Ch. 18: Managerial Accounting
Area of accounting aimed mainly at serving the decision-making needs of internal users.
What is managerial accounting?
Accounting system for manufacturing activities based on the perpetual inventory system.
What is the cost accounting system?
Number of units that would have been completed if all effort during a period had been applied to units that were started and finished.
What are equivalent units of production?
Company's normal operating range; excludes extremely high and low volumes not likely to occur.
What is relevant range of operations?
Procedure that yields an estimated line of cost behavior by using the costs associated with the highest and lowest sales volume
What is the high-low method? (Ch. 21)
The account types of raw materials inventory, work in process inventory, and finished goods inventory.
What are assets?
Name two characteristics of job order production.
What are (any combo of 2):
- Specialized/custom products
- Lower volume of production
- Higher cost per unit
- Production time varies
- Skilled labor usually required
Name two characteristics of process operations.
What are (any combo of 2):
- Standardized/identical products
- Higher volume of production
- Lower cost per unit (economies of scale)
- Fast production time
- Unskilled labor/automation
- Variable cost
- Fixed cost
- Mixed cost
What is:
VC - Costs that vary in total directly and proportionately with changes in activity level.
FC - Costs that remain the same in total regardless of changes in the activity level.
MC - Costs that include both fixed and variable costs.
Expenditures incurred in converting raw materials to finished goods, includes direct labor costs and overhead costs.
What are conversion costs? (Ch. 20)
The process of acquiring or producing inventory only when needed.
What is just-in-time (JIT) manufacturing?
A company applies overhead at a rate of 180% of direct materials cost. Direct materials cost is $300,000. Record the estimate applied to overhead.
What is:
Debit Work in Process Inventory $540,000
Credit Factory Overhead $540,000
Complete these 2 journal entries:
1. Purchased $25,000 of raw materials on credit.
2. Incurred $40,000 of direct labor costs in the roasting department.
What is:
1. Debit Raw Materials Inventory $25,000
Credit Accounts Payable $25,000
2. Debit WIP Inventory - Roasting $40,000
Credit Factory Wages Payable $40,000
Identify the following costs as being variable costs (VC), fixed costs (FC) or mixed costs (MC):
- Raw materials used in production
- Monthly rent for factory space
- Utilities bill
- Property taxes on factory
- Hourly wages for production worker
- Salary for production manager
- Sales commissions
What is:
Raw materials used in production - VC
Monthly rent for factory space - FC
Utilities bill - MC
Property taxes on factory - FC
Hourly wages for production worker - VC
Salary for production manager - FC
Sales commissions - VC
Expenditures directly identified with the production of finished goods; includes direct materials costs and direct labor costs.
What are prime costs? (Ch. 18)
The three categories that make up the Triple Bottom Line.
What is people, planet, and profit?
A company's applied overhead is $240,000. Actual overhead for the period was determined to be $195,000. Compute the under or applied overhead and prepare the journal entry to close overhead.
What is:
Debit Factory Overhead $45,000
Credit Cost of Goods Sold $45,000
Complete these 2 journal entries:
1. Transferred $55,000 of goods from the shaping department to the painting department.
2. Completed and transferred $30,000 of goods from the painting department to finished goods.
What is:
1. Debit WIP Inventory - Painting $55,000
Credit WIP Inventory - Shaping $55,000
2. Debit Finished Goods Inventory - $30,000
Credit WIP Inventory - Painting $30,000
*Use your notes for formulas
A company produces gizmos for $200 per unit. Fixed costs are $240,000, and variable costs are $120 per unit. The company aims to achieve an income of $300,000. Their sales forecast is 7,500 units. Determine the margin of safety ratio.
What is .6 or 60%?
1. Cm/u = 200 - 120 = 80
2. CMR = 80/200 = .4
3. BEP$ = 240,000/.4 = 600,000
4. MOSR = (1,500,000 - 600,000) / 1,500,000 = .6 or 60%
Concept calling for all managers and employees at all stages of operations to strive toward higher standards and reduce the number of defects
What is total quality management (TQM)? (Ch. 18)
Identify each as direct materials (DM), direct labor (DL), factory overhead (FOH), or period costs (PC):
- Salaries of corporate executives
- Factory janitorial wages
- Wages of assembly line workers
- Raw wood used for table production
- Drops of glue used in production
- Factory rent
Salaries of corporate executives - PC
Factory janitorial wages - FOH
Wages of assembly line workers - DL
Raw wood used for table production - DM
Drops of glue used in production - FOH
Factory rent - FOH
What is:
1. Debit Factory Overhead $50,000
Credit Raw Materials Inventory $50,000
2. Debit Factory Overhead $95,000
Credit Factory Wages Payable $95,000
3. Debit Factory Overhead $105,000
Credit Cash $105,000
Calculate the blending department's EUP for materials for September given the following information:
Units completed and transferred out = 12,000 units
Ending work in process inventory = 8,000 units
% Complete for direct materials = 60%
% Complete for conversion = 80%
What is 16,800 EUP?
12,000 + (8,000 * 60%) = 16,800
Calculate the variable cost per unit and total fixed costs using the high-low method for this data:
Quarter Hours Cost
1 20 500
2 10 350
3 16 440
What is:
VC/u: (500-350)/(20-10) = $15
TFC: 500 - (20*15) = $200
350 - (10*15) = $200
The shortcut Prof. Kroeger developed for remembering the order of Factory Overhead and COGS when computing and closing under vs over-applied overhead.
What is (Ch. 19):
Over-applied = FOH goes over COGS
(Debit FOH, Credit COGS)
Under-applied = FOH goes under COGS
(Debit Cogs, Credit FOH)