Exam 1 Concepts
What does the Retained earnings statement show?
change in retained earnings
Beginning retained earnings +/- Net income or loss - dividends
True or False: Process costing is more accurate than job order costing.
False
Janelle Company has budgeted the following unit sales
January: 450
February: 330
March: 600
She expects to sell the units at $5 in January and March, but $6 in February, when demand usually increases for valentines day.
Prepare the montly sales budget for Janelle.
Jan: $2,250,
Feb: $1,980,
March: $3,000
Resources owned by companies that provide future benefits
Asset
What is the formula for the Predetermined Overhead Rate?
Estimated annual overhead / Estimated annual operating activity
What are two benefits of budgeting?
Requires management to plan ahead, to set goals/objectives, creates an early warning system, activities more easily coordinated, increases management's awareness of the company's performance, motivates staff to meet objectives
If I sell equipment to someone else on account. What is the dual entry accounting transaction I would record?
Increase accounts receivable
Decrease assets (equipment)
Any factor or activity that has a direct cause-effect relationship with the resources consumed is a ?
Cost Driver
Instead of a production budget, a merchandising company would use a __________ budget
Purchases budget
What makes up retained earnings?
Revenue - expenses - dividends
What is the formula for Cost of Goods Manufactured?
Beginning WIP + Total Manufacturing Costs - Ending WIP
What is it called when everyone in the company gives their input on the budget?
Participative budgeting
What are the 3 classes of manufacturing costs
DM, DL, MOH
What is an activity cost pool? Give an 2 examples
The overhead cost attributed to a distinct activity.
Examples: machine setup, manufacturing, ordering materials, factory supervising
What makes the budget different from standard costs?
A standard is a unit amount. A budget is a total amount.