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Flashcards in Management Deck (97):
1

1. A company sell pretzels for $1.50/bag. Their February ending inventory was $1600. Marketing prepares the following forecast:
January 15,000 bags
February 12,000 bags
March 16,000 bags
Total 43,000 bags
Projected sales for April 13,000 bags. Try to maintain 10% of the next month’s forecasted sales in inventory. What is the projected for march?
a) 14,800 b) 16,000 c)15,700 d)16,500 e)can’t be determined from the data provided

Same info as no 1. What is the sales budget for January?

SECOND NUMBER TIMES BY %
For example.
First month=March
Second month=April
April * 0.10

(c ) 15,700

March= 16,000
April 13,000 (0.10) = 1300
March+April-Ending Inventory
16,000 + 1,300 = 17,300, 17,300 – 1600 = 15,700


Second answer

SECOND NUMBER TIMES BY %
For example.
First month=January
Second month=February
February * 0.10
January+February(.10)= 16,200 (1.50 perbag)

15,000 + 12,000 (0.10) = 16,200 (1.50)=24,300

2

Budgets are

Uses by individual, staffs, managers department.

3

Management accounting places more emphasis on
a. certified financial statement
b. future activities
c. historial cost information
d. cash flow
e. annual tax returns

B. Future activities

4

A listing of line item that the organization will use to classify its accounting information is?
a. balance sheet
b. income statement
c. chart of accounts
d. schedule of cash flows
e. production cost response

A

5

RABBIT

11.00

6

The brothers sell pretzels for $150 per back, marketing prepares the following sales forcast for the 1st quarter of the year.
jan 15000
feb 12000
march 16000

What is the sales budget for the 1st quarter

64500

???
--------------------------------------------------------------------------

15000+12000+16000
= 43000 (budgeted sales for 1st quarter)

43000 x $150 = $6,450,000 total sales.

7

Compute the fixed cost?
DM 100000
DL 150000
Overhead 75000
sales 120000

• Fixed cost will be Overhead 75000. If answer is not 75000 then “None of above”

Look at overhead its 7500

???
-------------------------------------------------------------------------
Overhead can be both fixed or variable and usually have a percentage of fixed and variable costs.

Variable for sure are DM and DL so you can eliminate 100000 and 150000.

If anything it would be 75000

8

Cost that are always relevent in making decisions are
a) cost incurred each period, b)cost that can be avoided, c) cost that are sunk
d) cost that are fixed
e) none

(b) Cost that can be avoided,

OR D

OR C Probably C
--------------------------------------------------------------------------

Sunk costs are NEVER relevant. Relevant costs are the ones that can be avoided!
B.

9

NPV and IRR not TRUE

(c) NPV alone can be used to compare investments of different sizes

WAS ON TEST
-------------------------------------------------------------------------
IRR: screen projects or to rank them; higher IRR is more desireable.

NPV: Positive means acceptable, negative is unnacceptable, and 0 is acceptable. Generally considered more reliable than the IRR for screening and ranking projects.

10

Company Z (long question)
What are the fixed cost?

(d) 20% of the sales revenue

11

which of the following is typically a starting point for the budget process?
a. a summary cash budget
b. a sales budget
c. a budget balance sheet
d. a production budget
e. a materials purchase budget

B. A sales budget

Starting> Sales Budget

12

Selected sales and cost data for a special job are given below
Direct material used 100,000
Direct labor 150,000
Factory overhead (100% direct, 40% variable) 75,000
Selling and administration ( 50% direct, 60% variable)120,000
Complete the Total Cost:
a. 120,000
b. 225,000
c. 352,000
d. 135,000
e. 93,000

C.

Complete the Total Cost: C. 352,000
100,000 + 150,000 + 30,000 (75000 X 0.40) + 72,000 (120000 X 0.60)


MULTIPLY BY VARIABLE
DM+DL+FOH(Variable)+Selling and admin(0.60)

-------------------------------------------------------------------------
DM: 100,000
DL: 150,000
Variable Overhead: (75,000 x.40): 30,000

Admin costs: (120,000 x .60): 72,000

100k + 150k + 30k + 72k = 352,000

C.
*only the variable costs are relevant.

13

Tax accounting is generally most used by:
a. Share holder
b. Manager
c. Creditors
d. Internal revenue service
e. Decision makers

B or E
Most likely E

???
--------------------------------------------------------------------------
I'm guessing that they're comparing tax accounting to financial accounting.

