Review

Question 1

Under applied manufacturing overhead

Answer 1

Excess of ACTUAL manufacturing overhead costs over applied manufacturing overhead costs

Question 2

Over applied manufacturing overhead

Answer 2

Excess of APPLIED manufacturing overhead costs over actual manufacturing overhead costs

Question 3

Cost of Goods Manufactured

Answer 3

Total manufacturing costs
+ Beginning Work-In-Progress
- Ending Work-In-Progress

Cost associated with units completed and transferred out during current production period

Question 4

Cost of Goods Sold

Answer 4

Cost of Goods Manufactured
+ Beginning Finished Goods Inventory
- Ending Finished Goods Inventory

Question 5

Equivalent Units of Production

Answer 5

Work required to COMPLETE units in beginning inventory
+ Number of units started and completed this period
+ Degree of completion of units in ending inventory

Question 6

Total Manufacturing Costs

Answer 6

Cost of beginning WIP inventory

+ Costs added to production process this period

Question 7

Process Costing

Answer 7

1. Find Equivalent Units of Production done during the processing time period
2. Calculate product cost per unit
   total cost during period/work done
   3.Calculate total cost of units completed and transferred out
3. Calculate total cost of units remaining at the end of production period (ending WIP inventory)

Question 8

Formula:

Work done in CURRENT period on BEGINNING WIP inventory

Answer 8

Number of physical units x (1 - percent completed last period)

Question 9

Formula:

Work done in CURRENT period on ENDING WIP inventory

Answer 9

Number of physical units x percent completed in current period

Question 10

Conversion Costs

Answer 10

Represents all direct labor and manufacturing overhead input during the period

Question 11

Formula:

Production Costs per Unit

Answer 11

Beginning WIP:
(Direct materials total cost/equivalent. units)
+ (Conversion total cost/equivalent units)
+ Current Period:
(Direct materials total cost/equivalent units)
+ (Conversion cost/equivalent units)

= Total Dollars In

Question 12

Formula:

Cost Transferred Out

Answer 12

Beginning WIP:
Initial direct materials
+ Initial conversion costs
+ (Cost to complete materials per unit x equivalent unit)
+ (Cost to complete conversion x equivalent units)
+ (Started and completed cost per unit x equiv. units)

= Total Cost Transferred Out

Question 13

Formula:

Cost of Ending WIP

Answer 13

(Cost per unit for direct materials x equivalent units)

+ (conversion cost per unit x equivalent units)

Question 14

Which Cost Allocation Method to Use

Answer 14

Traditional- products are the same or processes are very similar
Activity-Based Costing- nature of production process differs substantially across products

Question 15

Formula:

Activity Rate

Answer 15

Cost pool total/number of cost driver events

Question 16

Variable Costs

Answer 16

Remain the same per unit

Increase with number of units

Question 17

Fixed Costs

Answer 17

Remain constant in total

Decrease with number of units

Question 18

Formula:

Contribution Margin

Answer 18

Sales price - costs
or
current sales - break even sales

Question 19

Formula:

Break Even Point

Answer 19

Fixed costs/contribution margin
or
Fixed costs/(sales price - costs)

Question 20

Formula:

Profit

Answer 20

Sales revenue 
- Variable costs
- Fixed costs
or
(Sales price x units)
- (Variable costs x units)
- Fixed costs
or
Sales revenue
- (Contribution margin ratio x sales revenue) 
- Fixed costs

Question 21

Formula:

Contribution Margin Ratio

Answer 21

Contribution margin/net sales revenue

Question 22

Formula:

Solve for Break Even/Target Income

Answer 22

Sales revenue
- Variable costs
- Fixed costs
= 0/Target Income

Question 23

Formula:

Variable Costs

Answer 23

Variable cost per unit x number of units
or
Variable cost ratio x sales revenue

Question 24

Formula:

