ACCT 2521 1st Edition Final Exam Study GuideService Company MerchandiserIncome Statement COGSService Revenues Beginning Inv.- Operating expenses +PurchaseOperating Income +Import duties or tariffs+Freight-inCOGAS- End Inv.COGSRaw Materials (RM) Work in Process (WIP) Finished Goods (FG) Income StatementBeg. Inventory – RM Beg.Inventory – WIP Beg. Inventory – FG Sales + Purchases + DM Used, DL, MOH) + COGM - COGS RM Available for Use Goods Available for Manuf. COGAS Gross Profit -End. Inventory – RM -End. Inventory – WIP -End. Inventory – FG -Operating Exp. DM Used COGM COGS Operating Income- Beginning Inventory + Net Purchases = COGS + End Inventory Prime = DM + DLConversion = DL + MOHPre. Determined MOH rate = Total est. MOH costs/Total est. amount of allocation baseAllocated MOH = Pre. MOH rate x Actual amount of all. BaseUnder allocated Debit COGS Credit MOHo If you have a credit balance (overallocated MOH)MOH XXXCost of Goods Sold XXXo If you have a debit balance (underallocated MOH)Cost of Goods Sold XXXThese 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.MOH XXXo Purchase of Raw Materials Raw Materials XXXAccounts Payable/Cash XXXo Material UsageWork in Process XXX (This amount is your direct materials)MOH XXX (This amount is your indirect materials)Raw Materials XXXo Labor CostsWork in Process XXX (This amount is your direct labor)MOH XXX (This amount is your indirect labor)Wages Payable XXXo Applied MOHWork in Process XXX (use the formula above to get the # that goes here)MOH XXXo Actual MOHMOH XXXVarious Accounts XXXo Moving from WIP to Finished Goods…units are complete and ready to be soldFinished Goods XXX (use the calculation for CGM from Chapter 1here)Work in Process XXXo Sale of Finished GoodsAccounts Receivable/Cash XXXSales XXXANDCost of Goods Sold XXXFinished Goods XXXTotal variable costs change in direct proportion to changes in volumeVariable cost per unit remains the sameTotal variable cost (y) = Variable cost/unit (v) x Volume of activity (x)Cost EquationTotal cost = total V. cost + total F. costy = vx + fTotal fixed costs stay constant over relevant rangeFixed costs per unit vary inversely with changes in volume Total mixed costs increase as volume increasesTotal mixed cost = total V. cost + total F. cost y = vx+fHigh-lowFind highest and lowest # of activity level.∆ cost / ∆ volume = #y = vx +f * the # is vEx: Low Feb 2,600 $31,900 37,000-31,900 37,000 = 5.1(3,600)+f High May 3,600 $37,000 3,600-2,600 = 5.1 f = 18,640y = 5.1x + 18,640Contribution Margin Income StatementSales Revenue- Variable Expenses- Variable COGS- Variable Operating ExpensesContribution Margin- Fixed ExpensesFixed MOH Fixed Operating ExpensesOperating Income- Units produced > units sold then inv. levels increase = Absorption income > variableSales- V. costsCM-F. costsOp. IncomeUnit CM Margin CM (650 x 14) 9,100 CM% = Unit CM/Sales Price per unitSales price/unit 35 - F.C 7,000 CM% = CM/Sales Revenue- V. cost/unit 21 Op. Income $2,100CM/unit 14Breakeven in UnitsUnits sold = F.E + Op. Income Sales in $ = F.E + Op. IncomeCM/unit CM ratioMargin of safety: the excess of actual or expected sales over breakeven sales Expected sales in units – Breakeven sales in unitsSpecial Order DiscontinueSales rev. from special order CM 2,400,000 *** DO NOT discontinue- V. costs - F. Ex. Savings 740,000 positive – DO NOT V. DM, DL, MOH Op. Income lost 1,660,000 negative - discontinueCM- Additional F. ExpensesOp. income increaseTarget Costing = Revenue at market price Cost-plus = Total cost- Desired profit + Desired profitTarget total cost Cost-plus priceMake or BuyMake Buy Units needed 74,000 74,000x V. cost/unit 14.00 16.50Total V. Cost 1,036,000 1,221,000+ F. Cost 448,000 1,574,500Total cost 1,484,500 1,574,500*MAKEOpportunity cost- subtract amount that it may be losing from total cost DM Price Variance = AQP(AP-SP) Purchasing Manager- Cheaper or more expensive material, Special orderDM Quantity Variance = SP(AQU-SQA) Production Manager- Used more because cheaper material, used less because more expensive material, materials wastedDL Rate Variance= = AH(AR-SR) HR/Plant Manager- Skilled or unskilled workers, rate changeDL Efficiency Variance = SR(AH-SHA) Production Manager- Skilled or unskilled workers, machine breakdownVariable MOH Rate Variance = AH(AR-SR) Production Manager- Variance can be due to more than one input- We don’t know if the variance is due to using more of the input than expected or because the input costs more than expectedVariance MOH Efficiency Variance = SR(AH-SHA) Production Manager- Tied directly to the efficiency with which the machine hours were