Cost Categories
A _______ cost is an expense that happened in the past and is irrelevant to the current or future decisions
Sunk
Fixed costs _____________ in total as volume increases
stay constant
Would you use a job costing or process costing system if you only manufactured white paint?
Process Costing
What are the two components needed to calculate "goods available for sale?
beginning inventory + purchases/manufactured
What are the two components needed to calculate "raw materials available for production?
beginning inventory + purchases
Product or period:
flour in baking cookies
depreciation on an oven
Instagram ad for your bakery
the salary for the manager of your baking department
product
product
period
product
Variable costs _____________ per unit as volume increases
stays constant
what expenses will be on a job cost sheet? Actual direct material? Actual direct labor? Actual manufacturing overhead?
Yes; Yes; No (you will have applied and not actual manufacturing overhead on a job cost sheet)
What is your plant-wide predetermined overhead rate if you estimated to use $2.00 per direct labor hour plus a total fixed cost of $30,000. You also planned on using 10,000 direct labor hours
first calculate total predetermined overhead: FC + VC*unit = 30,000 + (10,000 * $2.00) = 50,000; then calculate rate: total estimated predetermined overhead / total estimated allocation base; $50,000 / 10,000 = $5.00/DLH
When calculating cost per equivalent unit, what process costs do you consider?
the value of beginning WIP plus costs incurred during the period by that department (DM, DL, MOHa)
Are these expenses direct or indirect for you’re the kitchen of your bakery:
the bakery's electricity,
your kitchen supervisor's salary,
your sales clerk's salary;
the cost of flour, sugar, and eggs for your cakes
indirect
direct
indirect
direct
Fixed costs _____________ per unit as volume increases
decrease
Which costing system keeps a different work in process account for each department
Process Costing
If you have a predetermined overhead rate of $5.00/DLH and you use 100 direct labor hours, how much overhead will you apply?
If you incurred $250 in direct materials and $1,500 in direct labor costs, what would the total cost of this job be?
MOH applied: $5.00/DLH * 100 DLH = $500
Total cost of job: $500 + 250 + 1,500 = 2,250
If a fabrication department has a beginning WIP balance of 5,000 units, transfers in an additonal 10,000 units, and has 2,000 units in ending WIP; how many units were transferred out during the month?
= beg + transferred in - ending = transferred out: 5,000 + 10,000 - 2,000 = 13,000
Which of the following items are considered manufacturing overhead costs:
direct labor?
Depreciation on factory equipment?
Direct material?
Sales commissions?
Insurance on factory?
Indirect labor in the plant?
CEO salary?
Factory manager's salary?
No;
Yes;
No;
No;
Yes;
Yes;
No;
Yes
Variable costs _____________ in total as volume increases
increases
What is the formula to calculate your POHR?
= estimated total manufacturing overhead costs / estimated total units in allocation base
You started with $15,000 in raw materials and purchased $18,000. If you used $1,000 as indirect materials and ended up with $12,000 in raw materials, how much direct material did you use?
= beg + purch - indirect - end = used; 15,000 + 18,000 - 1,000 - 12,000 = $20,000 used
You ending WIP inventory has 10,000 units that are 80% complete with respect to material and 30% complete with respect to conversion costs. Your cost per equivalent unit this month was $2.50 for material and $5.00 for conversion. What is the total cost assigned to ending WIP?
you need to calculate material separate than conversion: 10,000 * 80% * $2.50 = 20,000 for material plus 10,000 * 30% * $5.00 = 15,000 for conversion; equals a total of $35,000 in ending WIP
Which of the following costs can direct labor be classified as: Conversion? Manufacturing? Prime? Period? Product? Direct?
What if this was direct material?
What if this was manufacturing overhead?
DL: Yes; Yes; Yes; No; Yes; Yes
DM: No; Yes; Yes; No; Yes; Yes
MOH: Yes; Yes; No; No, Yes; Yes
Fixed costs _____________ per unit as volume decreases
increases
What is your predetermined overhead rate if you incurred actual manufacturing overhead expense of $21,000 and you only estimated to spend $20,000. You also planned on using 10,000 direct labor hours but used 9,000 instead
total estimated manufacturing overhead expense / total estimated allocation base; $20,000 / 10,000 = $2.00/Dlhour
Your WIP account began with $25,000 and ended with $24,000. You added $50,000 of direct materials and $30,000 of direct labor. Your manufactured overhead applied was $27,000 even though you incurred $27,500 in manufacturing overhead expense. What was your cost of goods manufactured?
begin WIP + DM + DL + MOH applied - ending WIP = COGM (remember, the difference between applied MOH and actual MOH will be used to change your cost of goods sold - not cost of goods manufactured
You started this month with 10,000 units that were 20% completed with respect to material costs. An additional 80,000 units were transferred out this month. You have 20,000 units 30% completed with respect to material costs; what were the equivalent units of production for material costs?
units transferred out + ending WIP * % completed; 80,000 * (20,000 * 30%) = 86,000