ACCT 226 Week 3 Notes
ACCT 226 Week 3 Notes ACCT 226 - 002
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ACCT 226 - 002
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This 3 page Class Notes was uploaded by Rachel Whitbeck on Saturday February 6, 2016. The Class Notes belongs to ACCT 226 - 002 at University of South Carolina taught by Debbie Huguley Brumbaugh in Spring 2016. Since its upload, it has received 32 views. For similar materials see Introduction to Managerial Accounting in Accounting at University of South Carolina.
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Date Created: 02/06/16
ACCT 226 TR 10:05 Tuesday, February 2, 2016 Practice problem a) Raw materials were purchased to use in production, $200,000. Raw materials 200,000 Accounts payable 200,000 b) Raw materals were requisitioned for use in production (all direct materials), $185,000 Work in process 185,000 Raw materials 185,000 c) Utility bills were incurred, $70,000 (90% related to factory operations, and the remainder related to selling and administrative activities) Manufacturing overhead 63,000 Utilities expense 7,000 Accounts payable 70,000 d) Salary and wage costs were incurred: direct labor (975 hours)- $230,000, Indirect labor- $90,000, Selling and administrative salaries- $110,000 Work in process 230,000 Manufacturing overhead 90,000 Salaries expense 110,000 Salaries and wages payable 430,000 e) Maintenance costs were incurred in the factory. $54,000 Manufacturing overhead 54,000 Accounts payable 54,000 f) Advertising costs were incurred, $ 136,000 Advertising expense 136,000 Accounts payable 136,000 g) Depreciation was recorded for the year, $95,000 (80% related to factory equipment, and the remainder related to selling and administrative facilities) Manufacturing overhead 76,000 Depreciation expense 19,000 Accumulated depreciation 95,000 h) Rental cost incurred on buildings, $120,000 (85% related to factory operations, and the remainder related to selling and administrative facilities) Manufacturing overhead i) , j) Cost of goods manufactured is $770,000. Finished goods 770,000 Work in process 770,000 k) Accounts receivable 1,200,000 Sales 1,200,000 Cost of goods sold 800,000 Finished goods 800,000 What causes manufacturing overhead to be debited? Finished goods get debited for items moved from work in process Credit cost of goods sold Thursday, February 4, 2016 Chapter 4 Both job-order costing and process costing: o Assign material, labor, and overhead costs to products and provide a mechanism for computing unit product costs o Use the same manufacturing accounts, including manufacturing overhead, raw materials, work in process, and finished goods o Use the same flow of costs through the manufacturing accounts Just process costing: o Used when a single product is produced on a continuing basis or for a long period of time o Systems accumulate costs by department o Systems compute unit costs by department o Processing departments- any unit in an organization where materials, labor, or overhead are added to the product Performed uniformly on all units of production Output must be homogeneous Flows in a sequence from one department from another Costs are traced an applied to departments in a process costs system Flow of raw materials in journal entry form o Debit work in process department A and B, then credit raw materials Flow of labor costs o Debit work in process (for the direct labor in departments A and B), and credit salaries and wages payable Flow of manufacturing overhead costs o When you apply overhead, you debit work in process and credit overhead o Debit side is always actual, and credit side is always applied Transfers from Department A to B o Debit department B and credit Department A Transfer to finished goods o Debit finished goods and credit work in process-department B Transfers from finished goods to COGS when you finally make the sale o Debit COGS and credit finished goods Equivalent units of production- multiply the number of partially completed units by the percentage completion of those units o These partially completed units complicate the determination of a department’s output for a given period and the unit cost that should be assigned o Two half-completed units equal one completed unit o Can be calculated in two ways: FIFO method Weighted average method Makes no distinction between work done in prior or current periods Blends together units and costs from prior periods Determines equivalent units of productions for a department by adding together the number of units transferred out plus the equivalent units in ending work in process inventory Labor and MOH are applied more evenly later in the process Direct labor and MOH may be combined into one classification of product called conversion cost Equivalent units of production always equals: units completed and transferred + equivalent units remaining in work in process Cost per equivalent unit = (cost of beginning work in process inventory + cost added during the period) ÷ equivalent units of production
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