Accounting Final Review

Accounting Final Review - Chapter 1: 1. Product Cost Vs....

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Unformatted text preview: Chapter 1: 1. Product Cost Vs. Period Costs Product Costs (Manufacturing Costs) - costs that are a necessary and integral part of producing the finished product. They are recorded as inventory. Do not become expenses until company sells the finished goods inventory. The company records these expenses as cost of goods sold. Direct Materials Direct Labor Manufacturing Overhead-Indirect Materials, Indirect Labor, Other Indirect Costs. Period Costs (Nonmanufacturing Costs) costs that are matched with the revenue of a specific time period rather than included as part of the cost of salable product. In order to determine net income, companies deduct these costs from revenues in the period in which they are incurred. Selling Expenses Administrative Expenses 2. Computation of Cost of Goods Manufactured Beginning Work in Progress + Total Manufacturing Costs (Direct Labor + Direct Materials + Manufacturing Overhead) Ending Work in Progress Inventory = Cost of Goods Manufactured Chapters 2 & 3: 1. Job Order Costing Vs. Process Costing Job Order Costing- used when company assigns costs to each job or to each batch of goods. Computes the cost per job. Production on Order, Customer Specifications, Products with distinguishing characteristics. Companies that want to produce specialized products. (Advertising Companies, Motion Picture Companies, Patient Care Companies) Process Costing- costs are accumulated by processes. Used when company manufacture a large volume of similar products. Companies mass produce similar products. (Car Companies, Food companies, Gas Companies) 2. Calculation of Pre-determines Overhead Rate Estimated Annual Overhead Costs / Expected Annual Operating Activity 3. Features and Uses of a Production Cost Report Production Cost Report- an internal document for the management that shows production quantity and cost data for the production department. Provides a basis for evaluating the productivity of a department. Managers use cost data to assess whether unit costs and total costs are reasonable. Helps managers jufge whether current performance is meeting planned objectives. 4 Steps in Preparing: 1. Prepare a physical unit schedule 2. Compute Equivalent Units 3. Compute Unit Costs 4. Prepare a Cost Reconciliation Schedule Chapter 4: 1. Activity Based Costing Benefits: more accurate product costing Multiple cost pools Allocate costs on logical cost basis Enhanced control over Overhead Costs Better management decisions...
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Accounting Final Review - Chapter 1: 1. Product Cost Vs....

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