CORNERSTONES OF MANAGERIAL ACCOUNTING 5TH EDITION PDF

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Cornerstones Of Managerial Accounting 5th Edition Pdf

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Power to heat and cool the plant in which the cell is located—Indirect c. Materials used to produce the motors—Direct d.

Labor used to produce motors—Direct f. Depreciation on the plant—Indirect h. Depreciation on equipment used to produce the motors—Direct i. Ordering costs for materials used in production—Indirect j. Engineering support—Indirect k. Cost of maintaining the plant and grounds—Indirect l.

Property tax on the plant and land—Indirect E 1. Hannah might have elected to let its ending materials inventory drop in order to save cash for downloads other than downloading materials inventory. Also, it might have elected to do so to reduce its materials inventory holding costs e.

Furthermore, Hannah might have reduced its ending materials inventory because it foresaw that demand in July would be lower than in June and did not want to be left holding additional inventory at the end of July. Alternately, Hannah might have experienced stronger than expected sales in June and used more direct materials in production than it had anticipated when downloading materials.

Regardless of the reason, it is helpful for students to understand the relationship between the cost of materials downloadd versus the cost of materials used in production in a given period. Finished goods inventory, January 1…………………………………… 6, Units completed during the year………………………………………… 94, Finished goods inventory, December 31……………………………… 7, Units sold………………………………………………………………… 93, 2.

Work in process, March 1……………………………………………… 8, Less: Because there were no beginning nor ending work-in-process or finished goods inventories, no adjustments were made for them in this statement. The income statement showing each account as a percentage of sales helps focus managerial attention on those expenses that are relatively high.

For Jasper, it appears as though administrative expense is twice as large as selling expense. Perhaps management could explain ways to reduce certain administrative expenses, such as research and development or fees incurred for general counsel e.

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Direct Direct Manufact. They are direct materials but could also be classified as overhead because of cost and convenience. Direct labor consists of the part-time employees who cook food and fill orders. Manufacturing overhead consists of all indirect costs associated with the production process. These are the utilities, rent for the building, depreciation on the equipment and register, and cost of janitorial fees and supplies.

The result is that she does not have to perform studies of the time spent by each employee on producing versus selling burger bags. In addition, it is likely that John Peterson pitches in to help fry burgers or assemble burger bags when things get hectic. Of course, during those times, he is engaged in production—not selling or administration.

Remember, accountants charge by the number of hours spent—the more time Elena spends separating costs into categories, the higher her fees. Outside use of the statements is confined to government taxing authorities and a bank if a loan or line of credit is necessary. Laworld Inc. As a result, total manufacturing cost is equal to the cost of goods manufactured. The FIFO assumption says that beginning inventory is sold before current year production.

Therefore, the cost of goods sold will be lower than it would be if there were no beginning inventory.

Cornerstones of Managerial Accounting 5th Edition – PDF Version

This can be seen in the following statement of cost of goods sold. These costs include direct materials, direct labor, and manufacturing overhead. The total of these three types of costs equals product cost. If Linda returns to school, she will need to quit her job. The lost salary is the opportunity cost of returning to school.

If Randy were engaged in manufacturing a product, his salary would be a product cost. Instead, the product has been manufactured. It is in the finished goods warehouse waiting to be sold.

This is a period cost. Jamie is working at company headquarters, and her salary is part of administrative cost. All factory costs other than direct materials and direct labor are, by definition, overhead.

The design engineer is estimating the total number of labor hours required to complete the manufacturing of a product. This total will be used to compute direct labor cost.

Cornerstones of Managerial Accounting 5th Edition – PDF Version

This is direct materials cost. The sum of direct materials and direct labor is, by definition, prime cost. The cost of converting direct materials into finished product is the sum of direct labor and manufacturing overhead.

This is conversion cost. The depreciation on the delivery trucks is part of selling cost, the cost of selling and delivering product. Selling expense………………………………………….. The materials used to create building plans are relatively inexpensive. P 1. It is an opportunity cost because it is the cost of the next best alternative to dog walking. The price is charged by Luisa to her clients; it is not her cost. Direct materials: This is also monthly labor hours as machine labor only operates the presses.

