concert in New York City Number of rock concert tickets sold
Managerial accounting data, such as daily sales reports, are often used in this type of day-to-day activity. Conversion costs include direct materials and direct labor. Distinguish between normal and abnormal spoilage. Units started in process during November. What apparent predetermined overhead rate does the company use to assign overhead cost to jobs?
X Note: The costs of the rent on the space occupied by the registration desk and the wages of registration desk personnel are neither differential costs, opportunity costs, nor sunk costs. Rent on factory machinery. Required: Calculate the Job Cost for each job. Feedback 9.
Cost of advertising the product. For this reason, fixed costs should be shown only in totals on a contribution-type income statement. If the salary cost is classified as a selling expense all of it will appear on the income statement as a period cost. What type of balance does each have in the Overhead account?
Sams expects to operate atmachine hours for the coming year.
Only the portion of the salary that has been assigned to finished units that are sold during the period will appear on the income statement as an expense part of Cost of Goods Sold for the period.
There were no inventories of any type on April 1.
What are the major types of period costs incurred by a manufacturer? Advertising by a dental office
For planning purposes, a manager must be able to anticipate which of these will happen; and if a cost can be expected to change, the man- ager must be able to estimate how much it will change. Upon closing, a. Example 2 Suppose that Neiman Marcus is considering investing a large sum of money in land that may be a site for a future store. Manufacturing Overhead Manufacturing overhead, the third element of manufacturing cost, includes all manufacturing costs except direct materials and direct labor. Activity-Based Cost Systems for Management 4—25 TriCo would like to institute an activity-based costing system to price products.
How are the costs of the beginning work-in-process inventory treated differently manxgerial the weighted-average and FIFO methods? This information will include the amount of direct material and direct labor costs in production, as well as the amount of overhead applied to each job. What is the balance in Cost of Goods Sold after the underapplied overhead is closed? Financial accounting does require some breakdowns of revenues and costs by major segments in external reports, but this is a sec- ondary emphasis. These are incurred once for each item produced and are considered part of total product cost. EASY finished unit of product that has no sales value.
Raw material available for use………………. Joint cost is allocated using the sales value method. Manufacturing costs 1.
Total fixed costs remain the same when the level of activity fluctuates within accounging relevant range. Enter each cost item on your answer sheet, placing the dollar amount under the appropriate headings. Wood glue: Product cost, variable, either direct material or manufacturing overhead indirect material depending on how significant the cost is. Ending inventory, work in process This core would be classified as a. Cost incurred to produce units that were both started and completed during March: Number Total cost per of units equivalent
Examples include a product line, a sales territory, a division, or a department.
Or, management might assume that the company will have to cut its prices to hang on to its market share.
Cost of goods manufactured……………………. The goal is to use information effectively and avoid information overload.
The company has two jobs in process at the end of the cycle, Jobs 17 and
The initial effect of emphasizing prevention and appraisal was to reduce external failure costs and increase internal failure costs. However, one can argue that if the price is within reason, any rock concert in New York City will be sold out and the function of advertising is simply to let people know the event will be happening.
Quality of conformance 2. Weigght Overhead. Managerial accounting; Financial accounting 6. However, one can argue that if the price is within reason, any rock concert in New York City will be sold out and the function of advertising is simply to let people know the event will be happening. The salary of the head nurse in the Immunization Center As a consequence, rework and scrap costs increased.
Manufacturing overhead. Most fixed costs are adjusted upward and downward in large steps, rather than being absolutely fixed at one level for all ranges of activity. Additionally, fixed costs will be affected by how many days are in a month. Is the company keeping its costs below the expected costs for each job? That is, management might be misled into thinking that the per unit fixed costs would be the same regardless of how many organs were sold during the month.
Required: For each cost, indicate whether it would most likely be classified as direct labor, direct materials, eexercises turing overhead, selling, or an administrative cost. What would be the approximate per-unit set-up cost for the green units of Product Z? Direct labor and direct materials used: Job No. In activity-based costing, how are cost drivers selected?
