Managerial (CH 18)
Managerial or Financial Accounting: Focuses on the financials as whole and is used by external users
Financial Accounting
Rate determined prior to the period that uses estimated overhead and an allocation factor (i.e. direct labor) to assign overhead costs to a job
Predetermined overhead rate
Rent, depreciation, office admin salary, advertising, etc.
How do you find contribution margin?
Sales - Variable Costs
Journal entry for $500 Materials Purchased
Raw Materials Inventory 500
Accounts Payable 500
Indirect or Direct Cost: Tire for a bicycle
Direct
Job Order Costing or Process Costing: A custom Yatcht
Job Order
Give me an example of variable cost
materials, hourly wages, etc.
How do you find contribution margin ratio?
Contribution margin per unit/ sales price per unit
Journal Entry for completing a car that cost $10,000 to make.
Finished Goods Inventory 10,000
WIP Inventory 10,000
Period or Product Cost: Office Manager Salary
Period Cost
Find the total cost of the following job lot:
Requisition $20,000 of materials
Paid $30,000 of factory assembly workers
Predetermined overhead rate is 120% of direct materials.
Total cost is 74,000
Direct materials - 20,000
Direct Labor - 30,000
Applied Overhead - 24,000
Which Series is mixed cost?
Series A - 0, 100, 200 , 300
Series B - 100, 100, 100
Series C - 100, 100, 200, 200
Series D - 200, 300, 400, 500
Series D - it has fixed and variable costs
Using the high-low method, determine the fixed and variable cost per unit.
Units 10 30 15
Cost $200 $340 $255
$7 variable cost per unit
(340-200) / (30-10) = $7
$130 Fixed cost
Fixed = 200 - ($7*10) = $130
Journal entry to record the sale of a car that cost $10,000 to make and we sold it at $15,000.
Sale Entry
Accounts Receivable $15,000
Sales/Revenue $15,000
Inventory Removal Entry
Cost of Goods Sold $10,000
Finished Goods Inv. $10,000
Prime or Conversion or Both: Rent of Factory
Conversion Cost
Expected Direct labor $50,000
Expected Direct Materials $30,000
Expected Overhead Costs $60,000
Rate = 1.2
60,000/50,000
Overhead/Activity base (direct labor)
What kind of cost is the following (mixed, fixed, variable, or step)?
Additional production line added to expand our capacity for units.
Step Cost
Find the break even point in units with the following information:
Fixed costs - 19,500
Sales Price - $20
Variable cost per Unit - $5
1,300 Units.
Fixed Costs/Contribution Margin per unit = Breakeven Units
19,500/(20-5) = 1,300 units
Journal entry for applying overhead of $600.
WIP Inventory 600
Factory Overhead 600
Computer COGS:
Finished Goods Beginning Inv: 100,000
WIP Beginning Inv: 50,000
WIP Ending Inve: 20,000
Cost of Goods Manufactured: 70,000
Finished Goods Ending Inv: 80,000
COGS = 90,000
FG Begin 100,000
+ COGM 70,000
Cost of goods available for sale = 170,000
- FG Ending 80,000
COGS = 90,000
We used our predetermined overhead rate and applied $10,000 of overhead to a project. We had actual overhead costs of $9,000 this period. Were we over- or under-applied in overhead?
Over-applied
To clear the overhead we would do the following entry:
Debit Factory Overhead 1,000
Credit Cost of Goods Sold 1,000
Which of the following are fixed, variable, and mixed?
Utilities
Rent
Wages
Utilities - mixed
Rent - Fixed
Wages - Variable
If we want a target income of $100,000 and have fixed costs of $30,000, variable cost per unit of $10, and selling price of $50, how many sales in dollars do we need?
$162,500 sales
Target Sales Dollars = (Fixed Cost + Target Income) / Contribution Margin Ratio
($30,000 + $100,000) / 80% = $162,500
CM Ratio = CMper unit/ Sales Price = 40/50
CM per Unit = Sales Price - VC per Unit = 50-10
Entry to close out the overhead account with the following information: Actual overhead costs were $400 and applied overhead was $350.
Cost of Goods Sold $50
Factory Overhead $50