Cost Categories
A _______ cost is an expense that happened in the past and is irrelevant to the current or future decisions
Sunk
Fixed costs _____________ in total as volume increases
stay constant
Would you use a job costing or process costing system if you only manufactured white paint?
Process Costing
What are the two components needed to calculate "goods available for sale?
beginning inventory + purchases/manufactured
If you started with $2,000 worth of materials in work in process inventory, added $18,000 of material into Work in Processes and produced 2,000 equivalent units, what is my equivalent cost per unit for material?
(2,000 + 18,000) / 2,000 = $10/unit
Classify the each cost (for a baking cookies) as either fixed or variable; manufacturing or nonmanufacturing, and if manufacturing - DM, DL, or overhead:
flour in baking cookies
depreciation on an oven
Instagram ad for your bakery
the salary for the manager of your baking department
the employee who decorates your cookies; they are paid per cookie
flour in baking cookies - variable; mfg; DM
depreciation on an oven - fixed; mfg; OH
Instagram ad for your bakery - fixed; nonmfg
the salary for the manager of your baking department - fixed; mfg; OH
the employee who decorates your cookies - variable; mfg; DL
Variable costs _____________ per unit as volume increases
stays constant
In a job-order costing system, which accounts do you debit to record:
direct material usage
direct labor usage
depreciation on equipment
applying manufacturing overhead applied
direct material usage - WIP
direct labor usage - WIP
depreciation on equipment - manufacturing overhead
applying manufacturing overhead applied - WIP
Your predetermined overhead rate is $2.00/direct labor hour. You used 10,000 direct labor hours and your actual overhead expense was $22,000. Did you over or under apply overhead? By how much?
under by $2,000
$2.00*10,000 hours = $20,000
22,000 actual - 20,000 applied = 2,000 under
When calculating cost per equivalent unit, what process costs do you consider?
the value of beginning WIP plus costs incurred during the period by that department (DM, DL, MOHa)
Are these expenses direct or indirect for you’re the kitchen of your bakery:
the bakery's electricity,
your kitchen supervisor's salary,
your sales clerk's salary;
the cost of flour, sugar, and eggs for your cakes
the bakery's electricity - indirect
your kitchen supervisor's salary -direct
your sales clerk's salary - indirect
the cost of flour, sugar, and eggs for your cakes - direct
Fixed costs _____________ per unit as volume increases
decrease
Which costing system keeps a different work in process account for each department
Process Costing
If you have a predetermined overhead rate of $5.00/DLH and you use 100 direct labor hours, how much overhead will you apply?
If you incurred $250 in direct materials and $1,500 in direct labor costs, what would the total cost of this job be?
MOH applied: $5.00/DLH * 100 DLH = $500
Total cost of job: $500 + 250 + 1,500 = 2,250
If a fabrication department has a beginning WIP balance of 5,000 units, transfers in an additonal 10,000 units, and has 2,000 units in ending WIP; how many units were transferred out during the month?
= beg + transferred in - ending = transferred out: 5,000 + 10,000 - 2,000 = 13,000
Which of the following items are considered manufacturing overhead costs:
direct labor?
rent on factory?
Production supervisor's salary?
factory equipment depreciation?
direct materials?
sales salaries?
indirect labor?
direct labor? NO
rent on factory? YES
Production supervisor's salary? YES
factory equipment depreciation? YES
direct materials? NO
sales salaries? NO
indirect labor? YES
Variable costs _____________ in total as volume increases
increases
What is the formula to calculate your POHR?
= estimated total manufacturing overhead costs / estimated total units in allocation base
You started with $15,000 in raw materials and used 20,000 in direct materials and $1,000 in indirect materials. Your ending balance was $12,000 in raw materials. How much direct material did you buy?
= beg - usage - end = purchase; 15,000 - 20,000 - 1,000 - 12,000 = $18,000 used
You ending WIP inventory has 10,000 units that are 80% complete with respect to material and 30% complete with respect to conversion costs. Your cost per equivalent unit this month was $2.50 for material and $5.00 for conversion. What is the total cost assigned to ending WIP?
you need to calculate material separate than conversion: 10,000 * 80% * $2.50 = 20,000 for material plus 10,000 * 30% * $5.00 = 15,000 for conversion; equals a total of $35,000 in ending WIP
Classify the following items as manufacturing or nonmanufacturing?
CEO Salary?
Direct material?
Equipment Depreciation?
Direct Labor
CEO Salary: nonmanufacturing
DM: manufacturing
MOH: manufacturing
DL: manufacturing
If my fixed costs are $1/unit when I make 1,000 units. What is my total fixed cost at 2,000 units?
$1,000
What is your predetermined overhead rate if you incurred actual manufacturing overhead expense of $21,000 and you only estimated to spend $20,000. You also planned on using 10,000 direct labor hours but used 9,000 instead
total estimated manufacturing overhead expense / total estimated allocation base; $20,000 / 10,000 = $2.00/Dlhour
Your WIP account began with $25,000 and ended with $24,000. You added $50,000 of direct materials and $30,000 of direct labor. Your manufactured overhead applied was $27,000 even though you incurred $27,500 in manufacturing overhead expense. What was your cost of goods manufactured?
begin WIP + DM + DL + MOH applied - ending WIP = COGM (remember, the difference between applied MOH and actual MOH will be used to change your cost of goods sold - not cost of goods manufactured
You started this month with 10,000 units that were 20% completed with respect to material costs. An additional 80,000 units were transferred out this month. You have 20,000 units 30% completed with respect to material costs; what were the equivalent units of production for material costs?
units transferred out + ending WIP * % completed; 80,000 * (20,000 * 30%) = 86,000