Kế toán, kiểm toán - Chapter 9: Recording and evaluating conversion process activities

Chapter 9Recording and Evaluating Conversion Process ActivitiesCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin9-*What are the Primary Activities in the Conversion Process?Schedule productionObtain raw materials (internal transfer)Use labor and manufacturing resources to convert raw materials into finished goodsStore finished goods until sold (internal transfer)9-*Which of the Conversion Process Activities are Accounting Events?Obtain raw materialsIncrease work-in-process inventoryDecrease direct materials inventoryUse labor and overheadIncrease work-in-process inventoryStore finished goodsIncrease finished goods inventoryDecrease work-in-process inventory9-*What is the Basic Flow of Information in the Conversion Process?Customer places an order and production is scheduledRaw materials are requisitioned and recordedLabor is used and recordedCost record prepared and goods are manufacturedGoods are finished and recorded9-*What are the Manufacturing Inventory Accounts?Direct materials inventoryCurrent asset (similar to Merchandise Inventory for a merchandising company): Cost of direct materials on handIncreases when purchases of direct materials are made (Chapter 8) Decreases when direct materials are requisitioned into production 9-*Inventories ContinuedWork-in-process inventoryCurrent asset: Cost of products that have been started but not completedIncreases when direct materials are requisitioned into production Increases when direct labor is used in productionIncreases when manufacturing overhead is applied to production Decreases when products are finished 9-*Inventories ContinuedFinished goods inventoryCurrent asset: Cost of products that have been finished but not soldIncreases when products are finished Decreases when products are sold (Chapter 10) 9-*How do Costs Flow through the Inventory Accounts?Beginning direct materials inventory+ Purchases of direct materials= Cost of direct materials available for useDirect materials issued into production= Ending direct materials inventory9-*Cost Flows Continued Beginning work-in-process inventory+ Direct materials issued into production+ Direct labor used in production+ Applied manufacturing overhead= Cost of goods in processCost of goods manufactured= Ending work-in-process inventory9-*Cost Flows Continued Beginning finished goods inventory+ Cost of goods manufactured= Cost of goods available for saleCost of goods sold= Ending finished goods inventory9-*How does the Manufacturing Overhead Application Process Work?Beginning of periodEstimate overhead for each cost poolUnit-relatedBatch-relatedProduct-sustainingFacility-sustainingEstimate cost drivers for each cost poolDivide estimated overhead by estimated cost driver = predetermined overhead rate9-*Overhead Application ContinuedDuring periodApply overhead to production as the cost driver is usedRecord actual overhead as incurredEnd of periodCompare total applied overhead to total actual overheadClose the overhead account to Cost of Goods Sold (difference between applied and actual)9-*What are Variances?Difference between the standards and the actual prices or quantitiesDirect labor variancesDirect labor price varianceDirect labor usage varianceDirect material variancesDirect material price varianceDirect material usage varianceDirect material inventory variance9-*How are Direct Labor Variances Calculated?Direct labor price variance(SP – AP) * AHTells us whether we paid more or less for labor than anticipated (budgeted)Direct labor usage variance(AH – SHa) * SPTells us whether we worked more or less hours than planned given the number of units produced9-*How are Direct Material Variances Calculated?Direct materials price variance(AP – SP) * AQpTells us whether we paid more or less for direct materials than anticipated (budgeted)Direct materials usage variance(AQu – SQa) * SPTells us whether we used more or less direct materials than planned given the number of units producedDirect materials inventory variance(AQp – AQu) * SPTells us whether inventory levels are increasing or decreasing