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by: Gerry Otto

2082ManagerialAccountingStudyGuideExam3.pdf ACCT2082

Marketplace > University of Cincinnati > Accounting > ACCT2082 > 2082ManagerialAccountingStudyGuideExam3 pdf
Gerry Otto
GPA 3.5
Managerial Accounting
Margaret Reed

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About this Document

Study Guide for Exam 3 over Chapter 5. UC Lindner College of business Prof Reed.
Managerial Accounting
Margaret Reed
Study Guide
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This 5 page Study Guide was uploaded by Gerry Otto on Monday October 5, 2015. The Study Guide belongs to ACCT2082 at University of Cincinnati taught by Margaret Reed in Fall 2015. Since its upload, it has received 95 views. For similar materials see Managerial Accounting in Accounting at University of Cincinnati.


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Date Created: 10/05/15
Accounting 2082 Managerial Accounting EXAM 3 Type of Question Number of Questions Points per question Allowed Time Total Points Multiple Choice 20 questions 2 points each 55 mins 40 points Free Points 10 points Total Points 50 points You may not use any notes books cell phones other media devices or programmable calculators While taking this exam but you may use a basic calculator Formulas Predetermined overhead rate Estimated annual overheadEstimated annual activity level Applied overhead Predetermined overhead rate X actual activity level Total normal product costs Actual direct materials actual direct labor applied overhead Overhead variance Actual overhead applied overhead Adjusted COGS Unadjusted COGS or overhead variance Departmental overhead rate Estimated department overheadestimated departmental activity level Direct materials used Beginning raw materials inventory Raw materials purchased Ending raw materials inventory Total manufacturing costs Direct materials used Direct labor costs Applied overhead Cost of goods manufactured Beginning WIP inventory Total manufacturing costs Ending WIP inventory Adjusted COGS Beginning finished goods inventory Cost of goods manufactured Ending finished goods inventory underapplied overhead or overapplied overhead Chapter 5 Notes on Following Page o The Differences Between J obOrder and Process Costing 0 Companies can be divided into two major types I Those firms producing similar products or services can use a processcosting accounting system I On the other hand if a company s products services are unique they require a job order accounting system 0 Characteristics of the J obOrder Environment 0 Customized or builttoorder products fit into this category as do services that vary from customer to customer a A job is one distinct unit or set of units I Examples printing construction furniture making medical and dental services automobile repair beautician services I For joborder production systems costs are accumulated by job I This approach to assigning costs is called a joborder costing system 0 Process Production and Costing 0 Firms in process industries massproduce large quantities of similar or homogeneous products a This approach to cost accumulation is known as a processcosting system a Process firms accumulate production costs by process or by department for a given period of time I Unit costs are measured using the following equation 0 Unit costs Process Costs Output I Examples of process manufacturers include 0 Food canning and manufacturing 0 Cement 0 Petroleum 0 Pharmaceutical and chemical manufacturing Comparison of JobOrder and Process Costing JobOrder Costing Process Costing I Wide variety at distinct products 0 Homogeneous products 0 Costs accumulated by job 0 Costs accumulated by process or department 0 Unit cost Total job costsOutput 0 Unit cost Process costsOutput 0 Actual Costing o In an actual cost system only actual costs of direct materials direct labor and overhead are used to determine unit cost 0 Defining Overhead Costs Overhead items do not have the direct relationship with units produced that direct materials and direct labor do a Uneven Overhead Costs Many overhead costs are not incurred uniformly throughout the year I Waiting until the end of the year to total the actual overhead costs is typically unrealistic o Uneven Production Distortions can occur if when averages are used with uneven production 0 Normal Costing o A normal cost system determines unit cost by adding actual direct materials actual direct labor and estimated overhead 0 Overhead can be estimated by approximating the year s actual overhead at the beginning of the year and then using a predetermined rate throughout the year to obtain the needed unit cost information Virtually all firms use normal costing Importance of Unit Costs 0 O O 0 Unit cost is a critical piece of information for a manufacturer Unit costs are essential for valuing inventory determining income and making numerous important decisions Disclosing the cost of inventories and determining income are financial reporting requirements that a firm faces at the end of each period In order to report the cost of its inventories a firm must know the number of units on hand and the unit cost Full cost information is