Study Guide Exam 1

Study Guide Exam 1 - Chapter 1 Learning objective number 1-...

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Chapter 1 Learning objective number 1 - is to identify and give examples of each of the three basic manufacturing cost categories. o Direct Materials - Raw materials that become an integral part of the product and that can be conveniently traced directly to it. Radio in a car assembled o Direct Cost -Those labor costs that can be easily traced to individual units of product. Wages Paid to an employee o Manufacturing Overhead -Manufacturing costs cannot be traced directly to specific units produced. Indirect Materials, Indirect Labor. Cleaning supplies used in the automobile assembly plant, Maintenance workers, janitors and security guards. Nonmanufacturing costs o Selling Costs -Costs necessary to get the order and deliver the product. o Administrative costs - All executive, organizational, and clerical costs. Product Costs - Includes all the costs that are involved in acquiring or making a product. o direct materials, direct labor, manufacturing overhead Period Costs - all the costs that are not product cost o Includes all selling and administrative costs Prime cost consists of direct materials plus direct labor. Conversion cost consists of direct labor plus manufacturing overhead. Merchandisers : Buy and sell finished goods Manufacturers : Buy raw materials, Produce and sell finished goods. Balance Sheet- Merchandiser Current Assets o Cash o Receivables o Prepaid Expenses o Merchandise Inventory Balance Sheet Manufacturer Current Assets Cash Receivables Prepaid Expenses Inventories: Raw Materials, Work in Process, Finished Goods Merchandising Company: COGS = Beginning merchandise inventory+ Purchases – Ending merchandise inventory Manufacturing Company: COGS = Beginning finished good inventory+ Purchases – Ending finished good inventory Beginning Balance + Additions to Inventory = Ending Balance + Withdrawals from Inventory Schedule of Cost of Goods Manufactured - Calculates the cost of raw material, direct labor and manufacturing overhead used in production. Calculates the manufacturing costs associated with goods that were finished during the period. Total variable cost - A variable costs varies, in total, in direct proportion to changes in the level of activity. For example, your long distance telephone bill may be
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based on how many minutes you talk—the total bill varies with the number of minutes used. Variable Cost Per Unit - Although variable costs change in total as the activity level rises and falls, variable cost per unit is constant. For example, the cost per long distance minute may be ten cents a minute. Total Fixed Cost- A fixed cost remains constant, in total, within the relevant range, regardless of changes in the level of the activity. In other words, fixed costs do not change as long as the activity level falls within the “relevant range.” For example, your monthly basic telephone bill probably is a set amount and does not change based
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Study Guide Exam 1 - Chapter 1 Learning objective number 1-...

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