management accounting by horngren 11th edition exam 1 review

8/2/2019 Management Accounting by Horngren 11th edition Exam 1 Review

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Exam 1 review

This review does not cover every

thing, use it with your books,notes, handouts, and quizzes.



Chapter 1

• Accounting is ….



Chapter 1

• The difference between financialaccounting and cost accounting is…



Chapter 1

• What is a budget?



Chapter 1

• Value chain is……..



• What are the four professional ethicsstandards?

Chapter 1



Chapter 2

• Definitions you need to know: – Cost

– Actual cost

– Cost object

– Direct costs and indirect costs

– Examples on direct and indirect costs

– Variable and fixed costs

– Cost driver

– Relevant range

– Cost behavior



Chapter 2

• You need to know how to graph total fixedcosts, per unit fixed costs, total variable

costs and per unit variable cost.



Chapter 2

• You need to know the difference betweentracing a cost and allocating a cost.

• You need to know the difference betweenmanufacturing firms and service firms interms of the inventory accounts they

maintain.



Chapter 2

• You need to know the difference betweeninventoriable costs and period costs.

• Prime costs = ?+?• Conversion costs = ?+?

• You need to know how to calculate

overtime premium.



Chapter 2

• These are important equations, there will be severalapplications on how to calculate DM used, COGS, COGM,and gross margin:

– DM used = DM Beginning Inventory + DM purchased - DMEnding inventory

– Cost of Goods manufactured = Beginning WIP Inventory + (DM+ DL+ MOH) – Ending WIP Inventory

– Cost of Goods Sold = Beginning Finished Goods Inventory +Cost of Good Manufactured – Ending Finished Good Inventory

– Gross margin = Sales revenue – Cost of Goods Sold



Questions:



Chapter 2

• 2-1 When 10,000 units are produced,fixed costs are $14 per unit. Therefore,

when 20,000 units are produced fixedcosts

• a. will increase to $28 per unit.

• b. will remain at $14 per unit.

• c. will decrease to $7 per unit.

• d. will total $280,000.



Chapter 2

• 2-2 Tire and Spoke Manufacturing currently produces1,000 bicycles per month. The following per unit dataapply for sales to regular customers:

• Direct materials $50

• Direct manufacturing labor 5• Variable manufacturing overhead 14• Fixed manufacturing overhead 10• Total manufacturing costs $79

• The plant has capacity for 3,000 bicycles and isconsidering expanding production to 2,000 bicycles.What is the per unit cost of producing 2,000 bicycles?



Chapter 2

• 2-3 The West Company manufactures several differentproducts. Unit costs associated with Product ORD203 areas follows:

• Direct materials $ 40• Direct manufacturing labor 8

• Variable manufacturing overhead 12

• Fixed manufacturing overhead 23

• Sales commissions (2% of sales) 6• Administrative salaries 9

• Total $98



Chapter 2

• What are the variable costs per unitassociated with Product ORD203?

• What are the fixed costs per unitassociated with Product ORD203?

• What are the inventoriable costs per unitassociated with Product ORD203?

• What are the period costs per unitassociated with Product ORD203?



Chapter 2

• 2-4 The following information pertains toScott’s Production Company:

Beginning finished goods, 1/1/20x3 $ 40,000Ending finished goods, 12/31/20x3 33,000

Cost of goods sold 250,000

Sales revenue 600,000Operating expenses 120,000



Chapter 2

• What is cost of goods manufactured for20x3?

• What is gross margin for 20x3



Chapter 2

• 2-5 Within the relevant range, if there is achange in the level of the cost driver then

• a. fixed and variable costs per unit will

change.• b. fixed and variable costs per unit will

remain the same.• c. fixed costs per unit will remain the

same and variable costs per unit will change.• d. fixed costs per unit will change andvariable costs per unit will remain the same.



Chapter 4

• Definitions you need to know:

– Cost pool.

– Cost allocation base.



Chapter 4

• You need to know how to calculate theoverhead allocation rate.



Chapter 4

• You need to know in what cases jobcosting system is used and in what cases

process costing system is used.



Chapter 4

• You need to know the difference betweenactual costing, normal costing and

standard costing.



Chapter 4

• You need to know three approaches todisposing underallocated or overallocated

overhead.



