Essay on Inventory and Direct Labor

Submitted By Sheldon-Cheng
Words: 1385
Pages: 6
Open Document
BUSN7031
Management Accounting
& Cost Analysis
Week 1
Introduction & Cost Terms
Chapter 1 & 2
Yangxin Yu
1

Lectures & Tutorials
Lecture notes on Wattle prior to lecture – please print and review before class.
90-100 minutes (One go, No Break)
Lecture problem solutions will be posted on Wattle after lecture.
Tutorial solutions will be posted on Wattle after the last tutorial.

2

Introduction
1. Financial Accounting

External
Reporting

reporting to external users: investors, creditors and governmental agencies. must be based on GAAP

2. Management Accounting reporting to managers need not be GAAP compliant

Internal
Reporting

3

Purpose of Managerial Accounting

4

5

Management Accounting
Managerial Accounting

R&D

Design

Production Marketing Distribution
& Sales

Customer
Service

BUSN7031

6

Cost Classifications Classification by Traceability
Direct costs
Costs traceable to a single cost object.
Examples: material and labor cost for a product.

Indirect costs
Costs that cannot be traced to a single cost object.
Example: A maintenance expenditure benefiting two or more departments.

7

Direct Materials
Direct material costs are the expenditures for direct materials that are separately and readily traced through the manufacturing process to finished goods.
Example:
Steel used in the frame of a mountain bike.

8

Direct Labor
Direct labor costs are the wages and salaries for direct labor that are separately and readily traced through the manufacturing process to finished goods.

Example:
Wages paid to a mountain bike assembly worker.

9

Factory Overhead
Factory overhead consists of all manufacturing costs that are not direct materials or direct labor and the costs cannot be separately or readily traced to finished goods.
Examples:
Indirect labor – maintenance
Indirect material – cleaning supplies
Factory utility costs
Supervisory costs
10

Flow of Physical Goods in Production
Direct
Materials
Purchased

Direct
Materials
Used

Finished
Goods

Direct
Labor

Manufacturing
Overhead

Goods
Sold
MegaLoMart
11

Identifications of Cost Classifications

* Although an assembly worker’s wages are classified as variable costs, their actual behavior depends on how workers are paid and whether their wages are based on a union contract (such as piece rate or monthly wages).

12

Manufacturer’s Costs

13

Reporting Manufacturing Activities
Merchandisers . . .

Manufacturers . . .

Buy finished goods.

Buy raw materials.
Produce and sell finished goods.

Sell finished goods.
SaleMart

14

Manufacturer’s Balance Sheet
Merchandiser

Manufacturer

Current Assets

Current Assets

Cash
Receivables
Merchandise
Inventory

Cash
Receivables
Inventories
Raw Materials
Goods in Process
Finished Goods

The primary difference is inventory.
15

Financial Statements of a Manufacturing Company

Income Statement

Balance Sheet

16

CONQUEST, INC.
Income Statement
For the Year Ended December 31, 2011
Sales
Cost of goods sold
Gross profit on sales
Operating expenses
Income from operations
Less: Interest expense
Income before income taxes Income tax expense
Net income

$ 1,300,000
782,000
$
518,000
400,000
$
118,000
18,000
$
$

100,000
30,000
70,000

The income statement is prepared using established
17
financial accounting procedures.

Financial Statements of a Manufacturing Company
CONQUEST, INC.
Partial Balance Sheet
December 31, 2011
Current Assets:
Cash and Cash Equivalents
Accounts Receivable, net
Inventories
Materials
Work in Process
Finished Goods
Total Inventories
Total current Assets

$ 60,000
190,000
$

20,000
40,000
168,000
228,000
$ 478,000

Manufacturers have three inventory accounts.
18

Inventories of a Manufacturing Business

Raw materials - inventory on hand
and
Show More

Related Documents: Essay on Inventory and Direct Labor

Case Study Essay

Answer: E LO: 2, 5 Type: N Chapter 3 50 15. Which of the following statements about manufacturing cost flows is false? A. Direct materials, direct labor, and manufacturing overhead are entered in the Work-inProcess Inventory account. B. The Finished-Goods Inventory account will contain entries that reflect the cost of goods sold during the period. C. The cost of units sold during the period will typically appear on the income statement. D. When…

