Exam 2: An Introduction to Cost Terms and Purposes

The total of the costs assigned to a particular product for a specific purpose is called

Answer the following question using the information below. Pederson Company reported the following: -What is the amount of gross margin?

Use the information below to answer the following question(s). Ontario Industries Inc.had the following activities during the year: -What is the amount of the beginning work-in-process inventory at Ontario Industries Inc.?

A fixed cost is a cost that changes per unit as cost driver volume changes.

Overtime premium consists of the wages paid to all workers (for both direct labour and indirect labour)in excess of their straight-time wage rates.

Conversion costs are all manufacturing costs other than direct materials.

Manufacturing overhead includes

Prime costs can include

Things are not going well for the widget industry this year.The well-known cyclical nature of widget sales is in a downturn and your plant has been ordered to cut costs by its American parent corporation.The plant manager explains that he has shown the lead by negotiating a $1.50 hourly wage decrease with the production workers,based on a formula that pegs a $1.50 per hour wage increase/decrease to sales volume,and since sales are down this year,so are hourly wage costs.In the quarterly management meeting,the sales manager complained that sales could have been higher,but that somehow costs had increased,at least that's what the reports out of your office in management accounting,indicated.The Purchasing manager assured everyone that she was able to obtain raw materials at the same price as last year,and unfortunately,you as the management accountant,were not in attendance at the meeting.Your assistant,a new employee attended in your place,and promised at the meeting to redo the reports and find the errors.Your assistant has come to you as he cannot find any errors in the reports.Consequently,the plant manager wants you to redo the reports,find the error reports produced by your department for the last quarter and to explain to your boss,the plant manager,why average costs have increased. Required: Assuming there are no errors in the cost reports,explain to the plant manager how direct labour costs could be decreased and direct materials costs could be the same as last year,and yet the selling price cannot be lowered without sacrificing net income for the plant.

A manufacturing plant produces two product lines: football equipment and hockey equipment.An indirect cost for the hockey equipment line is the

Office Supply Company manufactures office furniture.Recently the company decided to develop a formal cost accounting system.The company is currently converting all costs into classifications as related to its manufacturing processes. Required: For the following items,label each as being appropriate for ∙ direct cost tracing of the finished furniture, ∙ indirect cost allocation of an indirect manufacturing cost to the finished furniture,or ∙ as a nonmanufacturing item.