Chapter 4

Questions:



Chapter 4

• 4-1 XYZ is a manufacturing company thatuses job order costing system. Its job

costing system has two direct costcategories, DM and DL, and one indirect-cost pool. The indirect costs are allocated

at a rate of $30 per machine-hour. Thefollowing data in millions pertain tooperation of 2004:



Chapter 4

• Material control, Dec 31, 2003 $12• WIP control, Dec 31, 2003 2• Finished Goods Control, Dec 31, 2003 6• Material and supplies purchase on account 150• Direct material used 145

• Indirect material issued to various production department 10• Direct manufacturing labor 90• Indirect manufacturing labor 30• Depreciation on plant and equipments 19• Other manufacturing OH incurred 9• Manufacturing OH allocated (2,100,000 MHs) ?• Cost of goods manufactured 294

• Revenue 400• Cost of goods sold 292• Required:• Journal entries, posting, and ending balance of WIP.



Chapter 4

• 4-2 The Dougherty Furniture Companymanufactures tables. In March, the twoproduction departments had budgeted allocation

bases of 4,000 machine-hours in Department100 and 8,000 direct manufacturing labor-hoursin Department 200. The budgetedmanufacturing overheads for the month were

$57,500 and $62,500, respectively. For Job A,the actual costs incurred in the two departmentswere as follows:



Chapter 4

• Department 100 Department 200

Direct materials purchased on account $110,000 $177,500

Direct materials used 32,500 13,500

Direct manufacturing labor 52,500 53,500Indirect manufacturing labor 1,000 9,000

Indirect materials used ,500 4,750

Lease on equipment 16,250 3,750

Utilities 1,000 1,250



Chapter 4

• Job A incurred 800 machine-hours in Department 100and 300 manufacturing labor-hours in Department 200.The company uses a budgeted overhead rate for

applying overhead to production. • Required:

• a. Determine the budgeted manufacturingoverhead rate for each department.

• b. Prepare the necessary journal entries tosummarize the March transactions for Department 100.

• c. What is the total cost of Job A?



Chapter 4

• Answer:

a. Manufacturing overhead rate Department

100 = $57,500/4,000 hours= $14.375 per machine-hour

Manufacturing overhead rate Department

200 = $62,500/8,000 hours= $7.8125 per labor-hour



Chapter 4

• b. Materials Control Department 100 110,000• Accounts Payable Control 110,000• Work-in-Process Control Department 100 32,500• Manufacturing Overhead Control Department 100 7,500• Materials Control Department 100 40,000

• Work-in-Process Control Department 100 52,500• Manufacturing Overhead Control Department 100 11,000• Wages Payable Control 63,500• Manufacturing Overhead Control Department 100 17,250• Leaseholds Payable Control 16,250• Utilities Payable Control 1,000

• Work-in-Process Ctrl Dept. 100 ($14.375 x 800 hrs)11,500• Manufacturing Overhead Allocated 11,500•



Chapter 4

c. Job A:Direct materials Dept. 100 $ 32,500Direct materials Dept. 200 13,500

Direct manufacturing labor Dept. 100 52,500Direct manufacturing labor Dept. 200 53,500Manufacturing OH Dept. 100 ($14.375 x 800) 11,500Manufacturing OH Dept. 200 ($7.8125 x 300) 2,344

Total $165,844



Chapter 17

• You need to know examples of industriesthat would use process costing.

• You need to know the principal differencebetween process costing and job ordercosting.



Chapter 17

• What are the equivalent units ?



Chapter 17

Questions:



Chapter 17

• 17- 1The following information pertains to XYZ company:

• Beginning WIP (DM 100%, Conversion cost 60%) 225 units

• Units started in the current period 275 units

• Units complete in the current period 175 units• Ending WIP (DM 100%, Conversion 50%) 100 units

Cost DM Conversion

Beginning WIP 18,000 8,100

Costs incurred in the current period 19,800 16,380

Required:

Calculate the cost of complete and ending WIP.



Chapter 17

• 17-2 Which one of the following statements istrue?

• a. In a job-costing system, individual jobs

use different quantities of production resources.• b. In a process-costing system each unituses approximately the same amount of resources.

• c. An averaging process is used tocalculate unit costs in a job-costing system.• d. Both (a) and (b) are true.



Chapter 17

• 17-3 In a process-costing system, the calculationof equivalent units is used for

• a. calculating the dollar amount of ending

inventory.• b. calculating the dollar amount of the

cost of goods sold for the accounting period.

• c. calculating the dollar cost of aparticular job.

• d. both (a) and (b).



• Please email me if you have a question.

• Good luck.

management accounting by horngren 11th edition exam 1 review

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