ACCT 2302 Exam 1 Study guide
ACCT 2302 Exam 1 Study guide ACCT 2302
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This 4 page Study Guide was uploaded by Malvi Mehta on Sunday February 7, 2016. The Study Guide belongs to ACCT 2302 at University of Texas at Dallas taught by in Spring 2016. Since its upload, it has received 84 views. For similar materials see INTRO TO MANAGERIAL ACCOUNTING in Accounting at University of Texas at Dallas.
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Date Created: 02/07/16
ACCT 2302 – Managerial Accounting Exam 1 Study Guide (Chapters 1, 2, and 4) Chapter 1 Important Material: Direct costs – can be easily traced to a unit of production or other cost object (ex. Direct material, direct labor) Indirect cost – cannot be easily traced to a unit of production or other cost object (ex. Manufacturing overhead) Nonmanufacturing costs – include selling and administrative costs, direct or indirect Product costs: include direct material, direct labor, and manufacturing overhead *includes depreciation as well* Period costs: include all selling and administrative costs *includes taxes and sales commission* Cost behavior: how a cost will react to changes in the level of activity Variable costs – varies, in total, in direct proportion to changes in level of activity (ex. Total texting bill based on # of texts) *cost PER UNIT is fixed! Fixed costs – remains constant, in total, regardless of changes in activity (ex. Monthly contract fee) *average fixed cost PER UNIT varies inversely with changes in activity! Types of fixed costs o Committed: long term (depreciation, taxes) o Discretionary: can be altered in the short term (advertising, research, development) Mixed costs – contains both fixed AND variable elements (ex. Utility cost; fixed monthly charge + variable cost per kilowatt hour) HighLow method: Steps on how to use it with a graph Variable cost (slope)= _______________________________st at low activity High activity – low activity Fixed cost = total cost – variable cost Contribution margin: sales revenue – variable expenses Differential Cost and Revenue: costs and revenues that differ among alternatives Opportunity cost: the potential benefit that is given up when one alternative is selected over another Sunk cost: a cost that has already been incurred and cannot be changed now or in the future; should be ignored when making business decisions Chapter 2 Important Material: o Allocation base: used to assign manufacturing overhead to individual jobs o Predetermined Overhead Rate (POHR): used to apply overhead to jobs; is determined before the period begins POHR = ____________________________________ Estimated total manufacturing overhead cost Estimated total units in allocation base Example problem: A job required $500 of direct materials and 10 direct labor hours at $20/hour. Estimated total overhead was $640,000 and estimated direct labor hours were 40,000. What is the total cost of the job? POHR = $640,000/40,000 = $16 Direct materials $500 + Direct labor $200 (10*$20) + Manufacturing overhead $160 (10*$16) = Total cost = $860 Flow of Costs o Material purchases Raw materials o Direct Labor Work in process Finished goods Cost of goods sold Accounting for nonmanufacturing costs o Nonmanufacturing costs are not assigned to individual jobs – rather they are expensed in the period incurred Underapplied Overhead: the amount of overhead applied to jobs using the POHR is LESS THAN the total amount of overhead actually incurred during the period Overapplied Overhead: the amount of overhead applied to jobs using the POHR is MORE THAN the total overhead actually incurred during the period Example problem: Company B’s actual overhead for the year was $850,000 with a total of 125,000 direct labor hours. How much total overhead was applied to Company A’s jobs during the year? Given: POHR=$6 ($6)(125,000) = $750,000 $750,000<$850,000 therefore UNDERAPPLIED! Chapter 4 Important Material: Processing departments: any unit in an organization where materials, labor, and overhead are added to the product o Activities are performed uniformly on all units o The output of a processing department is homogenous o Products flow in a sequence from one department to another Equivalent units: the product of the number of partially completed units and the percent completion of those units o 10,000 units that are 70% complete = 7,000 complete units Example problem: Smith started 25,000 units and completed 10,000 units, leaving 15,000 units in process 60% complete. How many equivalent units of production does Smith have? 10,000 + (15,000*.60) = 19,000 Conversion cost: direct labor + manufacturing overhead Weightedaverage method: steps to find equivalent units 1. Identify units completed and transferred out 2. Calculate equivalent units of production in ending work in process with respect to materials 3. Calculate equivalent units of production in ending work in process with respect to conversion Cost of beg. Work in process inventory + cost added during the period Cost per equivalent unit = ___________________________________________ Equivalent units of production More practice problems! 1. Beginning raw materials inventory was $35,000. During the month, $225,000 of raw material was purchased. At the end of the moth, $42,000 of raw material was left. What is the cost of direct material used? $35,000 + $225,000 = $260,000 $260,000 $42,000 = $218,000 2. Beginning work in process was $140,000. Manufacturing costs added to production for the month were $750,000. There were 350,000 of partially finished goods remaining in work in process inventory at the end of the month. What was the cost of goods manufactured? $140,000 + $750,000 = $890,000 $890,000 $350,000 = $540,000 3. Beginning finished goods inventory was $150,000. The cost of goods manufactured for the month was $600,000. The ending finished goods inventory was $115,000. What was the cost of goods sold? $150,000 + $600,000 = $750,000 $750,000 $115,000 = $635,000
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