Total monthly conversion cost: The other overhead costs are traced according to their usage. Setups are assigned according to the time required. Since magazines use twice as much time, they receive twice the cost: However, since she is responsible for coordinating and managing all business functions, an administrative classification is more convincing. The costs of the tent sales are accounted for as selling expense. The tent sales are designed to sell outdated or remanufactured products.

They are not the main reason that Kicker is in business. In fact, an important objective is simply to increase awareness of the Kicker brand. As a result, these related costs are selling expense.

First, it could look for a more appropriate venue. The outer parking lot of a shopping center, or even a large grocery store, would enable Kicker employees to easily load downloadd product into customer cars.

Second, the disc jockey could be dispensed with; instead, music could be played from CDs over the audio system in the truck. Third, Kicker could spend a year or so raising brand awareness in the Austin market before attempting another tent sale.

Traceable costs using equipment hours: One can also argue that maintenance is a function of equipment hours and so the salaries of mechanics can assigned using equipment hours.

Pipe and other direct labor can be assigned using equipment hours because their usage should be highly correlated with equipment That is, equipment hours increase because there is more pipe being laid.

As hours increase, so does the pipe usage. A similar argument can be made for other direct labor. Actually, it is not necessary to use equipment hours to assign pipe or other direct labor because these two costs are directly traceable to jobs.

Leroy should politely and firmly decline the offer. The offer includes an implicit request to use confidential information to help Jean win the bid. For example, the salaries paid to downloading department employees in a factory are a direct cost to the downloading department but an indirect cost overhead to units of product.

Allocation means that an indirect cost is assigned to a cost object using a reasonable and convenient method. Since no causal relationship exists, allocating indirect costs is based on convenience or some assumed linkage. A product is tangible in that you can see, feel, and take it with you. Examples of products include a tube of toothpaste, a car, or an orange. A service is a task or an activity performed for a customer. For example, the dental hygienist who cleans your teeth provides a service.

Manufacturing overhead includes all product costs other than direct materials and direct labor. Direct materials downloads are first entered into the materials inventory.

They may or may not be used during the month. Prime cost is the sum of direct materials and direct labor. Conversion cost is the sum of direct labor and overhead.

Total product cost consists of direct materials, direct labor, and overhead. This is not equal to the sum of prime cost and conversion cost because then direct labor would be double counted. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A period cost is one that is expensed immediately, rather than being inventoried like a product cost Selling cost is the cost of selling and delivering products and services.

Examples include free samples, advertising, sponsorship of sporting events, commissions on sales, and the depreciation on delivery trucks such as Coca-Cola or Pepsi trucks. The cost of goods manufactured is the sum of direct materials, direct labor, and overhead used in producing the units completed during the current period and transferred to finished goods inventory.

The cost of goods manufactured is the cost of direct materials, direct labor, and overhead for the units produced completed during a time period. The cost of goods sold is the cost of direct materials, direct labor, and overhead for the units sold during a time period. The number of units produced is not necessarily equal to the number of units sold during a period. For example, a company may produce 1, pairs of jeans in a month but sell only pairs. The income statement for a manufacturing firm includes the cost of goods sold, which is the sum of direct materials, direct labor, and manufacturing overhead.

The income statement for a service firm contains no cost of goods sold because there is no product to download or to manufacture and, thus, there is no inventory account to expense as cost of goods sold.

In addition, because there is no cost of goods sold on the income statement of a service firm, there is no gross margin, unlike a manufacturing firm. The percentage column on the income statement gives some insight into the relative spending on the various expense categories. CE 1. Number of units sold: Finished goods inventory, June 1…………………………………….

Selling expense: Commissions 0. Allstar has no Cost of Goods Sold line item because the company is a service provider, rather than a manufacturer. Therefore, as a service provider, Allstar has no inventory costs raw materials, work in process, or finished goods to flow through to Cost of Goods Sold when it recognizes its sales revenue.

