Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: THEend8_
MGT11B Final Review Outline
WQ2021
Management 11B Outline
Chapter 1 – Managerial Accounting and Cost Concepts
Direct v. Indirect Costs
o Direct Costs –
o Indirect Costs –
Product v. Period Costs
o Product Costs –
o Period Costs –
Variable v. Fixed Costs
o Variable Costs –
o Fixed Costs –
Example
A company’s relevant range of production is 1,000 units to 3,000 units. The company
uses an absorption costing method. When it produces and sells 2,000 units, its average
costs per unit are as follows:
Average Cost Per Unit
Direct Materials $8
Direct Labor $7
Variable Manufacturing Overhead $6
Fixed Manufacturing Overhead $5
Fixed Selling Expense $4
Fixed Administrative Expense $3
Sales Commission $2
Variable Administrative Expense $1
What is the total amount of period costs incurred to make 3,000 units?
Chapter 2 – Job-Order Costing
Job-order costing is a type of absorption costing system
o Unit costs are computed by job on the job cost sheet
Job-order costing systems are used when:
Use a Predetermined Overhead Rate to apply overhead to jobs because the
actual overhead for the period is not known until the end of the period
Assign Predetermined Overhead Rate to product costs
Total Manufacturing Cost =
Example
A company has two manufacturing departments – Dep’t 1 and Dep’t 2. It has started
and completed only one job for the month. The following information is available for
the company as a whole and for the job.
Dep’t 1 Dep’t 2 Total
Estimated Total Machine-Hours Used 1000 2000 3000
Estimated Manufacturing Overhead
Per Machine-Hour
$10 $20
Job
Direct Materials $5000
Direct Labor Cost $4000
Actual Machine Hours Used
Dep’t 1 800
Dep’t 2 2300
Total 3100
Calculate the Manufacturing Overhead applied to the Job.
Chapter 3 – Job-Order Costing: Cost Flows and External Reporting
Product costs flow through three inventory accounts on the Balance Sheet until
they are sold, at which point they move to the Cost of Goods Sold on the
Income Statement
Cost of Goods sold – includes the manufacturing costs associated with the
goods that were sold during the period
At the end of the period, we need to close out any underapplied or
overapplied Manufacturing Overhead to the Cost of Goods Sold because the
estimated manufacturing overhead applied (amount calculated using the
POHR) will almost never equal the actual manufacturing overhead paid during
a period (amount calculated by adding receipts for manufacturing overhead
paid during the period)
Example
ABC Company’s Work in Process account has an inventory balance of $50,000 on
January 1. The company used Raw Materials in the amount of $500,000 during the
month, 475,000 of which were direct materials, and 25,000 of which were indirect
materials. The company spent $350,000 on direct labor, 100,000 on indirect labor, and
$150,000 on administrative salaries. The company’s accountant calculated the
applied manufacturing overhead to be $300,000, and the actual manufacturing
overhead for the month was $325,000. Jobs costing $750,000 to manufacture
according to their job sheets were completed during the month.
1. Calculate the amount of manufacturing overhead that is overapplied or
underapplied.
2. What is the ending balance in Work in Process?
Chapter 4 Process Costing
Process Costing is a type of absorption costing system
Process Costing is used when:
One product may go through multiple processing departments, which are units
within an organization where materials, labor, or overhead are added to the
product. Each has a separate Work in Process accounts.
o We consolidate costs into Materials Costs and Conversion Costs, with
Conversion Costs = direct labor and manufacturing overhead costs
Because we’re making identical products that may not be fully completed, we
calculate Equivalent Units in order to determine how much cost is in each
department at the end of the reporting period
Steps of Process Costing
1. Compute the Equivalent Units of Production
2. Compute the Cost Per Equivalent Unit
3. Assign Costs to Units
Example
Work in Process Inventory, January 1 500 units
January 1 Conversion Completed 90%
Work in Process Inventory, January 31 1000 units
January 31 Conversion Completed 75%
Units Transferred to Finished Goods 750
Total Cost – Materials $100,000
Total Cost – Conversion $75,000
Compute the equivalent units of production for conversion.
Chapter 5 Cost-Volume-Profit Relationships
Use Contribution Margin Income Statement to judge the impact on profits of
changes in selling price, cost, or volume
Contribution Margin =
o Contribution Margin is first used to cover fixed expenses and any
remaining amount contributes to the net operating income
Unit Sales to Break-Even or Make Desired Profit
Dollar Sales to Break-Even or Make Desired Profit
=