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UNT ACCT 2020 - terminology overview costing methods
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I. Terminology ReviewII. Terminology ReviewIII. Exam ReviewACCT 2020 1st Edition Lecture 11Outline of Last Lecture I. ReviewII. Steps To Variable CostingIII. ComparisonIV. Segment reportingV. Omission CostsVI. GAAPVII. ExamplesOutline of Current LectureI. Terminology ReviewII. Terminology ReviewIII. Exam ReviewCurrent LectureI. Terminology Review- Predetermined overhead rate (POHR): taking some type of overhead cost and divide it by some activity level. o Predetermined overhead rate = Total Estimated Manufacturing OverheadTotal Estimated Activity in the Allocation baseThese 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.We should believe that this allocation base is DRIVING this manufacturing overhead. We use this rate to apply overhead to jobs and compare it to the actual overhead at the end of the year. - Applied Overhead= POHR x relevant activity. At the end of the year we compare this applied overhead to the overhead actually incurred at the end of the year. Things like rent, property taxes, supervisor’s salaries etc. - Actual overhead = sum of all bills relating to overhead o Actual Overhead – Applied Overhead = under or over-applied Overhead. If the actual is greater than applied, than it is under applied. We would ADD this amount to cost of goods sold. If Actual overhead is less than applied, than we have over-applied overhead and will need to SUBTRACT this amount from Cost ofgoods sold. II. Terminology Review- Exercise 5-3 1 2 3o Begin Inventory 180 150 160End Inventory 150 160 200Change Inventory (30) 10 40o Fixed Mf OH begin 81,000 67,000 72,000(Unit sold x $450)Fixed Mf OH End 67,000 72,000 90,000(Unit sold x $450) CHANGE Fixed Mf OH (13,500) 4500 18000o Variable NI 292400 269200 251800Change in Mf OH -(13,500) +4500 +18000Absorption NI 278900 273,700 269800 Absorb NI < Variable NI Absorption NI < Variable NI Inventory Decreased Inventory Increased- Exercise 5-4o TOTAL CD DVDSales 750,000 300,000 450,000Variable Expenses 435,000 120,000 315,000Contribution Margin 315,000 180,000 135,000Traceable Fixed Expenses 183,000 138,000 45,000Product line Segment 132,000 42,000 90,000Common Fixed Expenses 105,000Net operating Income 27,000- Exercise 5-5o According to CVP analysis, we should have had a net income but we had a losswhy? We have to separate our costs in variable and fixed expenses to work withthe contribution margin. It is in line with a variable costing system, so if we useabsorption system it will seem to show a meeting the break-even point. Thedifference relates to where that fixed manufacturing overhead is sitting. Wheninventory decreases, IN absorption costing, net income is less than when usingvariable costing methods. The reason is because the inventory decreased whichresulted in fixed overhead from prior years being applied to current years. - Exercise 5-6o During the last year, 30,000 units were produced and 25,000 units were sold.Inventory account shows a balance of 85,000 for the 5,000 unsold units.  Variable cost/unit= 10+5+2= 17/unit,  Variable inventory cost = (17 * 30,000) 510,000 – (17*25,000) 425,000=$85,000 Absorption cost/unit = 10+4+2+ (90,000/30,000) 3= 20/unit Absorption Inventory cost = (20*30,000) 600,000 -(20*25,000)500,000=$100,000o Therefore, the company is using a variable costing system. o On the External report we will show inventory goods at 100,000 because variablecosting does not follow GAAP. oIII. Exam Review- Remember simple calculator, Pencil, Personal ID, and remember your Student ID number. - 25 multiple choice questions- Chapter 4 Absorption costing (Job order costing)o Calculate POHR, based on estimates and compared with the actual, then adjusted with the cost of goods sold.o Can take the unit product cost times the units sold and compare that to the real force.o KNOW MANUFACTURING OVERHEAD… differences between selling/admin costso Be able to come up with cost for a job = DL+DM+Applied Overheado Compute net operating income using different methods…- Variable costing net income- Chapter 6 – activity based costingo Cost pools and the different levels be able to classify items as these levelso Different types of cost drivers (2)o Compute the different cost pools and then find the total cost of the cost pool which we can find the rate of activity for the cost pool and then can apply that to cost objectso Once you have the cost for the object be able to find the margin, which is just therevenue of the object minus the cost. o Selling and admin sometimes applied to product, but NOT in


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UNT ACCT 2020 - terminology overview costing methods

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