First Midterm Material

Question 1

How do we calculate Cost of Goods Sold?

Answer 1

Beginning inventory + the cost of goods purchased or manufactured = cost of goods available – ending inventory.

Question 2

What do we do with Under Applied Overhead?

Answer 2

Under applied overhead is reported as a prepaid expense on the company’s balance sheet and, at the end of the year, it is balanced by inputing a debit to cost of goods sold

Question 3

How do we calculate Overhead Costs?

Answer 3

Divide your monthly overhead cost by monthly sales and multiply by 100 to find the percentage of overhead cost. For example, a business with monthly sales of $900,000 and overhead costs totaling $225,000 has ($225,000/$900,000) * 100 = 25 percent overhead.

Question 4

How do we calculate Mixed costs?

Answer 4

y=a+bx OR Fixed cost + Variable cost per unit

Question 5

How do we calculate operating income? (Variable Costing)

Answer 5

Sales - Variable expenses - Fixed expenses = Net Operating Income

Question 6

What is Material Price Variance?

Answer 6

Direct material price variance is the difference between the standard cost and the actual cost for the actual quantity of material used or purchased.

Question 7

What is Efficiency Variance?

Answer 7

An efficiency variance is the difference between actual and budgeted quantities you purchased for a specific price.

Question 8

What is Transfer Pricing?

Answer 8

Transfer pricing is the setting of the price for goods and services sold between controlled (or related) legal entities within an enterprise. For example, if a subsidiary company sells goods to a parent company, the cost of those goods paid by the parent to the subsidiary is the transfer price.

Question 9

How do we calculate the Minimum Acceptable selling price?

Answer 9

Take all of the costs to make the product. Basically a breakeven including all costs/ unit