If Tax Accounting is the same as Managerial Accounting, then the answer is the Manager.
B.

14

The term “product cost” as used in cost and managerial accounting context means.
a. an expenses
b. a variable cost
c. all manufacturing or production cost of the product
d. all fixed cost associated with a product
e. none

C

15

The discount rate for use in capital budgeting decision is also referred to as
a. a cost o capital
b. the cost of capital
c. the hurdle rate
d. the minimum required rate of return
e. all none

D

16

What is break even point in units?
Sale price $7.50 per unit
Variable cost $2.25 per unit
Fixed cost $10,000
Units sold 20,000

a. 1333
b. 1905
c. 10000
d. 20000
e. some number other than these 4

b. 1905 (7.50-2.25=5.25) & (1000/5.25)

Sales price - Variable cost=5.25

Fixed Cost/Answer=1905
--------------------------------------------------------------------------
Contribution Margin: 7.5 (sale price) - 2.25 (variable)
= $5.25

Break even = fixed cost / Contribution Margin
= 10,000/ 5.25
=1905

17

1. Which of the following is referring Management Accounting?
A. Is required by law
B. Is not subject to GAAP
C. Primarily stands by it self
D. Is and end itself
E. Emphasis on the part

B

18

2. The main purpose of management accounting is to provide information to?
A. Shareholders
B. Managers
C. Creditors
D. Government Agencies
E. All of the above

B

19

3. The term product cost as used in cost and managerial acct context means?
A. All cost of producing, selling and support a product
B. An expense
C. A variable cost
D. All manufacturing of production cost of the product
E. All fixed cost associated with a product

D

20

4. The sum of direct materials plus Direct Labor is classified as?
A. Product cost
B. Conversion Cost
C. Period Cost
D. Prime Cost
E. Manufacturing Cost

D

21

5. Which of the following organization would be most likely to adopt a process cost system?
A. Custom home builder
B. Law office
C. Paper Manufacturing
D. Dental Office
E. TV Sales and service organization

C

22

6. Zero based budget?
A. Start the budget process from last years number
B. Require mangers to build budget from the ground up
C. Are used primarily to invest short term cash
D. Involve planning for long same inventory
E. None of the above

B

23

Which of the following pairs most accurately represents the ease of traceability cost?
A. Direct costs and Indirect costs
B. Variable costs and Fixed costs
C. Product costs and Period costs
D. Standard costs and Operation costs
E. Sunk costs and Incremental costs

B NOT THIS

--------------------------------------------------------------------------
A. Since direct costs are the most easily traced.

24

The primarily purpose for carrying on cost Accounting activities are?
A. To set asset values
B. To measure in cost or core
C. To plan operation
D. To control operation
E. None

A

25

Over and Under Applied Over Head occurs when?
a. when either the overhead cost driver are estimated incorrectly
b. when actual cost are equal to estimate cost
c. when the amount of the estimated cost driver equals the amount of the cost driver
d. not often
e. when estimated overhead and the estimated cost driver are forecasted perfectly.

A

26

Chief Accounting officer in an organization is :
a) Vice President of Finance
b) Treasurer
c) Controller
d) General Accounting manager
e) tax manager

C

27

financial accounting information is most generally most useful to :
a) external parties b) internal parties c) environmentalist d) government agencies e) management decision maker

A

28

All the following are period cost except:
a) order getting costs b) order delivery cost c) factory rent
d) advertising cost e) administrative cost

C

29

Which of the following would most likely classified as direct material cost?
a) factory supplies b)an engine in a custom automobile c)depreciation in the assembly group d)Advertising expenses e)none

B

30

Pairs that most accurate for the cost volume analysis
a) direct cost and indirect cost
b) fixed cost and variable cost
c) product cost and period cost
d) standard cost and operation cost
e) sunk cost and incremental cost

B

31

15. the cost of rent for manufacturing plant is generally considered to be
Prime Cost Product Cost
a) no yes
b) no no
c) yes no
d) yes no
e) manufacturing plant rent is not normally either of the 4 answers

A

32

23. Target pricing :
A target cost + target profit
B target cost – target profit
C target cost – target profit
D Target cost= target price-target profit
E none are correct

E

33

Initial cash cost of investment $75,000
Estimated annual cash savings $18,000
Predicted residual value at the end of life $3,000
Estimated useful life 2 years
Cost of capital 12%
If Present Value factor of an annuity of $1 at 12% and 7 years is 4.564 and the present value factor of a payment of $1 at 12% and 7 years is 0.452. what is the total present value of the estimated cash inflow?

