Cost Types
The three major cost components of manufacturing a product are:
Direct materials, direct labor, and factory overhead.
True or False: GAAP constraints and guidelines are a management concept that were created to improve companies' performance.
False
A company has an overhead application rate of 121% of direct labor costs. How much overhead would be allocated to a job if it required total labor costing $14,000?
$16,940
($14,000 x 121%)
Kaye Company uses a job order costing system and allocates its overhead on the basis of direct labor costs. Kaye Company's production costs for the year were: direct labor, $21,000; direct materials, $41,000; and factory overhead applied $5,100. The overhead application rate was:
24.29%
($5,100 factory overhead/ $21,000 direct labor = .242857 = 24.29%)
The two basic types of cost accounting systems are:
Job order costing and process costing.
A cost that is traceable to a single cost object is this type of cost.
A direct cost
Goals of a Total Quality Management process include all of the following except:
Consistent production levels
James Company has an overhead application rate of 158% and allocates overhead based on direct material cost. During the current period, direct labor cost is $52,000 and direct materials used cost $82,000. Determine the amount of overhead James Company should record in the current period.
129,560
($82,000 x 158%)
Job ALCB was ordered by a customer on September 25. During the month of September, Jaycee Corporation requisitioned $3,200 of direct materials and used $4,700 of direct labor. The job was not finished by the end of the month, but needed an additional $3,700 of direct materials and additional direct labor of $7,900 to finish the job in October. The company applies overhead at the end of each month at a rate of 150% of the direct labor cost incurred. What is the balance in the Work in Process account at the end of September relative to Job ALCB?
$14,950
($3,200 Direct Materials + $4,700 Direct Labor + $7,050 Overhead)
A document in a job order costing system that is used to record the costs of producing a job is a(n):
Job cost sheet
A cost that does not change with changes in the volume of activity within the relevant range is this a ________ cost, but a cost that does change with the changes in the volume of activity is called a __________ cost.
Fixed, Variable
An attitude of constantly seeking ways to improve company operations, including customer service, product quality, product features, the production process, and employee interactions, is called:
Continuous Improvement
Brown Manufacturing uses a job order costing system. During one month, Brown purchased $205,000 of raw materials on credit; issued materials to production of $202,000 of which $23,000 were indirect. Brown incurred a factory payroll of $157,000, of which $33,000 was indirect labor. Brown uses a predetermined overhead rate of 150% of direct labor cost. The total manufacturing costs added during the period are:
$489,000
($202,000-$23,000= $179,000 direct raw materials issued; $157,000-$33,000= $124,000 direct labor; $124,000 x 150% = $186,000 factory overhead; $179,000 + $124,000 + $186,000 = $489,000)
Using the information below, compute the Days' sales in raw materials inventory:
Raw Materials Used $ 91,500
Beginning Raw Materials Inventory 8,600
Ending Raw Materials Inventory 10,200
40.70
($10,200 Ending raw materials/ $91,500 Raw materials used * 365 = 40.70)
A job cost sheet includes these three cost categories:
Direct material, direct labor, applied overhead.
Products that are in the process of being manufactured but are not yet complete are called ________________________. Goods a company acquires to use in making products are called _____________________.
Work in process inventory; Raw Materials Inventory
Managerial accounting information involves gathering information about this:
Costs for planning and control decisions.
Using the information below for Annabelle Dolls, Inc., determine the total manufacturing costs incurred during the year:
Work in Process, January 1 $ 50,600
Work in Process, December 31 37,300
Direct materials used 12,800
Total Factory overhead 5,800
Direct labor used 26,800
$45,400
($12,800 Direct Materials Used + $5,800 Total Factory Overhead + $26,800 Direct Labor Used)
Current information for the Remi Corporation follows:
Beginning work in process inventory $ 19,900
Ending work in process inventory 21,300
Direct materials 149,000
Direct labor 87,000
Total factory overhead 65,100
Remi Corporation's Cost of Goods Manufactured for the year is:
$299,700
($19,900 Beginning Work in Process + $ 149,000 Direct Materials + $87,000 Direct labor + $65,100 Factory Overhead - $21,300 Ending Work in Process = $229,700)
An approach to managing inventories and production operations such that units of materials and products are obtained and provided only as they are needed is called:
Just-in-time manufacturing
Manufacturing costs other than direct materials and direct labor, and are not readily traceable to specific units or batches of production are called ____________. The cost of workers who assist in, or supervise, the manufacturing process, not linked to specific units of product is called _________. Labor costs that are clearly associated with specific units of product because the labor is used to convert raw materials into finished products are called _____________.
Factory Overhead; Indirect Labor; Direct Labor
Managerial accounting is different from financial accounting in that:
Managerial accounting includes many projections and estimates whereas financial accounting has a minimum of predictions.
Spade Company accumulated the following account information for the year:
Beginning raw materials inventory $ 5,500
Indirect materials cost 2,500
Indirect labor cost 5,500
Maintenance of factory equipment 2,500
Direct labor cost 6,500
Using the above information, total factory overhead costs would be:
$10,500
($2,500 Indirect Materials Cost + $5,500 Indirect Labor Cost + $2,500 Maintenance of Factory Equipment)
The Work in Process Inventory account for Michael’s Manufacturing follows. Compute the cost of jobs completed and transferred to Finished Goods Inventory.
Work in Process Inventory
Beginning WIP 6,000
Direct materials 48,600
Direct labor 31,100
Applied Overhead 17,300
Total Manufacturing Costs 103,000
To Finished Goods ?
Ending WIP 11,900
The cost of units transferred to finished goods is:
$91,100
($6,000 Beginning WIP + $48,600 Direct Materials + $31,100 Direct Labor + $17,300 Applied Overhead – FG = $11,900 Ending WIP; $103,000 – FG = $11,900; FG = $91,100)
A company that uses a job order costing system would make debit _______________ and credit _________________ to record the flow of direct materials into production:
debit Work in Process Inventory, credit Raw Materials Inventory.