CH 3

Question 1

Absorption Costing?

Answer 1

Costing method includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead
(when calculating a product’s cost)

Question 2

What costs does the “Schedules of Cost of Goods Sold” have?

Answer 2

direct materials
direct labor
manufacturing overhead

Question 3

(Schedule of COGM) What is the order of (Schedule of COGM)? (4 categories)

Answer 3

1. Beginning Work in Process (WIP) Inventory
2. Direct Materials
3. Direct Labor
4. Manufacturing Overhead

Question 4

(Schedule of COGM) How to calculate Schedule of COG M section? (all the rows necessary)

Answer 4

1. Beginning Raw Materials Inventory
   1a. PLUS Purchase of raw materials
2. Total raw materials available
   2a. MINUS Ending raw materials inventory
3. Raw materials USED in PRODuction
   3a. MINUS Indirect materials USED in PRODuction
4. Direct Materials USED in PRODuction
   4a. PLUS Direct Labor
   4b. MO applied to WIP
   5.Total Manufacturing costs added to production
5. Total MC to account for (Begin. WIP In + Total MC)
6. MINUS Ending WIP Inventory
7. (GRAND TOTAL) COG manufactured

Question 5

(Schedule of COGS) What is the order of (Schedule of COGS)? (4 categories)

Answer 5

1. Beginning Finished Goods (FG) inventory
   2.COG available for sale
2. Unadjusted COGS (before Over/underapplied overhead)
3. Adjusted COGS

Question 6

(Schedule of COGS) How to calculate Schedule of COGS section? (all the rows necessary)

Answer 6

1. Beginning Finished Goods (FG) inventory
   1a. PLUS COGM (previous schedule)
2. COG available for sale
   2a. MINUS Ending FG inventory
3. Unadjusted COGS
   3a. Add UNDERapplied and subtract OVERapplied MO
4. Adjusted COGS

Question 7

What is an “activity” in activity-based costing?

Answer 7

any event that causes consumption of overhead resources

Question 8

How to calculate an “activity rate”

Answer 8

total (overhead) cost of each activity / total activity

Question 9

Focus of activity-based management?

Answer 9

1. Eliminating waste
2. reducing defects