Variable Costs Ratio

Answer 24

Variable cost/net sales

Question 25

Formula: | Sales Mix

Answer 25

(Fixed costs + Target Income)/Variable cost ratio | =Needed sales

Question 26

Formula: | Determine Sales Volume to Achieve Target Income

Answer 26

(Sales price x units) - (variable cost x units) - fixed costs = Target Income

Question 27

Formula: | Return on Sales Revenue

Answer 27

``` Sales revenue - Variable costs - Fixed costs = percentage x sales revenue or Net income/total sales revenue ```

Question 28

Formula: | Break Even Sales in Units

Answer 28

Total fixed costs/ (sales price per unit - variable cost per unit) = Break Even Sales in Units

Question 29

Formula: | Break Even/Target Income Volume in Units

Answer 29

(Fixed costs + Target Income)/Contribution Margin

Question 30

Formula: | Break Even/Target Income In Dollar Amount

Answer 30

Sales revenue - (Variable cost ratio x sales) - Fixed costs = Profit

Question 31

Formula: | Degree of Operating Leverage

Answer 31

Contribution margin/ operating income

Question 32

Operating Leverage

Answer 32

Higher the proportion of fixed cost to variable costs, the faster income increases or decreases with changes in sales volume high degree = relatively large fixed costs = small changes big impact

Question 33

Formula: | Operating Income Change

Answer 33

percent x operating leverage

Question 34

Margin of Safety

Answer 34

High margin indicates good cushion; low margin indicates close to break even only valid on current level of sales

Question 35

Formula: | Margin of Safety

Answer 35

In Units: Current sales in units - break even sales in units In Dollars Current sales- Break even sales In Percentage (Current sales - break even sales)/current sales In Clients (Current sales - break even sales)/cost per client

Question 36

Establishing a Standard Cost System

Answer 36

1. Develop standard costs 2. Collect actual costs 3. Compare and identify variances 4. Journalize actual and standard costs and record variances 5. Report results 6. Analyze causes of significant controllable variances 7. Take action to eliminate variance or revise standard cost

Question 37

Formula: | Materials Price Variance

Answer 37

(Standard material price - actual material price) | x quantity purchased or used

Question 38

Formula: | Material Quantity Variance

Answer 38

(Standard quantity allowed - actual quantity used) | x standard price

Question 39

Formula: | Standard Quantity Allowed

Answer 39

Standard quantity per unit x actual units produced

Question 40

Formula: | Labor Rate Variances

Answer 40

(Standard rate - actual rate) x quantity of labor used/actual hours (AR-SR)(AH)

Question 41

Formula: | Materials Rate Variance

Answer 41

(Standard rate - actual rate) | x quantity used/purchased

Question 42

Formula: | Variable Overhead Spending Variance

Answer 42

(Actual rate x standard rate of overhead) | - actual amount spent on variable overhead

Question 43

Formula: | Labor Efficiency Variance

Answer 43

(Standard quantity hour - actual quantity hours) x standard rate (SH-AH)(SR)

Question 44

Formula: | Materials Efficiency Variance

Answer 44

(Standard quantity x actual quantity) | x standard rate

Question 45

Formula: | Variable Overhead Efficiency Variance

Answer 45

(Standard hours allowed for actual output - actual hours) | x standard rate

Question 46

Variance Journal Entry

Answer 46

Work in Progress Inventory (SHxSR) Wages Payable (AHxAR) Labor Rate VAriance (AR-SR)(AH) Labor Efficiency Rate (SH-AH)(SR) unfavorable ~ expense = DEBIT favorable ~ revenue = CREDIT

Question 47

Current Operations Budget

Answer 47

Needs of prior budget + ending inventory - beginning inventory

Question 48

Production Budget

Answer 48

Sales budget + ending finished goods inventory - beginning finished goods inventory

Question 49

Direct Materials Production Budget

Answer 49

Production budget x direct material per unit

Question 50

Direct Materials Purchases Budget

Answer 50

Direct materials production budget + ending direct materials inventory - beginning direct materials inventory

Question 51

Differential Costs

Answer 51

- Variable cost - Direct fixed cost - Opportunity cost

Question 52

Joint Product Cost

Answer 52

Joint costs are IRRELEVANT to ADDITIONAL PROCESSING decision pre split off point. Joint costs are RELEVANT to the decision to INITIALLY PRODUCE AN ARRAY of joint products