Financial Accounting Answers

when overhead is underapplied a must be made to the manufacturing overhead account to close it out

3. Using the variable costing method, which of the following costs are assigned to inventory?

List at least one example of manufacturing overhead that you observed in the video. How does manufacturing overhead differ from direct materials and direct labor?

Yes, I agree that all the expenses of a company can be categorized into three broad terms, but I believe there are also so many subcategories within these broad terms. I also would add manufacturing overhead

Manufacturing overheads represent the costs contained within any manufacturing process for goods, the manufacturing overhead commonly the cost not associated with the straight labor and material.

Please define each of the following terms, direct manufacturing item, indirect manufacturing item, variable manufacturing overhead, fixed manufacturing overhead, pre-determined manufacturing overhead, pre-determined manufacturing overhead rate, and the base for pre-determined manufacturing overhead rate. Then discuss if predetermined manufacturing overhead rate depends on production level. Provide examples to clarify and support your argument.

The manufacturing overhead includes most of the indirect costs for a production of the output. This includes the supervisory

Compute the amount of under- or overallocated manufacturing overhead. Is the amount significant enough to warrant proration of overhead costs, or would it be permissible to write it off to cost of goods sold? Prepare the journal entry to dispose of the under- or overallocated overhead.

Overhead, also known as indirect manufacturing costs or manufacturing overhead consisting of all costs that are involved in the manufacturing process of a product except direct material and direct labor (Heisinger & Hoyle, 2012). Due to their difficulty in tracing to a specific job, these costs are often allocated to a particular job based on an estimate. Therefore predetermined rate which is calculated as; estimated overhead costs/estimated activity in allocation base - is used in the process. Proper allocation of overhead to products provides managers with the necessary information for decision making such as setting prices for products. Also, overhead allocation promote efficient use of resources, thereby allowing the company to minimize costs. In addition, as required by US GAAP, overhead must be

The three cost elements ordinarily included in the inventoriable cost of a manufactured product are direct materials, direct labor, and marketing costs.

Variable cost allocation includes only variable manufacturing costs, such as direct materials, direct labor, and variable manufacturing overhead. Absorption cost allocation includes manufacturing costs, including both variable and fixed overhead as

During the month, the company purchased an additional $68,000 of raw materials. During May, $92,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $5,000. The debits to the Work in Process account as a consequence of the raw materials transactions in May total:

Assigning Overhead Costs – Overhead costs are not directly related to production volume, and therefore cannot be traced to units of product in the same way as direct materials and direct labor. Consequently, we must assign overhead costs using an allocation system.

Product costs can be used both as “cost of goods manufactured” when the companies are incurring goods and as a “Cost of goods Sold” when the companies are selling the goods. Direct material cost includes all the cost that are used in the manufacturing of product; direct labor cost includes the cost of the labor that are physically in touch with product manufacturing and manufacturing overhead includes the cost other than direct material and labor cost like indirect materials, indirect labor, factory equipment depreciation. In manufacturing company’s balance sheet current assets of inventory includes cost of raw materials, work in progress and finished goods. Period Costs in manufacturing companies will include sales commissions, advertising costs, office salaries, property taxes, research and development, insurance, depreciation, selling

Absorption and variable costing differ in how they handle fixed manufacturing overhead. Under absorption costing, fixed manufacturing overhead is treated as a product cost and hence is an asset until products are sold. Under variable costing, fixed manufacturing overhead is treated as a period cost and is expensed on the current period’s income statement.