Managerial accounting exam 1 (chapters 1-3) – Flashcards
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Based upon the following information calculate the overhead rate per hour. Overhead is applied on the basis of direct labor-hours and they estimate that 10,000 labor hours will be worked during the year. DM=$10,000, DL=$25,000, Rent on factory building=$12,000, Sales commissions=$22,000, Depreciation on the factory equipment=$4,000, Indirect labor=$5,000 and the Production Supervisor's salary=$22,000.
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$4.30. (Rent on factory building "12000" + depreciation on factory equipment "4000" + indirect labor "5000" + production supervisor's salary "22000" = 43000, 43000/10000 labor hours = $4.30)
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If the level of activity increases within the relevant range what happens to: unit variable cost, total variable cost, Unit fixed cost, and total fixed cost
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Unit variable cost- increases Total variable cost - remains constant Unit fixed cost - decreases Total fixed cost - remains constant
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If the level of activity decreases within the relevant range what happens to: unit variable cost, total variable cost, Unit fixed cost, and total fixed cost
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Unit variable cost - decreases Total variable cost - remains constant Unit fixed cost - increases Total fixed cost - remains constant
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A manufacturing company prepays coverage for a two year period. The premium for two years is $3,600 and is paid at the beginning of the first year. Forty percent applies to manufacturing and the other sixty percent applies to selling and administrating expenses. what amounts should be considered product and period costs for the first year of coverage?
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Product cost = $720 period cost = $1,080 (annual insurance expense = 3,600/2= 1,800, product= 40% * 1800= 720, period= 60% * 1800= 1,080)
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The bailey company applies overhead to jobs on the basis of direct labor hours. the following information is available for last year. estimated overhead cost = $150,000 and estimated direct labor hours = 15,000. Actual overhead cost is $145,000 and actual direct labor hours = 14,500. was the overhead over or under applied and by what amount?
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under applied by 5,000 (estimated overhead cost 150,000/15,000 estimated direct labor hours=$10, 10 * 14,500 actual direct hours= 145,000 actual overhead cost, actual overhead cost 145,000- 150,000 estimated overhead cost= 5,000)
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what is the journal entry to record the application of overhead cost to jobs?
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WIP (debit) OH (credit)
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what is the journal entry to record indirect materials that will be used for the general factory use and not a particular job?
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OH (debit) Raw Materials (credit)
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What is the journal entry to allocate over applied overhead to WIP, FG, and COGS?
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OH (debit) WIP (credit) FG (credit) COGS (credit)
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What is the journal entry to allocate under applied overhead to WIP, FG, and COGS?
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WIP (debit) FG (debit) COGS (debit) OH (credit)
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what is the journal entry to record the accrual of wages that are both direct labor costs and indirect labor cost?
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WIP (debit) OH (debit) Salaries Payable (credit)
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What is the journal entry to transfer WIP to FG?
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FG (debit) WIP (credit)
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what is the journal entry to record the transfer of cost from FG to COGS?
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COGS (debit) FG (credit)
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What is the journal entry to record issuing raw materials to be used on a job?
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WIP (debit) Raw Materials (credit)
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what is product cost?
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all cost involved in making the product (DM, DL, OH)
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What does it mean for product cost to be inventoriable?
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Product costs are initially assigned to inventories
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what is period costs?
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all costs that are not product costs
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what are the two acceptable methods for closing out any balance of under applied or over applied overhead?
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close out OH to COGS / COGS (debit) OH (credit)
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why should you beware of using unit fixed costs to predict future cost?
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because fixed costs always remain constant
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what is sunk cost?
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cost that has already been incurred and cannot be changed by any decision made now or in future.
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what is an opportunity cost?
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potential benefit that is given up when one alternative is selected over another
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what does contribution margin mean?
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amount remaining form sales revenues after all variable expenses have been deducted.
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what is an example of discretionary fixed costs?
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advertising, research, public relations, management development programs, and internships for students
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what does the equation Y=a+bx mean?
