Unit 1
What is the basic accounting equation?
Assets = Liabilities + Stockholders' Equity
A form used to record the costs chargeable to a specific job. Collects the total costs, and the unit costs of the completed job.
Job Cost Sheet
Costs that have already been incurred and will not be changed or avoided by any decisions in the present or future.
Sunk Costs
A carefully predetermined measure of what a cost should be under stated conditions.
Standard
Which type of accounting provides information for external users?
Financial Accounting
A book of individual accounts and their balances. Arranged by account type and updated by the posting process.
Ledgers
During the first quarter of the year, Purple Rain Company recorded the following direct labor costs:
January - $40,000
February - $35,000
March - $50,000
Calculate the amount of manufacturing overhead to assign to production for February, using a predetermined rate of 70% of direct labor cost.
$24,500
When performing an incremental analysis, what is the decision rule for the special orders analysis?
Accept when the incremental revenue is greater than the incremental costs.
What are the three sections of the financial budget?
1. Capital expenditures budget
2. Cash budget
3. Budgeted balance sheet
Determine the ending balance of the following T-account:
Cash
150 | 100
350 | 110
70 | _________________
Debit Balance of 360
The company completed commission work for a client and sent a bill for $6,000 to be received within 30 days. What are the two impacts on the accounting equation?
+ Assets (Accounts receivable)
+ Equity (Revenue)
LaVon & Jean Enterprises, INC has the following budgeted information for their two production departments:
Fabricating Assembly
Overhead Cost: $300,000 $200,000
Direct Labor Hours: 75,000 DLH 125,000 DLH
Machine Hours: 80,000 MH 62,500 MH
Compute the departmental overhead rate based on machine hours in the fabricating department.
$3.75 per machine hour
Naylor Company has a product with a selling price per unit of $150, and variable costs per unit of $90. Fixed costs are $570,000. Their target net income for 2020 is $262,000. Compute the number of units that would need to be sold in 2020 to reach the target net income. (Round to the nearest whole number)
13,867 units
The direct materials budget shows the following:
Desired ending direct materials 18,000 pounds
Direct materials required for production 99,000 pounds
Beginning direct materials 13,200 pounds
The total quantity of direct materials to be purchased is:
103,800 pounds
A company that uses job order costing. Overhead is applied at the rate of 51% of direct materials cost.
Job 1 has the following information:
Direct materials used - $6,000
Direct labor used - $9,000
What is the total cost of Job 1?
$18,060
Compute the cost of goods sold using the following information:
Finished Goods Inventory, Beginning - $345,000
Work in Process Inventory, Beginning - $83,000
Work in Process Inventory, Ending - $72,000
Cost of Goods Manufactured - $918,000
Finished Goods Inventory, Ending - $283,000
$980,000
Actual Overhead - $659,100
Applied Overhead - $650,000
Create the journal entry to close any over or under applied overhead.
Cost of Goods Sold $9,100
Factory Overhead $9,100
Sala Co. is contemplating the replacement of an old machine with a new one. The following information has been gathered:
Old Machine New Machine
Price $300,000 $600,000
Accum. Depr. $90,000 $0
Remaining Life 10 years 10 years
Ann. Op. Costs $240,000 $180,600
If the old machine is replaced, it can be sold for $24,000. The net advantage (disadvantage) of replacing the old machine is:
$18,000 advantage
Monster Company produces a product requiring 3 direct labor hours at $16.00 per hour. During January, 2,000 products were produced using 6,300 DLH. Monster's actual payroll for direct labor during January was $98,280.
What is the labor quantity variance for the month?
$4,800 unfavorable
A jeans maker is designing a new line of jeans called Slams. Slams will sell for $285 per unit and cost $176.70 per unit in variable costs to make. Fixed costs total $69,000.
Compute the contribution margin ratio.
38%
Compute ending Work in Process Inventory for a manufacturer using the following information:
Raw materials purchased: $135,400
Direct materials used: $75,600
Direct labor used: $55,000
Factory overhead: $108,300
Work in Process Inventory, Beginning: $29,200
Cost of goods manufactured: $245,200
Ending Inventory: $22,900
Chen Company uses activity-based costing. It budgets $1,230,000 of overhead cost to sustainably dispose of 3,000 tons of hazardous waste.
A.) Compute the activity rate for hazardous waste disposal based on tons of hazardous waste.
B.) The company disposed of 8 tons of hazardous waste in completing Job 125. Allocate overhead cost to hazardous waste disposal as part of Job 125 using activity-based costing.
A.) $410 per ton
B.) $3,280
No Buggies Corporation sells three different models of a bug zapper.
Model 1 Model 2 Model 3
Sales Price $50 $100 $400
Variable Costs $35 $70 $300
Unit CM $15 $30 $100
Sales Mix 60% 15% 25%
The company has fixed costs of $269,500. How many units of each model must the company sell to break-even?
Model 1 - $4,200
Model 2 - $1,050
Model 3 - $1,750
The predetermined overhead rate for ABC Company is $5, comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150,000 was divided by normal capacity of 30,000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $9,500 variable and $6,050 fixed, and standard hours allowed for the product produced in June was 3,000 hours.
What is the total overhead variance?
$550 Unfavorable
What are the 7 components of the operating budget?
1. Sales budget
2. Production budget
3. Direct materials budget
4. Direct labor budget
5. Manufacturing overhead budget
6. Selling and Admin Exp budget
7. Budgeted income statement