Managerial Accounting Tutorial Set 1
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Questions and Answers

Which of the following best exemplifies a period cost in managerial accounting?

  • The salary of a sales manager. (correct)
  • Depreciation of factory equipment.
  • Raw materials used in production.
  • Direct labor costs of assembly line workers.

    • Considering the relationship between prime costs and conversion costs, which set of costs will always overlap?

  • Direct materials and indirect labor.
  • Direct labor and indirect materials.
  • Direct materials and direct labor. (correct)
  • Direct labor and manufacturing overhead.

    • Why is manufacturing overhead typically considered an indirect cost?

  • Because it includes all costs of the manufacturing division.
  • Because it is a fixed cost that does not vary with production levels.
  • Because it is not directly traceable to specific product units. (correct)
  • Because it is incurred outside the factory premises.

    • If a factory supervisor's salary is directly related to the product produced, how would this cost be categorized?

    <p>As a variable direct cost. (A)</p> Signup and view all the answers

    Which statement best describes the behavior of variable costs in relation to production volume?

    <p>They remain constant per unit but vary in total as production changes. (C)</p> Signup and view all the answers

    What is the cost of raw materials used in production during the year?

    <p>$180 (C)</p> Signup and view all the answers

    What is the cost of goods manufactured for the year?

    <p>$1,180 (C)</p> Signup and view all the answers

    What is the cost of goods sold for the year?

    <p>$1,080 (B)</p> Signup and view all the answers

    What is the net income for the year?

    <p>$520 (B)</p> Signup and view all the answers

    Which of the following costs is typically considered a fixed cost?

    <p>Rent on building (D)</p> Signup and view all the answers

    Which of the following costs is typically considered a variable cost?

    <p>Direct Labor (C)</p> Signup and view all the answers

    How would the cost of direct materials be classified?

    <p>Variable cost, dependent on finished goods (D)</p> Signup and view all the answers

    If Naya Ltd. increased its production volume by 10%, what effect would this have on supervisor salaries?

    <p>Remain the same (C)</p> Signup and view all the answers

    What is the prime cost, given the provided data?

    <p>$165,000 (D)</p> Signup and view all the answers

    What is the total conversion cost, based on the provided data?

    <p>$149,000 (C)</p> Signup and view all the answers

    What is the total production overhead cost?

    <p>$84,000 (D)</p> Signup and view all the answers

    What is the total production cost?

    <p>$259,000 (A)</p> Signup and view all the answers

    What is the total cost?

    <p>$479,000 (A)</p> Signup and view all the answers

    Using the high-low method, what is the variable cost per machine hour?

    <p>GH¢10 (B)</p> Signup and view all the answers

    Using the high-low method and the calculated variable cost, what is the monthly fixed cost?

    <p>GH¢21,000 (B)</p> Signup and view all the answers

    Flashcards

    Cost of raw materials used

    Total value of raw materials consumed in production.

    Cost of goods manufactured

    Total costs of finished goods produced in a period.

    Cost of goods sold

    Cost incurred to sell products during the year.

    Net income

    Total revenue minus total expenses for the year.

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    Variable cost

    Costs that change with the level of production or sales.

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    Fixed cost

    Costs that do not change with production levels.

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    Direct labor

    Wages paid to workers directly involved in production.

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    Selling expenses

    Costs incurred to sell and distribute products.

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    Product Cost

    Costs directly associated with the production of goods, including materials and labor.

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    Period Cost

    Costs that are not tied to production; thus, they are expensed in the period incurred.

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    Prime Cost

    The total of direct materials and direct labor costs associated with production.

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    Conversion Cost

    The costs incurred to convert raw materials into finished goods, comprising direct labor and manufacturing overhead.

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    Direct Cost

    Costs that can be directly traced to a specific cost object, like products or departments.

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    Direct Materials

    Raw materials used directly in the production of goods.

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    Production Overhead

    Indirect costs associated with manufacturing that cannot be directly linked to a specific product.

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    Non-production Overhead

    Costs not directly related to the factory and production processes, such as administrative expenses.

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    High-Low Method

    A method used to separate fixed and variable costs based on the highest and lowest activity levels.

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    Study Notes

    Managerial Accounting Tutorial Set 1

    • Question 1: Explains key managerial accounting terms:
      • Product cost: Costs directly related to producing a product, e.g., raw materials, direct labor.
      • Period cost: Costs not directly tied to production, but are incurred during a period, e.g., rent, salaries of non-production staff.
      • Prime cost: Direct materials plus direct labor.
      • Conversion cost: Direct labor plus manufacturing overhead.
      • Direct cost: Costs that can be traced directly to a specific product or activity.
      • Indirect cost: Costs that cannot be traced directly to a specific product or activity.

    Question 2

    • Manufacturing Overhead as Indirect Cost: Manufacturing overhead is considered an indirect cost because it's difficult to trace precisely to a specific product.

    • Direct vs. Indirect Costs:

      • Direct labor factory costs: Direct
      • Factory supervisor's salary (for product produced): Indirect
      • Factory supervisor's salary (for manufacturing division): Indirect
      • Manufacturing overhead costs (for products produced): Indirect
      • Manufacturing overhead costs (for manufacturing division): Indirect

    Question 3

    • Variable vs. Fixed Costs: The statement "A variable cost is a cost that varies per unit of product, while a fixed cost is constant per unit of product" is incorrect.

    • Correct perspective: Variable costs vary with the level of activity (e.g., per unit of output), while fixed costs remain constant in total, irrespective of activity, and thus vary per unit.

    Question 4

    • Data for Hajiashikishi Company: Provided financial data for a company. (Specific amounts and calculations omitted.)

    • Required: Calculations of costs using the provided data were necessary. (Calculations omitted)

    Question 5

    • Cost Classification:
      • Rent on building: Fixed
      • Direct labor: Variable
      • Supervisor salaries: Fixed
      • Direct materials: Variable
      • Sales commissions based on units sold: Variable

    Question 6

    • Naya Ltd Financial Data: Provided information on selling expenses, direct materials for two components, and direct wages for two departments. (Specific values omitted.)
    • Required: Calculations of costs were necessary. (Calculations omitted)

    Question 7

    • High and Low Method

    • Utility Costs: Provided utility cost data for a company over six months, including months, total cost, and machine volume. (Specific values omitted.)

    • Required: Calculation of variable cost per machine hour, total variable cost, monthly fixed cost, and total fixed cost were necessary. (Calculations omitted).

    • Mixed Cost Function: Form the equation (y=a+bx) of the total cost and then use this calculation to extrapolate costs at different machine hours. (Calculations omitted.)

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    Lancaster University Ghana Managerial Accounting Tutorial Set 1 PDF

    Description

    Dive into the fundamentals of managerial accounting with this tutorial set, focusing on essential terms like product cost, period cost, and conversion cost. Understand the differences between direct and indirect costs along with the implications for manufacturing practices. Perfect for students looking to enhance their knowledge in accounting principles.

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