Early Semester Stuff (Chapter 14)
Consider a service company that provides carpet cleaning. Classify the cost of the hourly workers who clean carpets for customers.
Indirect, Fixed, Period, Direct, and Variable.
(Choose all that apply)
An hourly carpet cleaner's wages would be direct labor and variable.
(Direct and Variable)
A company that makes highly customized yachts is likely use:
1. A Job Costing Order System
2. A Process Costing System
A Job Order Costing system.
______ Costs DO NOT change in proportion to changes in the volume of activity.
______ Costs DO change in proportion to changes in the volume of activity.
Fixed costs do not change
Variable costs do change
A special order should be accepted as long as incremental revenue exceeds ______ _______
incremental Costs
A manufacturing company reports the following items: Finished goods inventory, beginning balance: $1,000 Finish goods inventory, ending balance: $1,200 Cost of goods manufactured, $5,000 The cost of goods sold is $_____
$1,000+$5,000-$1,200= $4,800
Predetermined Overhead rate= _______ /_______
Predetermined OH Rate= Estimated OH Costs/ Estimated activity base
What is the High-Low Formula?
Change in Cost/Change in Units
or
Y2-Y1 / X2-X1
The main difference between absorption and variable costing is their treatment of _____ ________
Fixed Overhead
A company incurred the following costs: $6,000 for indirect labor; $26,000 for direct labor; $2,500 for utilities for the factory building; $10,300 for factory equipment depreciation; $8,700 for office equipment depreciation. The total factory overhead costs reported on the schedule of cost of goods manufactured is $_______
$6,000+2,500+10,300= $18,800
What does a journal entry to record the use of indirect materials look like? (what is the Debit and what is the Credit?)
Dr. Factory Overhead $$
Cr. Raw Materials Inventory $$
On a per-unit basis, _____ costs decrease with an increase in activity volume.
Fixed costs
Commonwealth Company has the following unit costs: direct materials $2, direct labor $4, variable overhead $1, fixed overhead $3. Under the absorption costing method, what is the total unit cost?
$10 (DL+DM+VOH+FOH)
Classify Each of these Product Costs as:
Variable or Fixed & Direct or Indirect
1. Machinery depreciation (straight-line)
2. Rubber core for soccer balls
3. Factory Rent
1. Fixed & Indirect
2. Variable & Direct
3. Fixed & Indirect
If your Factory Overhead account has a debit balance, is overhead Under or Overapplied?
Underapplied- since your actual overhead (debit) is more than your applied overhead (credit)
What is the Contribution Margin? (Formula and what it means)
Sales Price- Variable Costs
Essentially tells you how income of a certain product is left over to contribute to fixed costs, once it has paid of its own variable costs.
What is the formula for Unit Sales at target income?
Unit sales at Target Income=
(Fixed Costs+Pre-tax Target Income)/ CM per unit
Cost of goods manufactured= _____ + _____ - _____
COGM= Total Manufacturing Costs + Beginning WIP Inventory- Ending WIP inventory
To fix under/over applied overhead, you debit or credit what account? (considering that the difference is immaterial)
Cost of Goods Sold
A jeans maker is designing a new line of jeans called Slims. The jeans will sell for $355 per pair and cost $262.70 per pair in variable costs to make.
What is the Contribution Margin per unit (per pair)?
What is the Contribution Margin Ratio?
CM= $355-$262.70= 92.30 per pair
CM Ratio= 92.3/355= 26%
A manufacturing company has budgeted production at 5,000 units for May and 4,400 units in June. Each unit requires 3 pounds of materials at a cost of $10 per pound. On May 1, there are 2,750 pounds of materials on hand. The company desires an ending inventory of 60% of the next month's materials requirements. The total cost of direct materials purchases for May will be $_______
$201,700