Instead, all of the costs it incurs in providing advertising services appear as Operating Expenses on the income statement.

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The remainder is administrative cost. All commissions are selling costs. The two products that Holmes sells are playhouses and the installation of playhouses. The playhouse itself is a product, and the installation is a service. Holmes could assign the costs to production and to installation, but if the installation is a minor part of its business, it probably does not go to the trouble.

The opportunity cost of the installation process is the loss of the playhouses that could have been built by the two workers who were pulled off the production line.

Salary of cell supervisor—Direct b. Power to heat and cool the plant in which the cell is located—Indirect c. Materials used to produce the motors—Direct d. Labor used to produce motors—Direct f. Depreciation on the plant—Indirect h. Depreciation on equipment used to produce the motors—Direct i. Ordering costs for materials used in production—Indirect j.

Engineering support—Indirect k. Cost of maintaining the plant and grounds—Indirect l. Property tax on the plant and land—Indirect E 1.

Cornerstones of Managerial Accounting 5th Edition – PDF eTextBook

Hannah might have elected to let its ending materials inventory drop in order to save cash for downloads other than downloading materials inventory. Also, it might have elected to do so to reduce its materials inventory holding costs e. Furthermore, Hannah might have reduced its ending materials inventory because it foresaw that demand in July would be lower than in June and did not want to be left holding additional inventory at the end of July.

Alternately, Hannah might have experienced stronger than expected sales in June and used more direct materials in production than it had anticipated when downloading materials. Regardless of the reason, it is helpful for students to understand the relationship between the cost of materials downloadd versus the cost of materials used in production in a given period.

Finished goods inventory, January 1…………………………………… 6, Units completed during the year………………………………………… 94, Finished goods inventory, December 31……………………………… 7, Units sold………………………………………………………………… 93, 2. Work in process, March 1……………………………………………… 8, Less: Because there were no beginning nor ending work-in-process or finished goods inventories, no adjustments were made for them in this statement.

The income statement showing each account as a percentage of sales helps focus managerial attention on those expenses that are relatively high. For Jasper, it appears as though administrative expense is twice as large as selling expense.

Perhaps management could explain ways to reduce certain administrative expenses, such as research and development or fees incurred for general counsel e. Direct Direct Manufact. They are direct materials but could also be classified as overhead because of cost and convenience.

Direct labor consists of the part-time employees who cook food and fill orders. Manufacturing overhead consists of all indirect costs associated with the production process. These are the utilities, rent for the building, depreciation on the equipment and register, and cost of janitorial fees and supplies. The result is that she does not have to perform studies of the time spent by each employee on producing versus selling burger bags.

In addition, it is likely that John Peterson pitches in to help fry burgers or assemble burger bags when things get hectic. Of course, during those times, he is engaged in production—not selling or administration.

Remember, accountants charge by the number of hours spent—the more time Elena spends separating costs into categories, the higher her fees. Outside use of the statements is confined to government taxing authorities and a bank if a loan or line of credit is necessary. Laworld Inc. As a result, total manufacturing cost is equal to the cost of goods manufactured.

The FIFO assumption says that beginning inventory is sold before current year production.

Therefore, the cost of goods sold will be lower than it would be if there were no beginning inventory. This can be seen in the following statement of cost of goods sold. These costs include direct materials, direct labor, and manufacturing overhead. The total of these three types of costs equals product cost.

If Linda returns to school, she will need to quit her job.Salary of cell supervisor—Direct b. The cost of goods manufactured is the cost of direct materials, direct labor, and overhead for the units produced completed during a time period. Direct materials: Selling cost is the cost of selling and delivering products and services. All Rights Reserved.

Skip to main content. The price is charged by Luisa to her clients; it is not her cost. Leroy has a responsibility to act on behalf of his company, and clearly, disclosing confidential information acquired in the course of his work to a competitor would be prohibited. Power to heat and cool the plant in which the cell is located—Indirect c. Depreciation on the plant—Indirect h.