useful as an input for internal decisions as well as for financial reporting In the long run for any product to be viable its price must cover its full cost Normal Costing and Estimating Overhead O In normal costing overhead is estimated and applied to production The basics of overhead application can be described in three steps I Step 1 Calculate the predetermined overhead rate I Step 2 Apply overhead to production throughout the year I Step 3 Reconcile the difference between the total actual overhead incurred during the year and the total overhead applied to production Departmental Overhead Rates 0 A plantwide overhead rate or single overhead rate has been explained by dividing all estimated overhead for a factory by the estimated activity level across the entire factory I Some manufacturers and service firms believe that multiple overhead rates give more accurate costing information I Departmental overhead rates are a widely used type of multiple overhead rate I A departmental overhead rate is estimated overhead for a department divided by the estimated activity level for that same department I The steps involved in calculating and applying overhead are the same as those involved for one plantwide overhead rate Unit Costs in the J obOrder System 0 O The unit cost of a job is the total cost of the job materials used on the job labor worked on the job and applied overhead divided by the number of units in the job Unit cost Total cost Number of units J obOrder Cost Sheet O 0000 Accounting for joborder production begins by preparing the source documents that are used to keep track of the costs of jobs The joborder cost sheet is prepared for every job The joborder cost sheet is subsidiary to the workinprocess account and is the primary document for accumulating all costs related to a particular job As more and more jobs are produced a company will usually find it convenient to number them Work in process consists of all incomplete work In a joborder system this will be all of the unfinished jobs The balance in Work in Process at the end of the month will be the total of all the joborder cost sheets for the incomplete jobs Materials Requisition Form 0 The cost of direct materials is assigned to a job by the use of a source document known as a materials requisition form Notice that the form asks for the type quantity and unit price of the direct materials issued and most importantly the number of the job 0 Using this form the cost accounting department can enter the cost of direct materials onto the correct joborder cost sheet If the accounting system is automated this posting may entail directly entering the data into a computer using the materials requisition forms as source documents No attempt is made to trace the cost of other materials such as supplies lubricants and the like to a particular job Indirect materials are assigned to jobs through the predetermined overhead rate 0 Time Ticket 0 The means by which direct labor costs are assigned to individual jobs is the source document known as a time ticket Each day the employee fills out a time ticket that identifies his or her name wage rate and the hours worked on each job Time tickets are collected and transferred to the cost accounting department where the information is used to post the cost of direct labor to individual jobs Again in an automated system posting involves entering the data into the computer Time tickets are used only for direct laborers All completed joborder cost sheets of a firm can serve as a subsidiary ledger for the finished goods inventory Then the workinprocess account consists of all of the job order cost sheets for the unfinished jobs 0 Flow of Costs Through a J obOrder Costing Firm Balance Sheet Income Statement A K Materials Account l r Jobs Sold Cost of Goods Sold Purchases Materials used Subsidiary Accounts 0 0 0 0 0 0 Completed Jobs Materials Requisition Forms Labor Time Tickets o o o o u o u 0 Schedule of Cost of Goods Manufactured Icahnsoh Leathergodds Schedule of Cost of Goods Manufactured For the Month of January Direct materials Beginning raw materials inventory 5 0 Purchases of raw materials 2500 Total raw materials available 2500 Ending raw materials 1000 Total raw materials used 1500 Direct labor 1530 Overhead Lease S 200 Utilities 50 Depreciation 100 Indirect labor 65 S 41 5 Less Underapplied overhead 75 Overhead applied 340 Current manufacturing costs 3370 Add Beginning work in process 0 Total manufacturing costs 3370 Less Ending work in process 1050 Cost of goods manufactured 2320 0 Statement of Costs of Goods Sold 0 A schedule of cost of goods sold usually is prepared at the end of each reporting period as shown here for Johnson Leathergoods for January Beginning finished goods inventory 0 Cost ot goods manufactured 2320 Goods availiablie tor salie 2320 Less Ending finished goods 0 inventory Niormali cost of goods solid 2320 Add Underappiied overhead 75 Adjusted cost of goods solid 2395 0 Income Statement Saies 3480 Less Cost of goods said 2395 Gross margin 1085 Less seiiing and administrative expenses Seiiing expenses 200 Administrative expenses 550 75039 Net operating income 335


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