ACCT 2102 - Midterm #2 Study Guide (Fall 2019)Test Format - Multiple choice questions (45 @ 5.82 points each = 261.9 total possible points) - Maximum grade is 250! The extra points are to compensate for any weakness in the main test instrument and misunderstanding in the question wording. - Students need to bring their own scantrons and #2 pencils. Do not mark your scantron until you have selected your FINAL answer. Eraser marks confuse the scantron grading machine. All adverse consequences of eraser marks and mismarks are the student’s responsibility; therefore, bring extra scantrons. Do not write notes before or during the exam on your scantron. Do not write notes before or during the exam on your desk top surface. All work should be written on theexam. - You are only permitted to use a simple four-function calculator. Instructors/exam proctors will check each student’s calculator. NOT ALLOWED: Cell phones, scientific calculators, financial calculators, programmable calculators, and graphing calculators.- This is a closed book, closed note, and closed neighbor exam. You are NOT permitted to have scratch paper. You are NOT to look around during the exam. You are to keep your scantron sheet covered to the extent possible. - During the exam period, cell phones and other electronic devices should be turned off or on silentand any earpiece should be removed. If an instructor or exam proctor sees a cell phone during theexam period, the student will receive a zero on the exam. Put your cell phones away!- Questions regarding the exam cannot be asked during the exam period. - You must turn in your exam and scantron with your name, your instructor’s name, class time and the version letter of the exam on both. You will be asked to show a picture id when you turn in your exam and scantron. - You will have 120 minutes to complete the exam, including bubbling in your scantron. Do not start writing on the exam before you are instructed to begin.- The exam covers Chapters 4 through 8.Skills needed to succeed:Chapter 4:1. Determine which items qualify as direct material, direct labor, indirect material, indirect labor and other manufacturing overhead. Direct material: raw materials that can be traced to the final productDirect labor: labor directly traced to the production of a products via hands on or machine use. Indirect material: production support supplies like fabric glue, electricity, threadIndirect labor: support staff that’s not directly involved with the direct process2. Complete inventory reconciliation. 3. Understand and distinguish between the concepts of period costs and product costs.- Period cost: incurred but not related to the manufacture or service of product making. Found under operating expense on income statement, expensed during specific accounting period. Two types: 1) selling cost-storage, selling, & delivery of finished goods. Can’t be inventoried- Product cost: all costs used to make products, 3 kinds 1) direct material, 2) direct labor, 3) manufacturing overhead4. Calculate/apply the predetermined overhead rate based on given facts.Budgeted total manufacturing overhead costBudgeted total revenue of application base (DLH, MH, DL$, & units of production)– Direct labor hours, machine hours, direct labor costsBudgeted overhead cost- the total overhead cost expected during the yearApplication base- the measure that is correlated with overhead cost. 5. Understand the process flow from raw material inventory to work in process inventory to finished goods inventory to cost of goods sold. - 1. Raw materials- increases when raw materials are purchased, decreases when used. o If decreased by indirect materials, manufacturing overhead increases.o If decreased by D. materials, work in process increases. - 2. Work in Process- all beginning product making started but not completedo Both manufacturing overhead and direct labor recorded here.o Increases with D. materials used, o D. labor & manufacturing overhead decreases with completed products & moves to finished goods inventory- 3. Finished goods- all production costs of completed productso Increased with all D. material costs, D. labor, & manufacturing overheado Decreases with cost of goods sold6. Understand how to dispose of under/over applied overhead. – If manufacturing overhead is underapplied: debit COGS & credit MOH– If manufacturing overhead is overapplied: Credit COGS & debit MOHChapter 5: 7. Given facts in a problem, calculate standard costs for direct materials. - DM price X DM quantity = DM standard cost8. Given facts in a problem, calculate standard price and standard quantity for direct labor. - DL wage/hr X Qty made/hr = DL cost9. Understand the characteristics, advantages and disadvantages of the different types of budgeting andstandards. Types of standards- Ideal standard- perfection level, unrealistic standard- Practical standard- attainable with reasonable effortTypes of budgets- Master- collection of smaller budgets that make up financial statements (proforma)- Operating – gives financial plans for operations during the budget period- Sales- first budget to be produced. Forecasts how much will sell, what price, demand for each product. Influences the whole master budget since sales prediction errors can affect net income ifestimate is wrong.- Selling & administrative – how much selling & administrative expenses are incurred to support thelevel of sales. - Production – when & how many units need to produce to meet sales volume for beginning & ending inventory.:10. Calculate budgeted production and sales. a. Budget sales + b. budget ending inv.  c. budget begin. Inv. = budget productiono 1.Enter budgeted sales units from the sales budget (Sales units for the current month)o 2.Calculate budgeted ending inventory units for the period. (What the decided ending inventory % of the next months sales X the next months inventory sales)o 3.Add budgeted ending inventory units to budgeted sales units to determine the number of units required during the period.o 4.Subtract beginning inventory units from required units to determine the budgeted production. (Find C by multiplying the decided % by the current month)11. Determine how much cash will be collected in a given month. o Look at past collections history to estimate collection pattern & bad debt %o Once pattern is established: 1. Apply established collection pattern to existing acct. receivable & 2. Apply established