Review

Ch 1 2

Review Ch.1

What are the basic differences in orientation between financial and managerial Accounting ?

Managerial accounting is concerned with providing information to managers for use within the organization. Financial accounting is con cerned with providing information to stockholders, creditors, and others outside of the organization.

What are the major differences between financial and managerial accounting?

Comparison of Financial and Managerial Accounting

Exh.1-2

Review Ch.1

Distinguish between line and staff positions in an organization.

A line position is directly related to the achievement of the basic objectives of the organization. A staff position is not directly related to the achievement of those objectives; rather, it is supportive, providing services and assistance to other parts of the organization.

Review Ch.1

What are the major benefits of JIT System? The main benefits of a successful JIT sys tem

are reductions in: (1) funds tied up in inven tories;

(2) space requirements;

(3) throughput time; and

(4) defects.

More rapidresponse to

customer orders

More rapidresponse to

customer orders

Freed-up fundsFreed-up fundsReducedinventory

costs

Reducedinventory

costs

Greatercustomer

satisfaction

Greatercustomer

satisfactionHigher qualityproducts

Benefits of a JIT System

Increased throughput

Review Ch.1

Why is Process reengineering a more radical approach to improvement than total quality management?

TQM generally approaches improvement in a series of small steps that are planned and im plemented by teams of front-line workers. Process Reengineering involves completely redesigning business processes from the ground up—often with the use of outside consultants.

Review Ch.1

See your book P.30 Exercise 1-1

Exercise 1-11. Line2.Directing and motivating3.Budgets4.Planning5.Staff6.Decentralization7.Precision; Nonmonetary data8.Managerial accounting; Financial accounting9.Feedback10.Controller11.Performance report12.Chief Financial Officer

Review Ch.2

What are the three major elements of product costs in a manufacturing company ?

The three major elements of product costs in a manufacturing company are direct materials, direct labor, and manufacturing overhead.

Distinguish between the following : Direct material Indirect material Direct labor Indirect labor Manufacturing overhead

Review Ch.2

a. Direct materials are an integral part of a finished product and their costs can be conveniently traced to it.b. Indirect materials are generally small items of material such as glue and nails. They may be an integral part of a finished product but their costs can be traced to the product only at great cost or inconvenience. Indirect materials are ordinarily classified as manufacturing overhead.c. Direct labor includes those labor costs that can be easily traced to particular products. Direct labor is also called “touch labor.”d. Indirect labor includes the labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced to particular products. These labor costs are incurred to support production, but the workers involved do not directly work on the product.e. Manufacturing overhead includes all manufacturing costs except direct materials and direct labor.

Review Ch.2

Explain the differences between a product cost and a period cost A product cost is any cost involved in

purchasing or manufacturing goods. In the case of manufactured goods, these costs consist of direct materials, direct labor, and manufacturing overhead.

A period cost is a cost that is taken directly to the income statement as an expense in the period in which it is incurred

Review Ch.2

What is meant by the term cost behavior ? Cost behavior refers to how a cost will react or

respond to changes in the level of activity.

Review Ch.2

Define the following terms : differential cost, opportunity cost, and sunk cost. A differential cost is a cost that differs between

alternatives in a decision. An opportunity cost is the potential benefit that

is given up when one alternative is selected over another.

A sunk cost is a cost that has already been incurred and cannot be altered by any decision taken now or in the future.

Review Ch.2

Lompac products manufactures a variety of products in its factory. Data for the most recent month's operations appear below :

Beginning raw material Inventory $60000Purchase for raw material $690000Ending raw material Inventory $45000Direct Labor $135000Manufacturing overhead $370000Beginning work in process Inventory $120000 Ending work in process Inventory $130000

Required:Prepare a schedule of cost of goods Manufactured for the company for the month

Review Ch.2

Lompac Products Schedule of Cost of Goods Manufactured

Direct materials: Beginning raw materials inventory ............ $ 60,000 Add: Purchases of raw materials............... 690,000 Raw materials available for use................. 750,000 Deduct: Ending raw materials inventory.... 45,000 Raw materials used in production ............. $ 705,000

Direct labor................................................ 135,000 Manufacturing overhead ............................. 370,000 Total manufacturing costs........................... 1,210,000 Add: Beginning work in process inventory.... 120,000 1,330,000 Deduct: Ending work in process inventory.... 130,000 Cost of goods manufactured ....................... $1,200,000

Work-in-process inventory (January 1) $ 140,400Work-in-process inventory (March 31) 171,000Finished goods inventory (January 1) 540,000Finished goods inventory (March 31) 510,000Direct materials used 378,000Indirect materials used 84,000Direct manufacturing labor 480,000Indirect manufacturing labor 186,000Property taxes on manufacturing plant building 28,800Salespersons' company vehicle costs 12,000Depreciation of manufacturing equipment 264,000Depreciation of office equipment 123,600Miscellaneous plant overhead 135,000Plant utilities 92,400General office expenses 305,400Marketing distribution costs 30,000

Messinger Manufacturing Company had the following account balances for the quarter ending March 31, unless otherwise noted:

Required:

a.Prepare a cost of goods manufactured schedule for the quarter.

b.Prepare a cost of goods sold schedule for the quarter.

Answer:

a. Messinger Manufacturing Company Cost of Goods Manufactured Schedule for quarter ending March 31Direct materials used $ 378,000Direct manufacturing labor 480,000Manufacturing overhead

Depreciation of manufacturing equipment $264,000Indirect manufacturing labor 186,000Indirect materials 84,000Miscellaneous plant overhead 135,000Plant utilities 92,400Property taxes on building 28,800

Total Manufacturing overhead 790,200Total Manufacturing costs incurred $1,648,200

Work-in-process Statement

Beginning work-in-process inventory 140,400

Add Total Manufacturing costs incurred $1,648,200

= Total work-in-process for the period $1,788,600

Less ending work-in-process inventory 171,000

= Cost of goods manufactured $1,617,600

a.

Finished goods Statement

b.Messinger Manufacturing Company

Cost of Goods Sold Schedule For the quarter ending March 31

Beginning finished goods inventory $ 540,000

Cost of goods manufactured 1,617,600

Cost of goods available for sale 2,157,600

Ending finished goods inventory (510,000)

Cost of goods sold $1,647,600