Pre-Finals Set A Flashcards
are raw materials used in manufacturing processes that become an integral part of the finished product and the cost of which is identifiable and chargeable directly to it.
Direct Materials
a summary of the quantity of direct materials required in order to meet production requirements.
Direct Materials Budget
Formula for Direct Materials Requirement (Purchase in Units)
Usage
+ Desired Ending Material
- Beginning Inventory in Units
= Purchase in Units
How to compute the usage for Direct Materials Requirement?
no. of products x no. of products per unit
Formula for Direct Materials Budget
Units to be Produced
x Materials Needs per Unit
Material Needs for Production
+ Desired Ending Inventory of Materials
Total Needs
- Beginning Inventory of Materials
Materials to Be Purchased
x Unit Price
Purchase Cost
refers to the salaries and wages paid to workers directly involved in the manufacture of a specific product or in performing a service.
Direct Labor
shows the total direct labor cost and number of direct labor hours needed for production.
Direct labor budget
The formula for Direct Labor Cost / Direct Labor objective:
(also Direct Labor Budget)
Units to be produced
x Direct Labor Hours per unit
Total Hours
x Direct Labor Cost per Hour
Direct Labor Cost
contains all the costs, other than raw materials and labor that will be incurred by a manufacturing company or department.
Factory Overhead Budget
refers to manufacturing expenses other than direct materials and direct labor. These are the indirect costs.
Factory Overhead
Formula for Factory Overhead Budget / Cash Disbursement for overhead
Budgeted Direct Labor Hours
x Variable Overhead Rate
Variable Overhead Budget
+ Fixed Overhead budget
Overhead Budget
- Depreciation
Cash Disbursement for Overhead
costs that change as the volume of production changes or the number of services provided changes.
Variable Cost
costs that do not change even while the volume of production activity changes
Fixed Cost
