Financial Accounting Part 4

Financial Accounting Part 4 - FINANCIAL ACCOUNTING PART 4...

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FINANCIAL ACCOUNTING PART 4 Question 1 of 55 Suppose that in January, the total overhead of XYZ Co. was $150,000 and that 40% of this overhead is associated with production activity and 60% is general administration, what amount of overhead is considered a product cost? ________ $60,000. 40% of the total overhead is associated with production thus it is a product cost. 40% of $150,000 = $60,000. Question 2 of 55 Overhead costs that are classified as product costs are included in the ___________ account until the product is actually sold. Inventory. Product costs do not affect income until the product is actually sold. The costs of manufacturing are included in the inventory value on the balance sheet and are not moved to COGS (cost of goods sold) until the items are actually sold. Question 3 of 55 If XYZ company spends $10,000 on production overhead, $100,000 on direct labor, and $20,000 on direct materials, and if no product was sold, the Inventory account would be increased by what amount? _________ $130,000. None of the product were sold, therefore all the costs associated with its production are included in the inventory account. When the product is actually sold, then the COGS account will be debited. Question 4 of 55 Suppose the direct materials used to produce a widget cost $10, and ½ hour of direct labor is involved at a rate of $12/hour, and an overhead rate of $8 per direct labor hour is used. What is the cost of the widget recorded as? ____ $20. product cost = direct materials + direct labor + overhead = 10 + (0.5 * 12) + (0.5 * 8) = 10 + 6 + 4 = $20 Question 5 of 55 1
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Goody Company manufactures skateboards that retail for $80. Goody recently discover that it has 150 defective skateboards. Each skateboard has $40 of direct material, labor and overhead and the defective boards can be sold for $32 or repaired for $38. If Goody chooses to repair the boards what will its net income for the sale of all 150 boards be? ______ $300. Revenue: 150 boards @ $80 = $12,000 Product cost including Costs to fix: 150 boards @ $78 direct costs ($40 + $38) = $11,700 direct costs Net income = revenue – cogs = $12,000 - $11,700 = $300 Question 6 of 55 Goody Company manufactures skateboards that retail for $80. Goody recently discover that it has 150 defective skateboards. Each skateboard has $40 of direct material, labor and overhead and the defective boards can be sold for $32 or repaired for $38. If Goody chooses to sell the boards as defective what will its net income for the sale of all 150 boards be? _________ -$1,200. Revenue: 150 boards @ $32 = $4,800 COGS = 150 boards @ $40 direct costs = $6,000 direct costs Net income = revenue – cogs = $4,800 - $6,000 = $(1,200) Remember, parentheses indicates a negative number. Question 7 of 55
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This note was uploaded on 04/27/2010 for the course MATH 327 taught by Professor Schultz during the Spring '09 term at Christian Brothers.

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Financial Accounting Part 4 - FINANCIAL ACCOUNTING PART 4...

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