This could be how many Jeep Cherokees are produced, how many videos are rented, how many patients are treated, and so on.
Benefits from a new freezer X Note: The costs of the salaries of the head of the Radiology Department and Pediatrics Department and the rent on the space occupied by Radiology are neither differential costs, nor opportunity costs, nor sunk costs.
What average cost per unit and what total cost would you expect the company to incur for direct materials at this level of activity?
The costs of recalling and repairing a car create a. The changes in cost and activity are calculated for these two levels of activity. The Packaging Department is more cost-efficient than the Processing Department. Spoilage is detected just before the yogurt is placed into containers or at the 98 percent completion point. We define many of the activity-based costing, an elaboration that influence how managers perform terms that are used to classify costs in of job-order costing. Deduct: Finished-goods inventory, December Each different use of cost data may demand a different kind of cost.
Costs before separation are apportioned between the two main products by the net realizable value method. ANSWER: The sales value at split-off method assigns costs based only on the weighted proportions of the total sales values of the joint products without consideration of disposal costs at the split-off point. All of the costs you have listed above, except one, would be differential costs between the alternatives of Staci producing pottery or staying with the aerospace company. Compute unit costs for A and B. EASY causing companies to recognize that it may be more advantageous to confront, rather than compete with, the competition.
Introduction weigt Cost Management Systems b EASY Distinguishing a product by adding additional features or value is part of which of the following competitive strategies? Rework cost is classified as either a product or period cost. It emphasizes quality principles throughout the firm. Total cost per equivalent unit. There were no inventories of work in process or finished goods on January 1.
Cost Classifications Cost behavior means how a cost will react to changes in the level of business activity.
Need an account?
The organization would engage in intergroup coordination and coordinated management through employee empowerment.
Apples processed and canned by Del Monte X X 4.
June 30 Raw Mat. Most customers stop doing business with a company because of poor product or service quality.
Depreciation on equipment used to test assembled computers before release to customers: manufacturing overhead. Manufacturing overhead includes all manufacturing costs except direct materials and direct labor. Remember me on this computer. A short summary of this paper.
Baker applies overhead in Processing based on machine hours and on direct labor cost in Packaging. The hotel features access to concepfs, skiing, biking, and other activities in the Ziller alps as well as its own fitness facility and spa. Overtime premium is included in manufacturing overhead in order to spread the extra cost of the overtime over all of the products produced, since overtime often is a normal cost of the manufacturing operation. However, the cost per unit i. Managerial accounting, on the other hand, is not mandatory. In business decisions, each alternative will have costs and benefits that must be compared to the costs and benefits of the other available alternatives. Direct labor: Wages
Rental of office space for sales personnel Depreciation of the airline's computer equipment would be included in depreciation. Managers will investigate all variances from standard.
CC 17, 18, Cooking Department Mat. Enter the email address you signed up with and we'll email you a reset link. Actual costing assigns the actual cost of all direct material, direct labor, and overhead to the units produced. Saturating Department. Chapter 9 Cost Allocation for Joint Products and By-Products Briefly discuss the restrictions and requirements on service organizations and notforprofits that relate to joint cost allocation. Administrative costs Variable and Fixed Costs 1.
To see this most clearly, you may wish to review Exhibit 4—C. Discuss briefly the three monetary measurement techniques of weigght cost allocation. Additional information is as follows: Units produced Joint costs Sales value at split-off X 20,? Sometimes, because of negligence or conflicts of interest, senior management may accidentally or purposely give unethical instructions. The calculations in Exhibit 4—C are used as the basis for the following journal entry to transfer the cost of goods completed and transferred out to the Stitching Department.
Cleaning materials used to clean the skin wipe packages. Executive life insurance The electrical cost of running a roller coaster at Magic Mountain Number of times the roller coaster is run. Billing costs Spreading fixed overhead costs over a higher volume of sales would increase the gross margin percentage. Salaries of personnel who work in the finished goods warehouse Thus, the company is incurring more cost for scrap, rework, and so forth, but it is saving huge amounts in field servicing, warranty repairs, and product recalls.