m acc test 1 Flashcards
managers three main responsibility’s
planning, decision-making, and controlling
planning
establishing goals and specifying how to achieve them
decision-making
gathering feedback to ensure plans are properly executed or modified
controlling
selecting a course of action from competing alternatives
the differences between managerial accounting and financial accounting
mgl accounting uses internal users (employees, managers), management sets rules, financial accounting uses external users (auditors, creditors, investors), uses strict GAAP rules
the 4 standards of the IMA Statement of Ethical Professional Practice
credibility, confidentiality, competence, integrity
credibility
reliability
confidentiality
mouth shut on non public info
competence
academic knowledge
integrity
morality, avoiding conflict of interest
What is a cost object?
anything for which cost data are desired-including products, customers, plants, office locations, and departments, classified as direct or indirect
direct cost
easily traced to a specified cost object, salary of sales manager
indirect cost
cannot be easily traced to a specified cost object, common cost
What are the three manufacturing (product) costs
two direct costs (direct materials and direct labor) and one indirect cost (manufacturing overhead)
Non-manufacturing (period) costs?
two categories, selling costs and administrative costs
What are conversion costs
the sum of direct labor and manufacturing overhead, the two costs incurred to convert direct materials into a finished product
What are Prime costs
sum of direct materials cost and direct labor costs
Cost classifications for predicting cost behavior
variable, fixed, and mixed
Variable costs
varies in total in direct proportion to changes in the level of activity, cost of goods sold for a merchandising company, direct materials, direct labor, variable elements of manufacturing overhead such as indirect materials, supplies, and power, and variable elements of selling and administrative expenses such as commissions and shipping
Fixed costs
remains constant in total regardless of changes in the level of activity, manufacturing overhead includes fixed costs like depreciation, insurance, property taxes, rent, and supervisory salaries, selling and administrative costs include administrative salaries, advertising, and depreciation of nonmanufacturing assets
Mixed Costs
both variable and fixed costs elements, semivariable costs
absorption costs
all manufacturing costs, both fixed and variable are assigned to units of product-units are said to be fully absorb manufacturing costs, conversely all nonmanufacturing costs are treated as period costs and not assigned to products
What is job-order costing
used by companies that make different products, each with unique features, costs are traced and allocated to jobs and then the costs of the jobs are divided by the number of units in the job to arrive at an average cost per unit, also called the unit product cost
the various documents used during the manufacture of a product
bill of materials, job cost sheet, time tickets
bill of materials
a document that lists the quantity of each type of direct materials needed to complete a unit of product
job cost sheet
records the materials, labor, and manufacturing overhead costs charged to that job
time ticket
provides an hour by hour summary of the employees activities throughout the day, direct labor charges are automatically posted to job cost sheets, any indirect labor time is treated as part of manufacturing overhead and is not posted
allocation base
a measure, such as direct labor hours that is common to all products and used to assign overhead costs to them, direct labor hours, direct labor costs, machine hours, units of product
predetermined overhead rate
computed by dividing the total estimated manufacturing overhead cost for the period by the estimated total amount of the allocation base, computed before the period using a four step process
How are overhead costs assigned to jobs in production
the process of assigning overhead costs to jobs, formula for determining amount of overhead costs to apply yo a particular job: overhead= predetermined overhead rate * amount of the allocation base incurred by the job, apply throughout accounting period
Identify and apply the four steps to applying overhead using one plantwide overhead rate
Find estimated OH costs, Identify the allocation base, and the estimated amount of the allocation base, Calculate the predetermined OH rate., Apply overhead by multiplying the rate by actual amount of the allocation base
identify and apply the four steps to applying overhead using the departmental approach
Find estimated OH costs for each department, identify the allocation base, and the estimated amount of the allocation base for each
department, Calculate the predetermined OH rate for each department, Apply overhead by multiplying the rate by actual amount of the allocation base for each
department.
Which steps for applying overhead are performed at the beginning of the year, and which are
performed throughout the year
How do you calculate the total cost/manufacturing cost of a job
direct materials + direct labor + manufacturing overhead
Identify the three inventory accounts for a manufacturer, and the flow of costs through the inventory
accounts
raw materials, work in process, and finished goods
raw materials
any materials that go into the final product, when used in production as direct materials, their costs are transferred to work in process inventory
work in process
consists of units of product that are only partially complete and will require further work before sale, to transform direct materials into completed jobs, direct labor is added to WIP and manufacturing overhead cost is applied to WIP by multiplying the predetermined overhead rate by the actual quantity of the allocation base consumed by each job, when jobs are completed their costs are transferred from WIP to finished goods
finished goods
completed units of product that havent been sold
costs of goods manufactured
the amount transferred from WIP to FG includes the manufacturing costs associated with units of product finished during the period, beginning WIP + total mfg costs production (DM AND DL AND TOTAL GIVEN)p- ending WIP
balance sheet
raw materials (raw materials inventory), manufacturing overhead (direct labor, WIP, FG)
income statement
selling and administrative (costs of goods sold, selling and administrative expenses)
purchase of materials
debit raw materials, credit accounts payable
issuance of raw materials
debit WIP, debit MO, credit RM
direct and indirect labor costs
debit WIP, debit MO, credit salaries and wages payable
record MO applied to job
debit WIP, credit MO
administrative salaries
debit salaries expense, credit salaries and wages payable
completed job
DM + DL + MO: debit FG, credit WIP
rent and utlities
debit MO, credit accounts payable
goods sold on account
debit COGS and credit finished goods, debit AR and credit sales
depreciation
debit MO, credit accumulated dep
other MO costs accrued
debit MO, credit AP
costs of goods sold
debit COGS, credit FG
sales on account
debit AR, credit sales; x * % = y; x + y = number used
schedule of costs of goods manufactured
contains 3 elements of product costs- direct materials, direct labor, and MO- and it summarizes the portions of those costs remaining in ending WIP inventory and transferred out to FG,
schedule of costs of goods sold
contains 3 product costs, direct materials, direct labor, and MO- and summarizes the portions of those costs remaining in ending FG inventory and transferred out to COGS
costs of DM on schedule of costs of goods manufactured
cost of indirect materials is subtracted from raw materials used in production
costs of goods available for sale
beginning FG + costs of goods manufactured
unadjusted COGS
costs of goods available for sale = ending FG
adjusted COGS
unadjusted COGS + underapplied overhead (or - overapplied)
cost of direct materials used in production
beginning RM + purchases of RM - ending RM - indirect materials
over or under applied formula
predetermined overhead rate * actual total allocation base = total manufacturing overhead; actual total MO cost - total MO applied = under/over applied
underapplied overhead
debit COGS, credit MO; estimated < actual
overapplied overhead
debit MO, credit COGS; estimated > actual
