305 Midterm Chapter 2

Question 1

What is product cost?

Answer 1

Cost of producing your product.

Question 2

What is DM?

Answer 2

Direct Material: All material directly traced to the product. Stuff you can see on the product. EX. Fabric

Question 3

What is DL?

Answer 3

Direct Labour: All labour used directly in creating the product. They put there hands on what your making. Ex. Assembly

Question 4

What is MOH?

Answer 4

Manufacturing Over Head: All indirect costs in producing the product. Everything you need to make the product that you cant SEE when looking at the product. Ex. Manager

Question 5

What are MOH cost examples (6)?

Answer 5

Indirect Materials: Glue
Indirect Labour: Labour used you cant see
Factory depreciation
Factory utilities
Factory Taxes
Factory Insurance

Question 6

What is Period Cost?

Answer 6

Any cost related to selling the product.

Question 7

What are dome period cost examples (6)

Answer 7

Selling expenses, admin expenses, office rent, office utilities, advertising, commission, shipping.

Question 8

Trick for how can you differentiate between if something is a Product Cost vs Period Cost?

Answer 8

Product Cost: Will mention “Factory”
Period Cost: Will mention “Store or Office”

Question 9

What are Direct Costs?

Answer 9

DM, DL

Question 10

What are Indirect Costs?

Answer 10

MOH

Question 11

What is the total manufacturing cost formula?

Answer 11

DM + DL + MOH

Question 12

What is the prime costs formula?

Answer 12

DM + DL

Question 13

What is the conversion cost formula?

Answer 13

DL + MOH

Question 14

What is variable cost?

Answer 14

Costs that change as out put changes. Ex. DM, DL, VOH (with more demand you need more workers and material)

Question 15

What is fixed cost?

Answer 15

Costs that remain the same as output changes. EX. Rent (FOH factory overhead)

Question 16

What does it mean that variable costs are fixed per unit?

Answer 16

VC per unit will stay the same, and the total VC changes. SO it is the Same cost per unit BUT will cost more in Total.

Question 17

What does it mean that Fixed costs are variable per unit?

Answer 17

The total fixed costs stay the same, and the fixed cost per unit goes down or up (changes per unit). SO the more you produce the cheaper it costs for you.

Question 18

Once you buy DM, DL, and MOH, what is the order of tracking cost?

Answer 18

WIP -> Finished Goods Inventory -> COGS

Question 19

What is included in the Cost of Goods Manufactured Schedual

Answer 19

+ Beginning DM. x
+ Purchases of DM. x
- Ending DM. (x)
—————————
= DM Used
+ DL X
+ MOH X
—————–
= Total Manufacturing Cost X
+ Beginning WIP X
- Ending Work in Process
———————————————
= COG Manufactured (COGM) X

Question 20

What is included in the Income Statment?

Answer 20

Income Statement

+ Sales
- Cost of goods sold
—————–
= Gross Profit
- Period Expense
————————-
= Operating Income

Question 21

When asked for the COGS, What must you first find?

Answer 21

COGM (cost of good manufactured)

Question 22

What is the formula for the High Low Method?

Answer 22

VC per unit = (Highest cost) - (Lowest Cost) / (Highest Activity) - (Lowest Activity)
FINDS DENOMINATORS FIRST, AND THEN FIND NUMERATOR

Question 23

What is the Relevant Range?

Answer 23

The range of output the company normally operates at.

Question 24

If you get a question asking to find the cost outside of Relevant Range, what do you answer?

Answer 24

NONE OF THE ABOVE/INSUFFICIENT

Question 25

What is the Cost Of Goods Sold Schedual?

Answer 25

+BFG +COGM -EFG ----------------- = COGS

Question 26

Raw Material = Direct material when?

Answer 26

NO indirect materials (IM) are mentioned in question

Question 27

How do you differentiate if an item is a variable cost vs a fixed cost? (I.e. Cost is per month vs cost is per unit)

Answer 27

Cost is per unit is variable cost is per month is fixed

Question 28

What is the variable cost per unit formula?

Answer 28

VC per unit = Variable Production cost per unit + Variable selling cost per unit. *Variable production cost per unit = Total variable production cost / Units produced. *Variable selling cost per unit = Total variable selling cost/Units sold.

Question 29

What is the total cost per unit formula?

Answer 29

Total Cost = Total Variable Cost + Total Fixed Cost *Total variable cost = (VC per unit * # Units) + TFC

Question 30

What are the steps for solving High Low method Questions?

Answer 30

(1) Use high low method to solve for VC/Unit (2) Solve for TFC using algebra (TC = (VC/Unit * # of units) + Total FC. Pick highest activity and corresponding cost and plug into TC equation and solve for TFC with algebra (3) Answer Questions

Question 31

What algrebra formula shoud you use when asked to find direct costs of production (prime Cost)?

Answer 31

Direct Cost of Production (Prime Cost) = DM Used + DL

Question 32

MOH is split between what two things?

Answer 32

Variable overhead cost, and Fixed overhead cost

Question 33

What algebra formula should you use when asked to find Variable cost of production?

Answer 33

VPC = DM used + DL + VOH

Question 34

Total product cost is also know as what?

Answer 34

TMC (Total Manufacturing Cost)

Question 35

What is the total product cost per unit formula

Answer 35

TPC = (VPC per unit * # Units Produced) + TPFC

Question 36

What is the Total cost per unit formula

Answer 36

TC = VC/Unit *#Units) + TFC