managerial accounting

  1. Process Costing
    • -a company produces many units of a single product
    • - one unit of product is indistinguishable from other units of product
    • - identical nature of each unit of product enables assigning the same average cost per unit
  2. Examples of companies of Product Costing
    • --Weyerhaeuser (paper manufacturing)
    • -- Reynolds Aluminum (refining aluminum Ingots)
    • -- Coca-Cola (mixing and bottling beverages)
  3. Job Order Costing Characteristics
    • -- many different products are produced each period
    • -- Products are manufactured to order
    • -- the unique nature of each order requires tracing or allocating costs to each job, and maintaning cost records for each job.
  4. Example of companies that use Job-Order Costing
    • -- Boeing (aircraft manufacturing)
    • -- Walt Disney Studios (movie production)
    • -- Bechtel International (large scale construction)
  5. Predetermined Overhead Rate (POHR)
    • estimated total MOH cost for the coming period
    • estimated total units in the allocation base for the coming period (direct labor hours)
  6. Why should we use POHR
    makes if possible to estimate total job costs sooner
  7. Determining POHR
    • -- estimate level of production for the period
    • -- estimate total amount of the allocation base for the period
    • -- estimate total manufacturing overhead costs
  8. Schedule of Cost of Goods Manufactured
    Beg. Raw Materials inventory + Purchase of raw materials = Total Raw Materials Available - Ending raw marterials inventory = Raw materials used in production - Indirect materials used in MOH + Direct labor + MOH applied in WIP inventory = Total Manufacturing cost + Beg WIP Inv. - End WIP Inv. = COGM
  9. Schedule of Cost of Goods Sold
    Beg. finished goods inv. + COGM = Goods available for sale - Ending finished goods inv. = Unadjusted COGS + Under/-Over applied Overhead = Adjusted COGS
  10. Overhead Applied
    POHR x Actual Activity
  11. How do you find out if an item is over/under applied
    Use Applied Overhead = POHR x Actual Direct Labor Hours
  12. Underapplied Overhead
    exists when the amount of overhead applied jobs during the period using the POHR is less than the total amount of overhead actually incurred during the period.
  13. Overapplied Overhead
    exists when the amount of overhead applied to jobs during the period using the POHR is greater than the total amount of overhead actually incurred during the period
  14. What effect will the adjustment of the overapplied overhead have on net operating income
    Net Operating Income will increase
  15. What are the four levels used in cost Hierarchy
    • -- Unit-Level
    • -- Batch-Level
    • -- Product Level
    • -- Facility Level
  16. How is Unit-Level used
    • Activities include
    • processing units on machines, processing units by hand, consuming factory supplies
    • Activitity Measure
    • machine-hours, direct labor hours, units produced
  17. How is Batch-Level used
    • Activities include
    • processing purchase orders, processing production orders, setting up equipment, handling materials
    • Activity Measure
    • purchase orders processed, production orders processed, number of setups, pounds of material handled
  18. How is Product level used
    • Activities include
    • testing new products, administering parts inventories, designing products
    • Activity Measure
    • hours of testing time, number of part types, hours of desing time
  19. How is Facility- Level used
    • Activities include
    • general factory administration, plant building and grounds
    • Activity Measure
    • direct labor-hours, direct labor-hours
  20. Computing Activity Rates
    Estimated Overhead Cost / total expected activity
  21. Computing Overhead Cost Per Unit
    • Expected Activity x Activity Rate
    • Add them all up and divide by the number of units produced
  22. Finding the total Overhead Applied in an ABC System
    Activity Rate x Actual Activity and add all the activities up
  23. Formula for computing the cost per equivalent unit
    • Cost of beg. Work in process inventory + cost added during the period
    • Equivalent units of production
    • * do that for both Materials and Conversion and add them up
Card Set
managerial accounting
2nd test