A 4,167 years
B $82,152
C $1,356
D $83,508
E $8,508


D

?????
----------------------------------------------------------------------
PV of annuity: 4.564

18,000 x 4.564 = 82152 Present value of cost savings/ cash inflow.

B. Wow so easy.

34

Huts sells hot dog $2/each. The variable cost is $1 and $0.35 is fixed overhead cost. A summer camp wishes to buy 100 hotdogs for $1.25/each. Whats the profit for hut?
A increase by $65
B increase by $10
C decrease by $10
D decrease by $65
E none

C

Wishes to buy 100. Look at 100 and think 10


35

Lamar’s disc rate 12 %. If the discount rate the present value of an annuity of $1 at 12% for 8 years is 4.968 what is the present value of the salvage value ?
A $99,360
B 10
C $248,400
D $596,160
E the answer can’t be compute

E

NOT E
?????
-------------------------------------------------------------------------
I know this is a part of capital budgeting, but in the equations i've been looking through, they have something to do with the cash flow yearly, which this problem doesn't give.

I think it's E.

If the problem gives you a beginning salvage value, multiply it with 4.968.

36

kamp corporation has the following info
Unit sales price $10
Total fixed cost $50,000
Variable cost per input $6
Compute contribution margin?
A $10
B $6
C $5
D $4
E $3

Also find the _____?
A.83,xxx
B. 50,000

Contribution margin = Sales revenue – Variable expense D. $4 (10 – 6)


NOT 83,00

37

Which phrase best describes the current role of a management accountant in an organization?

A. managerial accountants prepare the financial statements for publication
B. managerial accountants are primarily information collectors.
C. managerial accountants make key decisions for an organization.
D. managerial accountants facilitate the decisions for an organization
E. managerial accountants file the organization tax returns.

D

38

What is the variable cost ratio?
Total $ %
$37,500
$15,000
$22,500 60%

$15,000
$ 7,500
_____________________________
A 100%
B 40%
C 60%
D 75%
E none

C. 60% (6/10 X 100)= 60
Total $ %
$37,500
$15,000
$22,500 60%
$15,000
$ 7,500

39

Hilton Corporation had sales revenue of $1,105 for the month. Marketing expenses for the month were $60 and administrative expenses were $50

Inventory classification 1st day of the month end of month
Direct material $60 $70
Work in process 120 115
Finished goods 150 165

During the month, Hilton purchased $250 of raw materials and spent $400 of direct labor. Other manufacturing costs such supervisory salaries and utilities were $90 and plant equipment depreciation was $100.

Direct materials used for the month are?
A. 240
B. 285
C. 590
D. 640
E. 830

One question will be What are the Direct labor used for the month?
DL=?

A. 240 [(60+250)-70=240]

DIRECT MATERIAL SO LOOK AT ONLY DM

60+250=310 - 70=240

Hilton purchased 250$ of raw material
Beginning DM=60

40

A thing of value that is owned by an organization and is expected to provide future benefit is classified as which of the following?

A. asset
B. liability
C. equity
D. revenue
E. expense

A

41

A quantified plan of action for management is

A. certified balance sheet
B. certified income statement
C. statement of cash flows
D. budget
E. cost of production report

D

42

Which equation best represents the basic production budget?

A. Sales forecast in units - projected ending inventory - beginning inventory
B. Total projected production needs - beginning inventory + projected ending inventory
C. Sales budget in units + projected ending inventory – beginning inventory
D. Projected production volume – projected ending inventory – beginning inventory
E. Sales budget in units + projected ending inventory – projected ending inventory

C

43

52. Scuffy has the following product information
Sales price $7.50 per unit
Variable cost $2.25 per unit
Fixed cost $10,000
Units sold 20,000
What is breakeven point in sales?

1905 7.50-2.25=5.25
10000/5.25=1905

Sales price - Variable cost=5.25
Fixed Cost/Answer=1905

LOOK AT THIS BREAKEVEN POINT

44

Scuffy has the following product information.
Sales price $7.50 per unit
Variable cost $2.25 per unit
Fixed cost $10,000
Units sold 20,000

What is total contribution margin?

Contribution margin = Sales revenue – Variable expense. 105000 (7.5 X 20,000) – (2.25 X 20,000) = 105000

(Sales Price x Unit Sold) - (Variable x Units Sold)
LOOK AT THIS TOTAL CONTRIB MARGIN
------------------------------------------------------------------------
lol wtf.

correct.

