Activity-Based Costing Traditional Costing Systems Allocates overhead using a single predetermined rate. ► Job order costing: direct labor cost may be the relevant activity base. ► Process costing: machine hours may be the relevant activity base. Assumption was satisfactory when direct labor was a major portion of total manufacturing costs. ► Wide acceptance of a high correlation between direct labor and overhead costs. 4-3 LO1 Recognize the difference between traditional
Premium Costs Manufacturing Activity-based costing
and nonfinancial aspects of the plan. 2. The revenues budget should be based on the production budget. 3. A favorable variance should be ignored by management. 4. The direct manufacturing labor price variance is likely to be unfavorable if lower-skilled workers are put on a job. 5. For fixed overhead costs‚ the flexible-budget amount is always the same as the static-budget amount. II. MULTIPLE CHOICE 6. The plans of management are expressed formally in: A. the annual report
Premium Variable cost Cost Manufacturing
expect to collect during the month of April? A. $286‚500 B. $320‚000 C. $192‚000 D. $94‚500 Solutions: A 270‚000 * 70% = 162‚000 270‚000 * 35% = 94‚500 320‚000 * 60% = 192‚000 94‚000 + 192‚000 = 286‚500 2. Fab Manufacturing Corporation manufactures and sells stainless steel coffee mugs. Expected mug sales at Fab (in units) for the next three months are as follows: Fab likes to maintain a finished goods inventory equal to 30% of the next month’s estimated sales
Premium Balance sheet Manufacturing Inventory
(drugs and medical devices)‚ physician surgical time‚ and operating room over-head. On January 1 of the current year‚ the annual operating room overhead is estimated to be: Disposable supplies $124‚500 Depreciation expense 24‚000 Utilities 15‚300 Nurse salaries 188‚000 Technician wages 47‚200 Total operating room overhead $399‚000 The overhead costs will be assigned to procedures based on the number of surgical room hours. The Medical Center expects to use the operating room an average
Premium Surgery Employment Wage
information for a manufacturing Enterprise by compiling a production cost statement. 1. The financial statements of manufacturing enterprises The financial statements of the manufacturing enterprise differs very little from those of the merchandising enterprise. Account titles on the balance sheet of the manufacturer are similar to those used by the merchandiser. The main difference between the balance sheets is the use of three inventory (stock) accounts by the manufacturing enterprise while merchandising
Premium Manufacturing Inventory Costs
basic objectives of an organization. A) Only I B) Only II C) Only I and II D) I‚ II‚ and III Answer: A Level: Medium LO: 2 24. Which of following would normally be found on a manufacturing company ’s organization chart? A) the layout of the factory assembly lines B) a list of the materials needed to produce each of the company ’s products C) the informal lines of reporting and communication
Premium Manufacturing Costs Inventory
1. Unit based costing first assigns overhead costs to departmental pools and then assigns these costs to products using predetermined overhead rates. a. True b. False ANSWER: True 2. Management information systems can be divided into a unit-based type and activity-based type. a. True b. False ANSWER: True 3. Predetermined overhead rates are calculated at the end of each year using the formula: overhead rate = budgeted annual driver level/budgeted annual driver level. a. True b. False ANSWER:
Premium Activity-based costing Costs Manufacturing
Study Sportway Corporation Sportway is a wholesale distributor supplying a wide range of moderately priced sports equipment to large chain stores Products: 60% purchased‚ 40% manufactured The company has a Plastics Department that is currently manufacturing molded fishing tackle boxes Sportway is able to manufacture and sell 8‚000 tackle boxes annually‚ making full use of its direct-labor capacity at available work stations Bo Vonderweidt‚ the production manager‚ wanted to put forward his suggestion
Premium Contribution margin Cost Manufacturing
sheet below by placing an "X" under each heading that identifies the cost involved. The "Xs" can be placed under more than one heading for a single cost. (5 Points) Variable Cost Fixed Cost Direct Materials Direct Labor Manufactu ring Overhead Period Cost Materials costs X X Production line workers wages X X Production Equipment rental X X Factory Building depreciation X X Advertising costs X X
Premium Manufacturing Costs Variable cost
Traditional Costing Systems • Product Costs – Direct labor – Direct materials – Factory Overhead • Period Costs – Administrative expense – Sales expense Appear on the income statement when goods are sold‚ prior to that time they are stored on the balance sheet as inventory. Appear on the income statement in the period incurred. Traditional Costing Systems • Product Costs – Direct labor – Direct materials – Factory Overhead • Period Costs – Administrative expense – Sales expense Direct labor and direct
Premium Costs Manufacturing