Following is a list of cost terms described in the chapter as well as a list of brief descriptive settings for each item.Cost terms:a. Opportunity costb. Period costc. Product costd. Direct labor coste. Selling costf. Conversion costg. Prime costh. Direct materials costi. Manufacturing overhead costj. Administrative costSettings:1. Marcus Armstrong, manager of Timmins Optical, estimated that the cost of plastic, wagesof the technician producing the lenses, and overhead totaled $30 per pair of single-visionlenses.2. Linda was having a hard time deciding whether to return to school. She was concernedabout the salary she would have to give up for the next 4 years.3. Randy Harris is the finished goods warehouse manager for a medium-sized manufacturingfirm. He is paid a salary of $90,000 per year. As he studied the financial statementsprepared by the local certified public accounting firm, he wondered how his salary wastreated.4. Jamie Young is in charge of the legal department at company headquarters. Her salary is$95,000 per year. She reports to the chief executive officer.5. All factory costs that are not classified as direct materials or direct labor. 6. The new product required machining, assembly, and painting. The design engineer askedthe accounting department to estimate the labor cost of each of the three operations. Theengineer supplied the estimated labor hours for each operation.7. After obtaining the estimate of direct labor cost, the design engineer estimated the cost ofthe materials that would be used for the new product.8. The design engineer totaled the costs of materials and direct labor for the new product.9. The design engineer also estimated the cost of converting the raw materials into their finalform.10. The auditor for a soft drink bottling plant pointed out that the depreciation on thedelivery trucks had been incorrectly assigned to product cost (through overhead).Accordingly, the depreciation charge was reallocated on the income statement.Required:Match the cost terms with the settings. More than one cost classification may be associated witheach setting; however, select the setting that seems to fit the item best. When you are done, eachcost term will be used just once.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Following is a list of cost terms described in the chapter as well as a list of brief descriptive settings for each item.
Cost terms:
a. Opportunity cost
b. Period cost
c. Product cost
d. Direct labor cost
e. Selling cost
f. Conversion cost
g. Prime cost
h. Direct materials cost
i. Manufacturing
j. Administrative cost
Settings:
1. Marcus Armstrong, manager of Timmins Optical, estimated that the cost of plastic, wages
of the technician producing the lenses, and overhead totaled $30 per pair of single-vision
lenses.
2. Linda was having a hard time deciding whether to return to school. She was concerned
about the salary she would have to give up for the next 4 years.
3. Randy Harris is the finished goods warehouse manager for a medium-sized manufacturing
firm. He is paid a salary of $90,000 per year. As he studied the financial statements
prepared by the local certified public accounting firm, he wondered how his salary was
treated.
4. Jamie Young is in charge of the legal department at company headquarters. Her salary is
$95,000 per year. She reports to the chief executive officer.
5. All
6. The new product required machining, assembly, and painting. The design engineer asked
the accounting department to estimate the labor cost of each of the three operations. The
engineer supplied the estimated labor hours for each operation.
7. After obtaining the estimate of direct labor cost, the design engineer estimated the cost of
the materials that would be used for the new product.
8. The design engineer totaled the costs of materials and direct labor for the new product.
9. The design engineer also estimated the cost of converting the raw materials into their final
form.
10. The auditor for a soft drink bottling plant pointed out that the
delivery trucks had been incorrectly assigned to product cost (through overhead).
Accordingly, the depreciation charge was reallocated on the income statement.
Required:
Match the cost terms with the settings. More than one cost classification may be associated with
each setting; however, select the setting that seems to fit the item best. When you are done, each
cost term will be used just once.
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