45

Selected sales and cost data for a special job are below

Direct materials used $100,000
Direct labor 150,000
F overhead 75,000 (100% indirect, 40%variable)
Selling and administration 120,000(50% direct, 60% variable)
Compute the period costs?

60000 (120,000 X 0.50)

Period think of #6 and 000000

Selling and admin x Direct
--------------------------------------------------------------------------
Period Costs: distribution, selling and administrative, marketing.

46

Selected sales and cost data for a special job are below:
Direct materials used $100,000
Direct labor 150,000
F overhead 75,000 (100% indirect, 40%variable)
Selling and administration 120,000(50% direct, 60% variable)

Compute the prime costs?
a. 250,000
b. 225,000
c. 310,000
d. 135,000
e. 325,000

Prime costs = Direct material + Direct Labor
100,000+150,000 250000

A

47

Which one of the following regarding ethics is true.

(b) Ethical issues frequently arise in the course of a management accountant’s work.

48

In theory, what is a sacrifice made when we give up a resource to obtain a resource that will benefit the firm

(b) A cost

49

Cost information-

(c ) Is used by managers across an organization.

50

A predetermined overhead rate is equal to

a. Divide estimate overhead by estimated units of the cost driver.
b. Multiply estimate overhead by estimate units of the cost driver.
c. Divide the predetermined overhead rate by the actual units of the cost driver.
d. Multiply the predetermined overhead rate by the actual units of the cost driver.

(a) Estimated overhead Divided by estimated units of the cost driver.

They're both estimated

51

D.M -- $7000
D.L -- $2000
M. Overhead - $10,000
Work-in-process(bb) $ ?
End work in process$4000
Cost of Goods Manufactured $18,000
Revenue $25,000 F.Goods(bb)$6000
Cost of Gods Sold $ ?
F. Goods(eb)$9000
Operating expense$6000
Net income $ ?
Gross margin (profits)$ ?
What is the cost of good sold?

(c) 15,000



F.Good (bb) + CGM – F.Good (eb) = CGS

18,000+6,000=24,000-9000=15,000

Cost of Goods Manufactured $18,000
Fixed Goods$6000
Cost of Gods Sold $ ?
Fixed Goods)$9000

52

Which of the following is true?

(a) factories already running at full capacity should have increased fixed costs if new special orders are accepted.

53

Comparing actual outcomes with budget outcomes, then following up, is a example of a .
a. planning activities
b. operating activities
c. controlling activities
d. accounting activities
e. staffing activities

D or B. Most likely D
or C

54

The following information is provided for company Z.
Per unit Total %
Sales revenue (1500 units) $37,500
Variable costs $15,000 40
Contribution Margin $22,500
Fixed cost $15,000
Net income$7,500

What are the Fixed costs per unit?
What is the price per unit?

Fixed cost per unit:(a) $10.00
15,000/1500
Fixed cost/Units


Price per unit: 37,500/1500)= 25

LOOK AT UNITS. That line. And then divide

55

Classified as a “Period cost”— Period cost =

Period cost = Variable cost + Manufacturing
overhead.
Period cost: Operating costs that are expensed in the period in which they are
incurred.

56

Total Contribution margin =

Sales revenue – Variable expense

57

Budget

The budget is a financial plan. The budgeted sales and cost data help
managers plan the hotel’s target profit (revenues – expenses

58

Break-even sales in units

The number of units you need to sales in break-even.

59

Break-even Point

The sales level at which operating income is zero.
Total revenues = total expenses

60

The going concern assumption assures that the loss

Will remain in operation for the foreseeable future

61

An increase in the discount rate:

The question might be
Which of the following is true about an increase in the discount rate?
A. It reduces the cost of reserves borrowed from the Federal Reserve.
B. It signals the Federal Reserve's desire to restrain money growth.
C. It signals the Federal Reserve's desire to support credit creation.
D. It signals the Federal Reserve's eagerness to lend additional reserves.

Will decrease the future value of the cash flow (if this ans not given) Then
None of the above


____________________
B

62

The amount of overhead applied to a product or service is normally calculated by.
a. Divide estimate overhead by estimated units of the cost driver.
b. Multiply estimate overhead by estimate units of the cost driver.
c. Divide the predetermined overhead rate by the actual units of the cost driver.
d. Multiply the predetermined overhead rate by the actual units of the cost driver.
e. Multiply the actual overhead rate by the predetermined overhead rate

A

63

Which of the following does not appear in financial statement service

Capital Accounts

64

Cost information

a. Is important for manufacture companies.

