BUSI 101 1st Edition Lecture 11 Outline of Last Lecture I. Midterm Practice Problems on page 48, 49, 53II. Managerial Accountinga. Cost of Production Report Practicei. Page 63 in Course PackOutline of Current Lecture I. Chapter 1 Managerial Accounting Reviewa. 3 types of businessb. 3 types of cost typesc. Basic Schedule, TMC, CGM, CGS, Income StatementII. Page 173 in Course PackIII. Page 38 in Managerial Accounting TextbookIV. Actual Costing versus Normal CostingV. Overapplied versus Underapplied ProblemsCurrent LectureExam next Monday30 Questions Optional Review Sunday at 11:30amChapter One of Managerial Due at TA Sessions this week:Course Pack pg. 252-253, Book Questions pg. 40,41These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Financial – external, objectiveManagerial – internal, subjective3 Types of Businesses:- Service Firms- Merchandising (department stores)- Manufacturing 3 Cost Elements:- Direct materials- Direct labor- Factory overheadI. Basic Schedule:Beg. Materials+Purchases=Available -Ending Materials=Materials UsedII. TMC:DM+DL+OHD=TMCIII. CGM:Beg. WIP+TMC=Available-End WIP=CGMIV. CGS:Beg. FG+CGM=Available-End FG=CGSV. Income Statement:Sales-CGS=GP-Op. Exp.=Op. ProfitPg. 173 in the Course Pack1. CGM:Beg. WIP 10+TMC 500=Available 510-End WIP 0=CGM 510Answer: B2. CGS:Beg. FG 0 30+CGM 200 400=Available 200 430-End FG 50 0=CGS 150 430CGS=CGM – Increase in FG Inv.150=200-50CGS=CGM + Decrease in FG Inv.430=400+30Answer: C6. Many companies manufacture products that are untouched by human hands, what do they use to achieve this?Answer: B: computer-integrate manufacturingPg. 38 in the Managerial Accounting BookChapter One: Problem 3ACase One:I. Basic Schedule:Beg. Materials+Purchases=Available -Ending Materials=Materials Used 9600II. TMC:DM 9600+DL 5000+OHD 8000=TMC 22,600(a)III. CGM:Beg. WIP 1000+TMC 22,600=Available 23,600-End WIP 6600 (b)=CGM 17,000IV. CGS:Beg. FG 3,000 (c)+CGM 17,000=Available 20,000-End FG 3400=CGS 16,600 (d)V. Income Statement:Sales 22,000-CGS 16,600=GP 5,400 (e)-Op. Exp. 2500=Op. Profit 2900 (f)Pg. 38 Chapter 1 Managerial Accounting Problem 1-4I. Basic Schedule:Beg. Materials 48,000+Purchases 96,400=Available 144,400-Ending Materials 39,600=Materials Used 104,800II. TMC:DM 104,800+DL 139,250+OHD 141,660=TMC 385,710III. CGM:Beg. WIP 19,800+TMC 385,710=Available 405,510-End WIP 18,600=CGM 386,910IV. CGS:Beg. FG 96,000+CGM 386,910=Available 482,910-End FG 75,900=CGS 407,010V. Income Statement:Sales 529,800-CGS 407,010=GP 122,790-Op. Exp. 8,650 =Op. ProfitOHD: OP. EXP.: 4600 8,65016,00027,60058,00024,9609,6001,400141,660Balance Sheet:Cash 22,000A/R 27,000Inv. M 39,600WIP 18,600FC 75,900193,100Chapter 1:Actual Costing: (more accurate)Actual DMActual DLActual OHDChapter 2:Normal Costing: (more timely)Actual DMActual DLApplied OHDTwo Extremes of the Spectrum:- In reality, companies have both types of systems in placeChap. 2 – Job Order Costing - tailor made or unique goodsChap. 3 – Process Costing – continuous mass production of like unitsEx: Estimated OHD for year: $400,000Estimated DL Hours: $100,000Actual OHD for year: $403,000Actual DL Hours: 102,000What is Overhead?1. Overapplied or underapplied?2. By how much?Overhead Application Rate= $400,000/$100,000=$4.00/direct labor hourApplied Overhead = actual direct labor hours x application rate(102,000)(4.00) = 408,000 applied overheadManufacturing OverheadActual Applied403,000 408,000Actual:MFG OHD 403,000Various Credits 403,000Applied:WIP 408,000MFG OHD 408,000Answer: overapplied by $5,000Close the overapplied at the end of the year:Either 1. Write it off or close to cost of goods soldMFG OHD 5,000CGS 5,000OR 2. ProrateMFG OHD 5,000WIP -FG - 5,000CGS -To close an underapplied account: CGSMFG OHDOr WIPFGCGSMFG OHDEx. Applied OHD: 510,000Budget OHD: 500,000Actual OHD: 512,0001. Over applied or underapplied?2. By how much?Manufacturing OverheadActual Applied512,000 510,000WIP 510,000AFG OHD 510,000MFG OHD 512,000Various Credits 512,000Answer: Underapplied by 2,000Dispose:Close to CGSCGS 2000MFG OHD 2000ORProrate: (more accurate approach)WIP -FG - 2000CGS -MFG OHD 2000Ex. Budgeted ActualOHD 600,000 610,000Labor Hours 200,000 203,000 1. Overapplied or underapplied?2. By how much?Application Rate: Budgeted Overhead/Budgeted Overhead Hours600,000/200,000=$3.00 per labor hourApplied Overhead: Actual labor Hours x Application Rate(203,000)(3.00)=$609,000Manufacturing OverheadActual Applied610,000 609,000MFG OHD 610,000Various Credits 610,000WIP 609,000MFG OHD 609,000Answer: Underapplied by $1,000To Close CGS or write it off:CGS 1,000MFG OHD