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Cost of goods manufactured is equal to:
Cost of goods manufactured is equal to:
The cost of wages paid to employees directly involved in the manufacturing process in converting materials into finished products is classified as:
The cost of wages paid to employees directly involved in the manufacturing process in converting materials into finished products is classified as:
In the variable costing income statement, deduction of variable selling and administrative expenses from manufacturing margin yields:
In the variable costing income statement, deduction of variable selling and administrative expenses from manufacturing margin yields:
Which of the following are basic phases of the management process?
Which of the following are basic phases of the management process?
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In a period of rising prices, which inventory method is best to use for tax purposes?
In a period of rising prices, which inventory method is best to use for tax purposes?
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All of the following are documents used for inventory control except:
All of the following are documents used for inventory control except:
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The inventory method that assigns the most recent costs to cost of goods sold is
The inventory method that assigns the most recent costs to cost of goods sold is
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All of the following are inventory costing methods except
All of the following are inventory costing methods except
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An overstatement of ending inventory in one period results in
An overstatement of ending inventory in one period results in
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Which of the following is not a way to accomplish an activity cost reduction?
Which of the following is not a way to accomplish an activity cost reduction?
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Using multiple department factory overhead rates instead of a single plantwide factory overhead rate
Using multiple department factory overhead rates instead of a single plantwide factory overhead rate
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A company uses a single plantwide factory overhead rate based on direct labor hours. Overhead costs would be overcharged to which of the following departments?
A company uses a single plantwide factory overhead rate based on direct labor hours. Overhead costs would be overcharged to which of the following departments?
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Common allocation bases are:
Common allocation bases are:
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Activity rates are determined by
Activity rates are determined by
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Which of the following is not included in conversion costs?
Which of the following is not included in conversion costs?
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Job order costing and process costing are:
Job order costing and process costing are:
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A process cost system would be appropriate for a:
A process cost system would be appropriate for a:
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Which of the following is not a use of the cost of production report?
Which of the following is not a use of the cost of production report?
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For which of the following businesses would a process cost system be appropriate?
For which of the following businesses would a process cost system be appropriate?
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Which of the following conditions would cause the break-even point to increase?
Which of the following conditions would cause the break-even point to increase?
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Contribution margin is
Contribution margin is
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The point where the profit line intersects the horizontal axis on the profit-volume chart represents the:
The point where the profit line intersects the horizontal axis on the profit-volume chart represents the:
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If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:
If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:
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Which of the following ratios indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?
Which of the following ratios indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?
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Which of the following is not a method commonly used in applying the cost-plus approach to product pricing?
Which of the following is not a method commonly used in applying the cost-plus approach to product pricing?
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The target cost is determined by taking:
The target cost is determined by taking:
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Which of the following methods used in applying the cost-plus approach to product pricing includes only desired profit in the markup?
Which of the following methods used in applying the cost-plus approach to product pricing includes only desired profit in the markup?
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Which of the following methods of applying the cost-plus approach to product pricing includes selling expenses, administrative expenses, and desired profit in the markup?
Which of the following methods of applying the cost-plus approach to product pricing includes selling expenses, administrative expenses, and desired profit in the markup?
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The approach that requires the transfer price to be less than the market price but greater than the supplying division's variable costs per unit is called the ____ approach.
The approach that requires the transfer price to be less than the market price but greater than the supplying division's variable costs per unit is called the ____ approach.
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Which of the following costs are conversion costs?
Which of the following costs are conversion costs?
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Study Notes
Cost of Goods Manufactured
- Cost of goods manufactured is calculated as total manufacturing costs plus beginning work-in-process inventory less ending work-in-process inventory.
Direct Labor Cost
- Direct labor cost is the cost of wages paid to employees directly involved in the manufacturing process.
- It's categorized as a direct labor cost.
Contribution Margin
- In a variable costing income statement, deducting variable selling and administrative expenses from the manufacturing margin yields the contribution margin.
Management Process Phases
- The management process comprises the phases of planning and controlling, organizing and directing, and decision making and supervising.
Product Costs vs. Period Costs
- Costs categorized as product costs—such as direct materials, direct labor, and factory overhead—are assigned to the product.
- These costs are recorded as inventory until the product is sold.
- Period costs—such as selling expenses and administrative expenses—are expensed in the period they are incurred.
