Exam review covers 5 problems, one from each chapter.
Exercises similar to test problems but with different numbers.
Focus on traditional vs. contribution format income statements, predetermined overhead rates, journal entries for job order costing, process costing, and contribution margin ratio.
Chapter 1: Traditional vs. Contribution Format Income Statement
Traditional Income Statement Format:
Start with Sales.
Deduct Cost of Goods Sold (COGS) to find Gross Margin.
Deduct Selling and Admin Expenses to find Net Operating Income.
Example Calculation:
Sales: $216,000 (12,000 units x $18 each).
COGS calculated using beginning inventory, purchases, and ending inventory.
Selling expenses include variable ($2/unit) and fixed costs.
Admin expenses include variable ($3/unit) and fixed costs.
Net Operating Income calculated after all deductions.
Contribution Format:
Separate fixed and variable costs.
Calculate Contribution Margin by subtracting variable costs from sales.
Fixed expenses remain the same in both formats.
Chapter 2: Plantwide Predetermined Overhead Rate
Rate: $23.50 per direct labor hour.
Applied to actual direct labor hours.
Important to differentiate between estimated and actual hours for calculation.
Chapter 3: Journal Entries for Job Order Costing
Accounts Involved: Raw Materials, Work in Process, Manufacturing Overhead, Accounts Payable, Cash, Accumulated Depreciation.
Key Transactions:
Purchase raw materials on account and adjust the T accounts accordingly.
Allocate material and labor costs between direct (Work in Process) and indirect (Manufacturing Overhead).
Record depreciation on factory equipment.
Chapter 4: Process Costing
Use Weighted Average Method for calculating equivalent units.
Total costs include materials, labor, and overhead added during the period.
Divide total costs by equivalent units to find cost per equivalent unit.
Chapter 5: Contribution Margin and Variable Expense Ratios
Calculate contribution margin ratio and variable expense ratio:
Contribution Margin Ratio = Contribution Margin / Sales.
Variable Expense Ratio = Variable Expenses / Sales.