COST
What are the three parts of a manufacturing cost?
Direct Materials, Direct Labor, Manufacturing Overhead
What is the difference between job order and process costing?
Job order is for specific products that have identifiable costs. Process costing is for a large batch of homogenous products.
What are prime costs?
Direct Materials and Direct Labor
What is the calculation for an Activity Rate?
Budgeted Activity Cost $/Budgeted Total Activity-Base Usage
What is the difference between financial and managerial accounting?
Financial - external users; GAAP approved
Managerial - internal users; does not have to be GAAP approved
Define Product Costs
Are incurred to produce a product or service; also called manufacturing costs. Include DM, DL, and OH.
What method is used when many different jobs are worked on during each period, costs are accumulated by individual job, and units are computed by job on the job cost sheet
Job order costing
What are Conversion Costs
Direct Labor and MOH
What is the calculation for applying OH to each activity?
Actual Activity-Base Usage x Activity Rate
What is the order in creating financial statements?
Income statement, Stmt of Retained Earnings, Balance Sheet and Statement of Cash Flows
What are period costs?
Non-manufacturing costs. Examples of period costs are selling and general administrative expenses.
What method is used when a single product is produced either on a continuous basis or for long periods of time. All units are identical. Costs are accumulated by department and units costs are computed by department.
Process costing
What are the three basic inventory accounts on the Balance Sheet?
Material Inventory, WIP, Finished Goods
How many activity rates can you use in one company?
Trick question - As many as you need/makes sense for your company/product
What time periods are used in managerial accounting financial statements?
Trick question - Any time period you want!
Daily, Weekly, Monthly, Quarterly, Yearly
What are indirect costs?
Indirect costs cannot be traced to a specific product. Factory overhead represents an indirect cost. Also indirect materials and indirect labor.
What is the Predetermined Factory OH Rate formula?
Estimated MOH Costs ($)/Estimated Activity Base
If the ending balance in the OH account is a debit, has OH been underapplied or overapplied?
Underapplied
If material is added at the beginning of the process, what % is used to calculate the equivalent units in ending inventory?
100%
The financial statements created for internal use are shared with investors: True or False
False
How do you calculate Cost of Goods Manufactured?
Beginning WIP + DM + DL + MOH - Ending WIP.
What is the formula used to apply OH to the products in the WIP account?
Applied OH = Actual Activity Base x Predetermined OH Rate
What account is used to close out under/over applied OH at the end of the year?
Cost of Goods Sold
If beginning inventory is 40% complete for conversion costs, what % is used to calculate equivalent units?
60%
Can an Income Statement show a net loss?
Yes