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
If you started with $2,000 worth of materials in work in process inventory, added $18,000 of material into Work in Processes and produced 2,000 equivalent units, what is my equivalent cost per unit for material?
(2,000 + 18,000) / 2,000 = $10/unit
Classify the each cost (for a baking cookies) as either fixed or variable; manufacturing or nonmanufacturing, and if manufacturing - DM, DL, or overhead:
flour in baking cookies
depreciation on an oven
An ad for your bakery
the salary for the manager of your baking department
the employee who decorates your cookies; they are paid per cookie
flour in baking cookies - variable; mfg; DM
depreciation on an oven - fixed; mfg; OH
An ad for your bakery - fixed; nonmfg
the salary for the manager of your baking department - fixed; mfg; OH
the employee who decorates your cookies - variable; mfg; DL
Variable costs _____________ per unit as volume increases
stays constant
In a job-order costing system, which accounts do you increase to record:
direct material usage
direct labor usage
indirect material cost
applying manufacturing overhead
direct material usage - WIP
direct labor usage - WIP
indirect material cost - manufacturing overhead
applying manufacturing overhead - WIP
Your predetermined overhead rate is $2.00/direct labor hour. You used 10,000 direct labor hours and your actual overhead expense was $22,000. Did you over or under apply overhead? By how much?
under by $2,000
$2.00*10,000 hours = $20,000
22,000 actual - 20,000 applied = 2,000 under
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 the bakery's kitchen:
the bakery's electricity,
your kitchen supervisor's salary,
your sales clerk's salary;
the cost of flour, sugar, and eggs for your cakes
the bakery's electricity - indirect
your kitchen supervisor's salary -direct
your sales clerk's salary - indirect
the cost of flour, sugar, and eggs for your cakes - 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?
rent on factory?
Production supervisor's salary?
factory equipment depreciation?
direct materials?
sales salaries?
Wages for factory custodians?
direct labor? NO
rent on factory? YES
Production supervisor's salary? YES
factory equipment depreciation? YES
direct materials? NO
sales salaries? NO
Wages for factory custodians? 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 used 20,000 in direct materials and $1,000 in indirect materials. Your ending balance was $12,000 in raw materials. How much direct material did you buy?
= beg - usage - end = purchase; 15,000 - 20,000 - 1,000 - 12,000 = $18,000 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
Classify the following items as manufacturing or nonmanufacturing?
CEO Salary?
Direct material?
Equipment Depreciation?
Direct Labor
CEO Salary: nonmanufacturing
DM: manufacturing
MOH: manufacturing
DL: manufacturing
If I make 1,000 units, my variable costs are $0.50/unit and my fixed costs are $1/unit. What is my total cost when I make 2,000 units?
Variable costs: $0.50 * 2,000 = $1,000
Fixed costs: $1.00 * 1,000 = 1,000
Total costs: 2,000
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
(from ch 1): Calculate the contribution margin if
sales are $1,000
variable product costs are $250
fixed product costs are $50
variable selling and admin is $175
fixed selling and admin is $200
Contribution margin is sales minus variable costs so
sales - variable product costs - variable selling and admin costs =
1,000 - 250 - 175 = $575
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