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UGA ACCT 2102 - Exam 2 Study Guide
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ACCT 2102 1st EditionExam # 2 Study Guide Lectures: 10 - 18Here is the outline of the test: Chapter 4 2 conceptual and 4 calculationChapter 5 2 conceptual and 5 calculationChapter 6 4 conceptual and 3 calculation1 extra credit question as a bonusBelow are conceptual and mathematical ideas, which may or may not be on the test. Farmer says nothing outside of the notes we did in class will be on the test; therefore, a book is not required unless needed for own personal reference. Again, nothing in Chapters 4, 5, or 6 that were not in the notes will be on the test. She gave hints in class about what some of the conceptual questions would be, so if there is an asterisk* beside a concept then it will 100% be on the test.Chapter 4:Lecture 10 (September 9), Lecture 11 (September 11), Lecture 12 (September 13), and Lecture 13 (September 16)Two ways of depicting a more accurate allocation of MOH which will be discussed throughout this chapter are:• Departmental Overhead Rates• Activity Based CostingTraditional Costing System . . . Plant-wide Overhead Rate- Calculate the company’s plant-wide overhead rate, assuming the company uses DL hoursas its allocation base. Refined Costing System . . . Departmental Overhead Rates- Calculate departmental overhead rates, assuming the company would use machine hours as the allocation base for the Machining department and DL hours as the allocation base for the Assembly department.DM and DL remain the same in both the Traditional and Refined Costing Methods.Cost distortion: Over- or under-costing your job when running two systems (traditional and refined) simultaneously; caused by difference in resource consumptionWhat is the goal of ANY refined costing system? Increase accuracy to get a true picture of what our costs areCan refined costing systems only be used to allocate MOH at manufacturers? NoWhat are the key steps in implementing ABC?1. Identify the activities and estimate the total MOH costs associated with each activity. These are called “activity cost pools.”• Unit Level- activity we perform on all of our units• Batch Level- activity we perform on a group of units• Product Level- activity we perform on an individual product line• Facility Level- activity we perform on everything else2. Choose an allocation base for each activity• Consider true cost driver when making this selection3. Calculate a POHR for each activity4. Allocate the indirect costs. Circumstances favoring the implementation of ABC- Offers multiple products- Consume at different rates than under the traditional systemABC will often uncover that a high volume product has been overcosted.*Great mathematical problem to review because a similar problem WILL be on the test.Also keep in mind that “per unit cost” and “total cost” will be different!Before the Amplifier is a manufacturer of guitars. The company sells acoustic and electric guitars. The electric guitar line is not as profitable as expected despite high production levels. Management is concerned that the price of the electric guitar line is too high in comparison toits competitors and is considering switching to ABC to improve costing accuracy. Currently, manufacturing overhead is applied to production based on DL hours and Before the Amplifier sets its sales prices by marking up unit production costs. The following information has been prepared:(GIVEN)Activity Cost Driver Cost PoolAssembly DL Hours $500Machining Machine Hours $1,500Setting Up Equipment Number of Setups $1,200Moving Goods Number of Moves $800(WORKED)Activity Cost Driver Cost Pool Acoustic Electric TotalAssembly DL Hours $500 20 DL hours 80 DL Hours 100 DL hoursMachining Machine Hours$1,500 10 M Hours 40 M Hours 50 M HoursSetting Up EquipmentNumber of Setups$1,200 4 Setups 4 Setups 8 SetupsMoving GoodsNumber of Moves$800 1 Move 4 Moves 5 MovesTotal $4,000Each Acoustic guitar requires 1 direct labor hour and .5 machine hours to produce. Each Electric guitar requires .8 direct labor hours and .4 machine hours to produce. The production equipment is setup for every 5 Acoustic guitars produced and for every 25 Electric guitars produced. Acoustic guitars are moved during production in groups of 20 guitars; Electric guitars are moved during production in groups of 25 guitars.The direct material cost per Acoustic guitar is $60 and the direct material cost per Electric guitaris $70. Direct Laborers are paid at a rate of $25 per hour. The projected production levels for theperiod are 20 Acoustic guitars and 100 Electric guitars.Determine the amount by which the lines are over/underallocated IN TOTAL.Traditional Costing System ABC Costing SystemPOHR 1 = $4,000 = $40/DL hr 100 DL hrsPOHR 1 = $500 = $5/DL hr 100 DL hrsPOHR 2 = $1,500 = $30/m hr 50 m hrs.POHR 3 = $1,200 = $150/setup 8 setupsPOHR 4 = $800 = $160/move 5 movesAcoustic (per unit approach)DM $60DL ($25 x 1 hr) $25MOH ($40 x 1 hr) $40Total per unit $125DM $60DL ($25 x 1 hr) $25MOH 1 ($5 x 20 hrs / 20) $5 2 ($30 x 10 hrs / 20) $15 3 ($150 x 4 setup / 20) $30 4 ($160 x 1 move / 20) $8Total per unit $143$125 - $143 = $18/unit undercosted Total undercosted? $18/unit x 20 guitars = $360 undercostedElectricDM $70DL ($25 x .8 hrs) $20MOH ($40 x .8 hrs) $32Total job cost $122DM $70DL ($25 x .8 hrs) $20MOH 1 ($5 x 80 hrs / 100) $4 2 ($30 x 40 hrs / 100) $12 3 ($150 x 4 setup / 100) $6 4 ($160 x 4 move / 100) $6.4Total job cost $118.40$122 - $118.40 = $3.60/unit overcosted Total overcosted? $3.60/unit x 100 guitars = $360 overcosted*The higher volume product is normally overcosted by the traditional systemChapter 5:Lecture 14 (September 18), Lecture 15 (September 20)


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UGA ACCT 2102 - Exam 2 Study Guide

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