65

Which of the following is not a capital budgeting method.

e. Excess present value index.

66

Period Cost

Depreciation on assembly equipment.

67

Hilton Corporation had sales revenue of $1,105 for the month. Marketing expenses for the month were $60 and administrative expenses were $50

Inventory classification
1st day of the month end of month
Direct material $60 $70
Work in process $120 $115
Finished goods $150 $165

During the month, Hilton produced and transferred into finished Goods units with a
Cost of $915. The cost of good sold for the month was

D. $900

Finished goods start+ Cost=1065 - End


How?

The cost of good sold for the month

68

A cost that is not a “Product Cost”?

d. Computer depreciation

69

David has the following product information.
Sales price 7.50 a unit
Variable cost 2.25 a unit
Fixed cost $10,000
Units sold 20,000

What is the contribution margin per unit?

a) 7.50
b) 5.25
c) 9.75
d) 4.75
e) None

B

CONTRIBUTION MARGIN PER UNIT

7.50-2.25 = 5.25

70

David has the following product information.
Sales price 7.50 a unit
Variable cost 2.25 a unit
Fixed cost $10,000
Units sold 20,000
What is the contribution margin ratio?

CM ratio = CM / Sales. 70%

5.25 X 20000 / 7.50 X 20000

(Sale price-Variable) x Units sold= Y
Y/Sales price x Units Sold
-------------------------------------------------------------------------
$7.50 - $2.25 = $5.25 (CM)
$5.25/ $7.5 = .7 or 70%

71

92. In setting the price of a particular product / service for the congress, which of the following should represent the best cost basis?
a. Product / service cost
b. Marketing cost
c. Administrative cost
d. Production market cost
e. Production market and administrative cost

E

72

An alternate name for the “Time Adjusted rate of return is:
a. Cost of capital
b. The hurdle rate
c. The minimum rate of return
d. The investment burden rate
e. The internal rate of return

E

73

What type of their special short run decision is most likely to be needed to make:
a. Accept reject a special order
b. Bring standard product
c. Make it your self or buy it from out side
d. Sell now or process future
e. All

C
--------------------------------------------------------------------------

This one you can probably figure out by looking at the problem they'll give you (:

74

Which of the following is most representative of what is a summary cash budget?
a. cash flow from activities
b. cash flow from O/P
c. cash flow from Investing activities
d. cash flow from Borrowing activities
e. All

E

75

Unplanned uses of organization recourses, usually measured by the resources given up are defined as?
a. An expense
b. A cost
c. A loss
d. A production cost
e. A period cost

A

76

Which of the following accounting is in the Calculation of working capital:
a. Retained Earning
b. Sales
c. Merchandise Inventory
d. Common stock
e. Long-term debt

C
-------------------------------------------------------------------------
Working Capital = Current Assets - Current Liabilities

merchandise inventory is a current asset

77

Used by individual, staffs, managers department are...?

Budgets

78

What is important for manufacture companies.

The cost information

79

Managers should use budget for
a. planning activities
b. operating activities
c. controlling activities
d. accounting activities
e. staffing activities

A

80

Cost volume profit analysis attempt to answer which of the following:
a. which sales volume is needed to break even.
b. which sales volume is needed to make a desire profit.
c. Given the sales volume, what is expected profit.
d. How would change in price, variable cost, and out put affect profit
e. All

E or D or C?

???

The cost-volume-profit analysis helps managers predict the outcomes of
their decisions. For a given level of expected sales volume, it helps managers plan costs and predict
operating income or loss.
--------------------------------------------------------------------------
E. Again!

81

I NET present profit value of an investment is less than 0 and the cost capital is 16% the internal rate of return would be:
a. up 16
b. = 16
c. down 16
d. cannot determine
e. none

C

Down 16 because less than 0

82

Cost volume profit (CVP) analysis to answer which of the following
a) what sales volume is needed to break even
b) what sales volume is needed to make a desired profit
c) given a sales volume, what is the expected profit?
d) how could changes in price, VC, TF and output affect profit?
e) all

D or E?

???

These graphs provide cost-volume-profit
relationships for decision makers. The cost-volume-profit analysis helps managers predict the outcomes of their decisions. For a given level of expected sales volume, it helps managers plan costs and predict operating income or loss.