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Mixed cost formula y=total cost a=fixed cost b=variable rater per unit of activity x=number of units of activity
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at an activity level of 8,700 units, P corporation's total variable cost is $653,109 and its total fixed cost is $658,416. Assume that this activity is within the relevant range. For the activity level of 8,8800 units, compute the total variable cost
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660,616 (658,416/8700=75.07, 75.07*8,800=660,616)
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at an activity level of 8,700 units, P corporation's total variable cost is $653,109 and its total fixed cost is $658,416. Assume that this activity is within the relevant range. For the activity level of 8,8800 units, compute the total fixed cost
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658.416 (remains the same)
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at an activity level of 8,700 units, P corporation's total variable cost is $653,109 and its total fixed cost is $658,416. Assume that this activity is within the relevant range. For the activity level of 8,8800 units, compute the total cost
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319,032 (653,109+658,416=319,032)
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at an activity level of 8,700 units, P corporation's total variable cost is $653,109 and its total fixed cost is $658,416. Assume that this activity is within the relevant range. For the activity level of 8,8800 units, compute the average variable cost per unit
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75.07 (660,616/8,800=75.07)
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at an activity level of 8,700 units, P corporation's total variable cost is $653,109 and its total fixed cost is $658,416. Assume that this activity is within the relevant range. For the activity level of 8,8800 units, compute the average fixed cost per unit
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74.82 (658,416/8,800=74.82)
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at an activity level of 8,700 units, P corporation's total variable cost is $653,109 and its total fixed cost is $658,416. Assume that this activity is within the relevant range. For the activity level of 8,8800 units, compute the average total cost per unit.
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149.89 (1,319,032/8800=149.89)
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ABC company provided the following information concerning its delivery costs. Month-Total electric costs-Machine hours Jan-280-625 Feb-290-700 Mar-265-500 Apr-170-320 May-240-550 Jun-260-575 Jul-150-300 Aug-248-450 Management believes that total electric cost is a mixed cost that depends on the number of machine hours. a) Estimate the variable cost per machine hour using the high low method. show your work.
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$0.35 (v = change in costs / change in activity = 290-150/700-300= 140/400= 0.35)
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ABC company provided the following information concerning its delivery costs. Month-Total electric costs-Machine hours Jan-280-625 Feb-290-700 Mar-265-500 Apr-170-320 May-240-550 Jun-260-575 Jul-150-300 Aug-248-450 Management believes that total electric cost is a mixed cost that depends on the number of machine hours. B) estimate the fixed cost per month using the high low method. Show your work
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$45 (FC=total-Total variable cost= 290-(.35x700)=$45)
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ABC company provided the following information concerning its delivery costs. Month-Total electric costs-Machine hours Jan-280-625 Feb-290-700 Mar-265-500 Apr-170-320 May-240-550 Jun-260-575 Jul-150-300 Aug-248-450 Management believes that total electric cost is a mixed cost that depends on the number of machine hours. C) prepare the cost function based upon your answers in a) and b) above.
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Y=45+.35x
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ABC company provided the following information concerning its delivery costs. Month-Total electric costs-Machine hours Jan-280-625 Feb-290-700 Mar-265-500 Apr-170-320 May-240-550 Jun-260-575 Jul-150-300 Aug-248-450 Management believes that total electric cost is a mixed cost that depends on the number of machine hours. D) if the number of machine hours for next month is estimated to be 600, what would be your predictions for the total electricity cost?
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255 (y=45+.35 (600)=255
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The Manson corporation, a merchandising company, reported sales of 200 units for June at a selling price of $125 per unit. The cost of goods sold (all variable) was $75 per unit. Variable selling Expense was $5 per unit and fixed selling Expense was $2,500. Variable administrative Expense was $3 per unit and fixed administrative was $3,500. Required: prepare a contribution format income statement in good form for the month of June
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Manson Corporation Income statement For the month of June 30, 2016 Sales (25,000) -variable cost : -COGS (15,000) -Selling (1,000) -Admin (600) = total viable costs (16,600) =contribution margin (8,400) -fixed cost: -selling (2,500) -admin (3,500) =total fixed costs (6,000) = operating income (2,400) (FORMAT* sales -variable cost (cogs, variable selling, variable admin) =contribution margin - fixed costs (fixed selling, fixed admin) = operation income
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At an activity of 7,000 units a month z corporation's total variable maintenence cost is $350,000 and it's total fixed maintenence cost is 130,000. What would be the total maintenence cost, both fixed and variable, at an activity level of 7,500 units in a month?
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505,000 (fixed cost remain the same = 130,000, variable cost equals = 350,000/7,000=50, 50*7,500= 375,000, 130,000+375,000=505,000
