Account Earnings (rev.) Cost of Const Labor Material Total Direct Cost Gross Profit Overhead Var. Op. Exp. Fixed Op. Exp. Total Op. Exp Net Profit (BT) New Work Division 300,000 500,000 100,000 50,000 1,000,000 800,000 200,000 150,000 50,000 Use the data provided above to answer the following questions. 1. Gross Profit Method 1.1. Overhead and Profit Rate = Gross Profit/Total Direct Cost 1.2. What is the problem with this technique?

Account Earnings (rev.) Cost of Const Labor Material Total Direct Cost Gross Profit Overhead Var. Op. Exp. Fixed Op. Exp. Total Op. Exp Net Profit (BT) New Work Division 300,000 500,000 100,000 50,000 1,000,000 800,000 200,000 150,000 50,000 Use the data provided above to answer the following questions. 1. Gross Profit Method 1.1. Overhead and Profit Rate = Gross Profit/Total Direct Cost 1.2. What is the problem with this technique?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expens than the home consoles. The company only recently began producing the home model. Since the introduction of the new product. profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products particularly because sales of the new product have been increasing Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,366,000 based on production of 340.000 handheld consoles and 89,000 home consoles. Direct labor and direct materials costs were as follows. Direct labor Materials Handheld $1,294, 500 790,000 Cost Driver Number of production runs Quality tests performed Shipping orders processed Total overhead…
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Management Accounting Questions MCQ 1. Which of the following statements comparing the weighted-average method with the FIFO method of accounting for cost flows is incorrect? a)Using the FIFO method, the equivalent units are calculated differently from the weighted-average method because the equivalent work done on the opening work-in-progress last period is excluded from the computation. b)The weighted-average method averages the costs associated with the work done in the previous period with the costs incurred in the current period. c)The fact that there are two different methods suggests that it is not possible to state which method provides more accurate results. d) When there are no beginning inventories or ending inventories, both methods will provide identical results. 2. Which of the following statements about a process costing system is incorrect? a) In a process costing system, there is a work-in-progress account for each processing department. b) In a process costing…
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