3 sectors of companies: Service Companies, Merchandising Companies, Manufacturing
Companies
Service Companies sell intangible items: Typically do not have inventory, they sell services.
Merchandising Companies: Resell tangible producers they buy from suppliers. For example,
Walmart buys clothing, toys, and electronics and resells them to customers at higher prices rather
than what it pays its own suppliers for these goods.
Manufacturing Companies: Use Labor, Plant, and Equipment to convert raw materials into new
finished products. They have 3 types of inventory: Raw materials, Work in process, and Finished
Goods.
Value Chain: R&D (Research and Development), Design, Production or Purchases, Marketing,
Distribution, Customer Service
Cost object: anything for which managers want a separate measurement of cost, Toyota’s cost
objects may include the following.
The same cost can be direct or indirect, depending on the Cost Object.
Inventoriable Product Costs: ONLY include the costs incurred during the “production or
purchases” stage of the value chain.
Summary of the 3 Types of Manufacturing Costs: Direct Materials + Direct Labor +
Manufacturing Overhead = Inventoriable Product Cost
Indirect materials: materials used in the plant that are not easily traced to individual units. Ex: If
you are manufacturing a table, you are going to need glue. The glue would be considered a
material that is indirect as overhead.
Manufacturing Overhead includes: Indirect materials, Indirect labor, and Other indirect
manufacturing costs.
Davis Caspers
Professor Fisher
ACC 241
17 Jan. 2017
Chapters 2 & 3
Prime Costs = Direct materials + Direct labor
Conversion Costs = Manufacturing overhead + Direct labor
Revenue - Operating Expenses = Operating Income.
Sales Revenue - COGS = Gross Profit.
Gross profit - Operating expenses = Operating income This is one calculation.
Inventory accounts for a manufacturing company:
Raw materials, Work in Process, Finished Goods.
Job costing:
TEST ON JOB COST RECORD / SHEET
Chapter 4 - Not covering Lean Costing and the Costs of Quality
Activity Based Costing = ABC
Cost Levels On HW but NOT ON TEST 1
Cost Drivers = Cost Activities (The same exact thing)
What classifies as relevant information?
1) Expected future data
2) Differs among alternatives
Six kinds of decisions in the chapter:
1) Special sales orders
2) Pricing
3) Discontinuing products, departments, or stores
4) Product mix when resources are constrained
5) Outsourcing (make or buy)
6) Selling as is or processing further
Incremental costs are the same thing as Variable Costs
Will ONLY make special deals if there is available excess capacity.
If a lowering of sales price will tarnish a company’s image as a high quality brand, they will not
do the special offer. If it ruins your image, reject it.
For exam 2: Know how to do problem on page 488.
In setting regular sales prices, companies must cover ALL of their costs (literally any type of
cost).
Know how to calculate Cost-Plus Price per Unit.
ACC 241 Final Exam Study Tips:
Chapter 2 - 2 questions
Chapter 3 - 2 questions
Chapter 4 - 4 questions
Chapter 5 - NONE
Chapter 6 - 1 questions
Chapter 7 - 3 questions
Chapter 8 - 3 questions
Chapter 9 - 4 questions
Chapter 10 - 6 questions
Chapter 11 - 5 questions
Chapter 12 - 10 questions
2 hours for the exam - Same time as normal class
Full sheet of paper front and back cheatsheet (Type it out and print it if you wish)
Chapter 2 / 3
- Know these: Product costs, Prime costs, Conversion costs
- Know: materials, work in process, and finished goods (all these are inventory accounts
which means that they are all considered assets)
- Know how Overhead works (MOH)
- Predetermined OH rate = Est. Overhead / Activity base (could be anything whatever it
says in the problem)
Chapter 4
Job costing (Job 603 is the problem on the test)
- DM
- DL
- OH
Cost of Quality (COQ) (question is what kind of cost is it?)
- Appraisal
- Prevention
- Internal failure
- External failure
TQM = Total Quality Management (Know which statement is not true regarding TQM)
Chapter 6
“Dog Collar” problem. (Know how variable and fixed costs relate to changes in volume.)
Chapter 7
- Know how to calculate breakeven sales
- Know what breakeven in units are
- Understand “What if?” examples. (Aka the effect of how breakeven can be affected)
- Operating leverage factor calculation (Know the formula for the problem)
Chapter 8
- Special order problem
- Discontinuing of a product line problem
- Constraint problem (machine hours is the constraint in the problem)
Chapter 9
- What is the purpose of budgeting? Like a definition problem
- Problem dealing with calculating total cash received in a month
- Purchases budget - calculate cash disbursement based off of a certain month’s purchases
- Direct labor budget - calculate direct labor for a couple months
Chapter 10
- Responsibility accounting
- Profit centers, cost centers,
- 3 q’s on knowing the difference between profit centers, cost centers, etc.
- Return on investments and sales margin, residiual income (Know all of these three
calculations)
- Balance scorecard question know the 4 different areas and examples of what would fall
under each category
Chapter 11
- Calculate a standard for a certain product similar to calculating direct labor?
- Theory type problem on which variance would be affected by a problem or issue that
takes place. Understand the purpose of the 4 variances. 2 problems like this.
- Understand how to calculate the 4 variances: labor rate variance, labor efficiency rate
variance etc. 2 q’s on this.
Chapter 12
- Payback period problem. Know what it is and how to calculate it.
- Problem on Accounting Rate of Return (ARR). How to calculate it know that.
- Several questions on NPV (Net present value). Know how to calculate it and the theory
behind it aka what it means and how changes affect it. From all of these methods, you
need to know why each of them are used. Understand the internal rate of return (You will
be calculating it and you need to know what it is. Given the cost of the machine and
something else….
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