chapter two

1. Chapter Two

3. Objectives (continued) Describe how direct material, direct labor, and manufacturing overhead are assigned to jobs. Explain the role of a predetermined overhead rate in applying overhead to jobs.

4. Objectives (continued) Explain why the difference between actual overhead and overhead allocated to jobs using a predetermined rate is closed to Cost of Goods Sold or apportioned among Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold.

5. Objectives (continued) Explain why the difference between actual overhead and overhead allocated to jobs using a predetermined rate is closed to Cost of Goods Sold or apportioned among Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold. Discuss modern manufacturing practices and how they affect product costing.

6. Cost Classifications for Manufacturing Firms

7. Cost Classifications for Manufacturing Firms 3. Manufacturing Overhead-all other production costs including A. Indirect materials and supplies B. Indirect labor C. Depreciation on plant and factory equipment D. Factory utilities.

8. Cost Classifications for Manufacturing Firms

9. Non-manufacturing Costs

10. Product and Period Costs Product Costs and Period Costs are Synonymous with Manufacturing and Nonmanufacturing costs, respectively.

11. Product Cost Information in Financial Reporting and Decision Making GAAP (Generally Accepted Accounting Principles) requires that inventory on balance sheets and cost of goods sold on income statements be disclosed (reported) using Full Cost information.

12. Raw Materials Inventory.- account contains direct and indirect materials Work in Process Inventory.- account contains costs incurred on those jobs not finished at the end of the reporting period Finished Goods Inventory.account includes costs for completed products not yet sold.

13. Instructors, click on the words Product Costs to reveal the terms for students.Instructors, click on the words Product Costs to reveal the terms for students.

14. Instructors, click on the words Product Costs to reveal the terms for students.Instructors, click on the words Product Costs to reveal the terms for students.

16. Cost of Goods Manufactured includes all costs of goods completed during the period.

35. ABC is a method of assigning overhead based on a number of different allocation bases (rather than just one). ABC groups overhead costs into Cost Pools.

36. Predetermined Overhead Rate = Estimate Total Overhead Cost Estimated Level of Allocation Base

37. Actual costs are accumulated in the Manufacturing Overhead Account and Overhead is applied to production based on the Predetermined Overhead Rate.

38. Unless estimates are perfect, there will be either a debit or credit balance in the Manufacturing Overhead account. If actual > applied, a debit balance, results, thus under-applied overhead. If actual < applied a credit balance, results, thus over-applied overhead.

39. Manufacturing Overhead should have a zero balance at year-end Often closed it out to Cost of Goods Sold. Theoretically it should be allocated between Work in Process, Finished Goods and Cost of Goods Sold.

40. Job-Order Costing is also used by service companies. Examples include hospitals (patients) and automobile repair firms.

41. Just-in-Time (JIT) Production. Computer-Controlled Manufacturing. Total Quality Management (TQM).

42. Which of the following is a period cost? Raw materials costs. Manufacturing plant maintenance. Wages for production line workers. Salary for the vice president of finance.

43. Which of the following is a period cost? Raw materials costs. Manufacturing plant maintenance. Wages for production line workers. Salary for the vice president of finance.

44. Which of the following is a direct materials cost? Steel for a ship builder. Production supervisor salary for an auto manufacturer. Factory rent. Pocket protector for company accountant.

45. Which of the following is a direct materials cost? Steel for a ship builder. Production supervisor salary for an auto manufacturer. Factory rent. Pocket protector for company accountant.

46. Beginning work-in-process plus total manufacturing costs minus ending work-in-process equals Cost of materials used. Finished goods inventory. Cost of goods sold. Cost of goods manufactured.

47. Beginning work-in-process plus total manufacturing costs minus ending work-in-process equals Cost of materials used. Finished goods inventory. Cost of goods sold. Cost of goods manufactured.

48. Cost of Goods Sold is $200,000, beginning Finished Goods is $50,000, ending Finished Goods is $100,000 and ending Work in Process is $10,000. What is the Cost of Goods Manufactured? $100,000 $250,000 $50,000 $150,000

50. Cost of Goods Sold is $200,000, beginning Finished Goods is $50,000, ending Finished Goods is $100,000 and ending Work in Process is $10,000. What is the Cost of Goods Manufactured? $100,000 $250,000 $50,000 $150,000