Still use pre determined overhead rate to determine

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►STILL USE pre-determined overhead rate todetermine each department’s allocated manufacturedoverhead(c)►Each department transfers its own WIP to the nextdepartment’s WIP (and then to Finished Goods then toCOGS)(i)COMPARE to job-order costing which has ONLY ONEWIP for all jobs(d)►Journal entries: (SAME as job-order costingEXCEPT each department has its own WIP)(i)►Accumulate department’s costs(a)►DR WIP (Dept A) CR Raw MaterialsCR Salaries Payable CR ManufacturingOverhead(ii)►Transfer costs to next department(a)►DR WIP (Dept B) CR WIP (Dept A)(iii)►Completion of manufacturing(a)►DR Finished Goods CR WIP (Dept B)(iv)►Sales of products(a)►DR COGS CR Finished Goods(3) ►Calculate equivalent units of production by department(a)►WHY is this necessary?(i)Each department has some partially completed unitsin its beginning and ending inventories11
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Chapter 7 / Exercise 10
Successful Project Management
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(ii)Equivalent units merely restate a department’s endingWIP as if it were comprised of a smaller number offully completed units(a)EXAMPLE: 2 half-completed unitsEQUALS 1 fully completed unit(b)►STEPS:(i)►Identify units completed and transferred out of thedepartment(a)►FORMULA: Unitscompleted/transferred out = beginning WIP +units started in production – ending WIP(ii)►Calculate equivalent units in ending WIP for directmaterials and conversion costs(a)Conversion costs are direct labor PLUSmanufacturing overhead(b)►FORMULA:(i)Equivalent units of production =(# units completed/transferred out x100%) + (# of partially completed units x% of completion)(ii)NOTE: we don’t care aboutbeginning balance in the departmentbecause the equivalent units ofproduction on the beginning balancewas already captured in the prior period(4) ►Calculate cost per equivalent unit(a)►FORMULA:(i)(Cost of beginning WIP + cost added duringproduction) ÷ Equivalent units of production(a)NOTE: we don’t include ending WIPbecause those units are not yet completedAND have already been captured by theequivalent units of production(5) ►Calculate the cost of ending WIP inventory AND unitscompleted and transferred to next department(a)►FORMULA:(i)Equivalent units x cost per equivalent unit5.►Cost-Volume-Profit Relationships (CH 5)a)►PURPOSES:(1) ►Helps managers understand how profits are affected by:(a)Selling prices(b)Sales volume(c)Unit variable costs(d)Total fixed costs(2) ►USES contribution format income statement to judge impacton profits of changes in these items(a)(Sales – variable expenses) – fixed expenses = netprofit(3) ►Emphasizes cost behavior(a)Variable costs are separate from fixed costsb)►FORMULAS:12
(1) ►Contribution margin(a)Represents amount available to cover fixed costs andprovide for a net operating profit(b)►FORMULAS: (there are 2 ways to calculate this)(i)Sales – Variable expenses OR(ii)►Unit contribution margin x quantity sold(a)►Unit contribution margin(i)Selling price per unit – variableexpenses per unit(c)►BENEFITS for managers:(i)Helps determine whether a product is covering itsown variable manufacturing costs(ii)Helps determine whether variable costs for thatproduct should be reduced

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Term
Winter
Professor
TIAN
Tags
Finished Goods, COGS
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The document you are viewing contains questions related to this textbook.
Successful Project Management
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Chapter 7 / Exercise 10
Successful Project Management
Clements/Gido
Expert Verified

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