Words 9386 - Pages 38

Managerial Accounting Solution-Chapter 3,Hilton Essay

CHAPTER 3 Product Costing and Cost Accumulation in a Batch Production Environment ANSWERS TO REVIEW QUESTIONS 3-1 (a) Use in financial accounting: In financial accounting, product costs are needed to determine the value of inventory on the balance sheet and to compute the cost-of-goods-sold expense on the income statement. b) Use in managerial accounting: In managerial accounting, product costs are needed for planning, for cost control, and for decision making. c) Use in cost…

Words 10804 - Pages 44

Essay about Sm Ch 16

AND CRITICAL THINKING CASES Brief Exercises B. Ex. 16.1 B. Ex. 16.2 B. Ex. 16.3 B. Ex. 16.4 B. Ex. 16.5 B. Ex. 16.6 B. Ex. 16.7 B. Ex. 16.8 B. Ex. 16.9 Topic Product vs. period costs Direct material used Cost of goods sold Materials inventory Direct labor journal entries Manufacturing overhead assigned Inventory balances Work in process balances Prime vs. conversion costs B. Ex. 16.10 Partial balance sheet Exercises 16.1 16.2 16.3 16.4 16.5 16.6 Topic Accounting terminology Basic types of manufacturing…

Words 9236 - Pages 37

Accounting: 1944 and Total Manufacturing Cost Essay

Job-order 6. Process 7. Job-order (contracts or projects) 8. Process 9. Job-order EXERCISE 3-24 1. Raw-material inventory, January 1 $174,200 Add: Raw-material purchases 248,300 Raw material available for use $422,500 Deduct: Raw-material inventory, January 31 161,200 Raw material used in January $261,300 Direct labor 390,000 Total prime costs incurred in January $651,300 2. Total prime cost incurred in January $651,300 Applied manufacturing overhead…

Words 439 - Pages 2

Acc 212 Essay

costing: we don’t track of each individual job or item We calculate the overage of the jobs or items Most cars in here Honda bmw benze Pepsi: Product cost: direct materials, direct labor, and manufacture overhead. Prime cost: direct material, direct labor Conversion costs: direct labor, manufacture overhead Documents used by manufacturing company 1. Job cost sheet: only used in job order costing, this document will keep track of cost each item or job.…

Words 372 - Pages 2

Essay about Answers to CH 2

determined. 2. A cost accounting system consists of accounts for the various manufacturing costs. These accounts are fully integrated into the general ledger of a company. An important feature of a cost accounting system is the use of a perpetual inventory system. Such a system provides information immediately on the cost of a product. The two basic types of cost accounting systems are (a) a job order cost system and (b) a process cost system. 3. Under a job order cost system, costs are assigned…

Words 3466 - Pages 14

Bus 503 Chapter 2 HW Solutions Essay

Schedule of Cost of Goods Manufactured For the Year Ended December 31, 20x2 Direct material: Raw-material inventory, January 1 $ 20,000 Add: Purchases of raw material 90,000 Raw material available for use $110,000 Deduct: Raw-material inventory, December 31 12,500 Raw material used $97,500 Direct labor 100,000 Manufacturing overhead: Indirect material $ 5,000 Indirect labor 7,500 Utilities: plant 20,000 Depreciation: plant and equipment 30,000…

Words 445 - Pages 2

Essay on Executive Shirt Company Case Analysis

One additional worker needs to be hired to operate this machine. Therefore, the regular shirts labor content = 2.5 / 5 = 0.5 minutes. The time taken per shirt = 0.5 minutes Since this is the same as the maximum time taken for a single sewing process causing the bottleneck (make cuffs), the cycle time / shirt will remain equal to 0.5 minutes Here the time taken is 2.5 min / labor / batch, which forms the bottleneck and represents the cycle time. The cycle time / shirt = 2.5 / 5 = 0…

Words 2279 - Pages 10

Acct 505 Quiz Notes Essay

CH 1 | 1 CORRECT | | Managerial accounting is concerned with: | | | A) | reporting financial information to stockholders. | | | B) | reporting financial information to regulators. | | | C) | providing information for use within the organization. | | | D) | the financial consequences of past activities. | | | | | | Feedback:The correct answer is C: Managerial accounting is concerned with providing information to managers for use within the organization. | | 2…

Words 5493 - Pages 22

Essay on Unit One Practice

customer feedback and objective data gathering and analysis techniques to drive process improvement? a. Theory of constraints b. Value chain c. Supply chain management d. Six sigma e. Lean thinking model Which of the following is a production and inventory control system in which materials are purchased and units are produced only as needed to meet actual customer demand? a. Just-in-time b. Value chain c. Supply chain management d. Work in process e. Lean thinking model Which of the following is a…

Words 9947 - Pages 40