I'm guessing its C or maybe E?
-------------------------------------------------------------------------
All of the above!
E.

83

Paid parking for employees of law firm=

Indirect activity

84

Corn

Not -10 and not +400

85

115. The principle that requires every business to be accounted for separately and distinctly from it’s owner or owners is known as the

A. Objective
B. Business entity
C. Growing – concern
D. Revenue recognition
E Cost

A
-------------------------------------------------------------------------

Economic/Business Entity
B.

86

113. Nik’s beginning equity 4,350 million, Net income 490 million dividends withdraw 100 million. Increase in equity due to the times 50 million. It’s ending equity is?

A. 3,810 million
B. 4,690 million
C. 470 million
D. 4,990 million
E. 371 million

A


4350-540=3,810

490+50=540

87

108. Which of the following isn’t accounting assumption

A. Integrity
B. Going concern
C. Time period
D. Economic entity
E. None

A

88

5000 units of product $10/ unit. The normal domestic price is 12/unit
VC = $9.00
FC = $1.00
What is the gain or loss

A. Gain 5000
B. Loss 5000
C. Gain 10,000
D. Loss 10,000

--------------------------------------------------------------------------
Special Order:

Fixed costs are covered so:

$10 per unit - $9 variable cost = $1 CM
5000 gain...

5000 gain

???
--------------------------------------------------------------------------
Maybe this is a relevant cost problem, make or buy?
The Fixed Cost would be allocated to the "bought" product, but idk how 5000 gain can be found from the info given.

On test


WAS ON TEST

89

Know conversion cost formula

Which is... Direct Labor Cost + Manufacturing Overhead Cost

90

Something something starting point.

Not regression line
--------------------------------------------------------------------------

LOL.
might be about starting with sales in a budget?

91

How to calculate NPV? (Was on test)

??? CH 9
--------------------------------------------------------------------------
NPV compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account. If the NPV of a prospective project is positive, it should be accepted. However, if NPV is negative, the project should probably be rejected because cash flows will also be negative.

http://puu.sh/5pv5G.png

Present value of cost savings - Present value of required investment = NPV.

e.g.
Initial Cost : 50000
Life of project: 5 years
Annual cost savings = 18000
Salvage: $0
Required rate of return = 20%

Present Value of Annuity: 2.991(found by checking an appendix)

18000 x 2.991 = 53838 (Present value of cost savings)

53838 - 50000 = 3838 NPV.

92

Selected sales and cost data for a special job are given below
Direct material used 100,000
Direct labor 150,000
Factory overhead (100% direct, 40% variable) 75,000
Selling and administration ( 50% direct, 60% variable)120,000
What is the product cost?
a. 120,000
b. 225,000
c. 352,000
d. 135,000
e. 93,000

What is the product cost?

In the case of manufactured goods, product costs
would include direct material, direct labor, and manufacturing overhead.

CH 7


93

What is not in Fin accounting?

Ch 1

94

What does no appear in financial statement?

Ch 2

95

What is costing system?

??? CH 3

96

What is the direct material in production?
Similar to this
D.M -- $7000
D.L -- $2000
M. Overhead - $10,000
Work-in-process(bb) $ ?
End work in process$4000
Cost of Goods Manufactured $18,000

Revenue $25,000 F.Goods(bb)$6000
Cost of Gods Sold $ ?
F. Goods(eb)$9000
Operating expense$6000
Net income $ ?
Gross margin (profits)$ ?
What is the cost of good sold?

???

CH 5
--------------------------------------------------------------------------
COGM:
WIP (beginning) = ?
DM= 7000
DL = 2000
Overhead 10,000
WIP (ending) = 4000
COGM = 18,000

COGM = WIP (beg) + DL + DM + MO - WIP (end)
18,000 = ? + 2000 + 7000 + 10000 - 4000
? =

Part Two:
COGS:
COGM = 18,000
Finished Goods (beginning) = 6000
Finished Goods (ending) = 9000

COGS = COGM + Finished Goods (beginning) - Finished Goods (ending)
= 18000 + 6000 - 9000

97

Actual+Budget=

CH 5

In each quarter,
in addition to that quarter’s budgeted sales
, an ending inventory buffer is
added. This buffer is so that ther
e are sufficient finished goods availa
ble to begin the following quarter and
also to accommodate budget inaccuracies
should actual sales be larger than
budgeted sales.