Inventory Method for Tax Purposes
- LIFO (Last-In, First-Out) is the best inventory method for tax purposes in a period of rising prices.
Inventory Control Documents
- A petty cash voucher isn't a document used for inventory control.
- Other documents include receiving reports, vendor's invoices, and purchase orders.
Inventory Balances (Scarlet Manufacturing Company)
- Data presented includes beginning and ending inventory balances for materials, work-in-process, and finished goods.
- Data also includes direct labor, material purchased, factory overhead incurred (indirect labor, machinery depreciation, heat, light and power, supplies, property taxes, and miscellaneous cost) for the month ending June 31.
Cost of Goods Manufactured Statement
- A cost of goods manufactured statement calculates the cost of goods produced during a specific period.
- It follows the formula: Beginning work-in-process inventory + Total manufacturing costs - Ending work-in-process inventory = Cost of goods manufactured.
Inventory Method (LIFO, FIFO, Average Cost, Specific Identification)
- LIFO (Last-In, First-Out): Assigns recent costs to the cost of goods sold, reducing income tax during times of rising prices.
- FIFO (First-In, First-Out): Assigns oldest costs to the cost of goods sold; this often results in the highest reported profits in periods of inflation.
- Weighted Average Cost: Calculates an average cost for all inventory items. This is useful for both accounting and tax purposes.
- Specific Identification Method: Uses the actual cost of each unit of inventory. This is common when dealing with unique items such as vehicles.
Overstatement of Ending Inventory
- An overstatement of ending inventory in a period leads to an understatement of the gross margin in the next period.
Cost Flow Methods (Periodic & Perpetual)
- Cost flow methods (periodic and perpetual) track costs of goods sold and ending inventory in relation to the flow of goods. Specific values depend on the specific method used and the specifics of the company's inventory transactions. The exact numbers and values should be evaluated if specific calculations are needed.
Activity Cost Reduction
- Improving operations to reduce activity-base usage per unit is a way to accomplish activity cost reduction.
Factory Overhead Rates
- Using multiple department factory overhead rates, instead of a single plantwide rate, results in more accurate product costs.
- It's easier to compute than a plantwide rate. This approach prevents overhead costs being applied equally to all departments.
Common Allocation Bases
- Common allocation bases include direct labor dollars, direct labor hours, and machine hours. Other options (e.g., machine dollars, direct material dollars) may not be considered common.
Activity Rates
- Activity rates are determined by dividing the total cost of an activity pool by the estimated total activity base for that activity pool.
Cost of Production Report
- A cost of production report summarizes the production costs for a particular period.
- Help managers monitor, evaluate, and make decisions regarding company operations.
Process Costing Applications
- Process costing, unlike job order costing, is best for companies manufacturing standardized products (e.g., natural gas refinery vs. custom furniture).
Cost-Volume-Profit (CVP) Analysis
- A break-even point increases if total fixed costs increase, unit selling price decreases, or unit variable cost increases.
Contribution Margin
- The difference between sales revenue and variable costs represents the contribution margin.
Profit-Volume Chart Point
- The intersection of the profit line and horizontal axis on a profit-volume chart indicates the company's break-even point.
Increase in Variable Costs
- If variable costs per unit increase (e.g., due to higher wage rates), the break-even point will increase.
Contribution Margin Ratio
- A contribution margin ratio indicates the percentage of each sales dollar available to cover fixed costs and generate a profit.
Cost Classifications
- Costs of production (property taxes, insurance premiums, springs, consulting fees, electricity) can be either variable, fixed, or mixed.
Cost-Plus Pricing
- The product cost method includes selling expenses, administrative expenses, and desired profit, while the variable cost method only includes variable costs in the markup.
Transfer Pricing
- Negotiated cost is the transfer pricing approach that requires the transfer price to be less than the market price but greater than the supplying division's variable cost per unit.
Job Order Costing
- Record your answers following the format where you use commas to separate thousands and a point for cents, showing two numbers behind the point. Negative numbers should be denoted with a "-" symbol.
- Separate costs: Materials, labor, and overhead. Determine the costs required for each job's production process.
- Journal entries: Record the journal entries for all costs for both materials and labor for each job. Combine and total all costs incurred during production.
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Description
This quiz covers key concepts in cost accounting, including the cost of goods manufactured, direct labor costs, contribution margins, and the distinction between product and period costs. It also explores the management process phases that are essential in manufacturing contexts.
