Inventory and Raw Materials

Topics: Inventory, Manufacturing, Cost accounting Pages: 11 (1597 words) Published: August 5, 2013
Week 01

APPLICATION: JOB-ORDER COSTING
EXERCISE2-1 the work of Management and Managerial and Financial Accounting

1. WHEN DIRECTING AND MOTIVATING, MANAGERS MOBILIZE PEOPLE TO CARRY OUT PLANS AND RUN ROUTINE OPERATIONS.

2. The plans of management are expressed formally in BUDGETS

3. PLANNING consists of identifying alternatives, selecting among the alternatives the one that is best for the organization, and specifying what actions will be taken to implement the chosen alternative.

4. Managerial accounting places less emphasis on PRECISION and more emphasis on TIMELINESS than financial accounting.

5. MANAGERIAL ACCOUNTING is concerned with providing information for the use of those who are inside the organization, whereas FINANCIAL ACCOUNTING is concerned with providing information for the use of those who are outside the organization.

6. MANAGERIAL ACCOUNTING emphasizes detailed segment reports about departments, customers, product, and customers.

7. FINANCIAL ACCOUNTING must follow GAAP whereas MANAGERIAL ACCOUNTING need not follow GAAP.

8. The accounting and other reports that help managers monitor performance and focus on problems and/or opportunities are a form of FEEDBACK.

9. The manager in charge of the accounting department is usually known as the CONTROLLER.

10. A detailed report to management comparing budgeted data with actual data for a specific time period is a PERFORMANCE REPORT

EXERCISE2-2 Classifying Manufacturing Costs

THE PC WORKS ASSEMBLES CUSTOM COMPUTERS FROM COMPONENTS SUPPLIED BY VARIOUS MANUFACTURERS. THE COMPANY IS VERY SMALL AND ITS ASSEMBLY SHOP AND RETAIL SALES STORE ARE HOUSED IN A SINGLE FACILITY IN A REDMOND, WASHINGTON, INDUSTRIAL PARK. LISTED BELOW ARE SOME OF THE COSTS THAT ARE INCURRED AT THE COMPANY.

For each cost, indicate whether it would most likely be classified as direct labor, direct materials, manufacturing overhead, selling or and administrative cost.

1. The cost of a hard drive installed in a computer. (direct materials cost)

2. The cost of advertising in the Puget Sound Computer User newspaper. (selling cost)

3. The wages of employees who assemble computers from components. (direct labor cost )

4. Sales commissions paid to the company’s salespeople. (selling cost)

5. The wages of the assembly shop’s supervisor. (manufacturing overhead)

6. The wages of the company’s accountant. (administrative cost)

7. Depreciation on equipment used to test assembled computers before release to customers. (manufacturing overhead)

8. Rent on the facility in the industrial park. (selling cost)

EXERCISE2-4 Constructing an Income Statement

LAST MONTH CYBERGAMES, A COMPUTER GAME RETAILER, HAD TOTAL SALES OF $1,450,000, SELLING EXPENSES OF $210,000, AND ADMINISTRATIVE EXPENSES OF $180,000. THE COMPANY HAD BEGINNING MERCHANDISE INVENTORY OF $240,000, PURCHASED ADDITIONAL MERCHANDISE INVENTORY FOR $950,000, AND HAD ENDING MERCHANDISE INVENTORY OF $170,000

|Sales |$1,450,000 | | | Beginning merchandise inventory |$240,000 | | | | Add: Purchases |$950,000 | | | | |$710,000 | | | |Deduct: Ending merchandise inventory |$170,000 |$540,000 | |Gross margin...
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