REVIEW QUESTIONS (3)

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ON THE SUBJECT OF

GENERAL EXPENSE AND COST SUMMARIES


1. Explain the relationship between expense and cost of production and why the former should be absorbed by the latter.

2. Why is manufacturing expense related to cost rather than selling price?

3. Why is the labor cost of production considered the most reliable basis for calculating expense?

4. What is a safe rule to follow in the segregation of pay-roll into productive and non-productive labor?

5. Why is expense not added to operating costs?

6. For a factory with, say, twelve departments or processes, some without any machinery, some with machinery in operation all the time, and others where it is running but part of the time, what means for handling the factory expense would you recommend and why?

7. What do you consider the value of machine rates and where can they be used to advantage?

8. When selling expense is not included in the general expense distribution, how is rate of same arrived at and the selling cost found?

9. Wherein would be the error to carry all the factory operating and general expense in one account and distribute both by one average rate for the entire plant?

10. The trial balance shows a debit balance for operating expense Dept. F and a credit balance for Dept. G. What do these balances mean? How should they appear on the balance sheet?

11. The debit balance of operating expense Dept. F, at the end of the month, is $100; at the end of the next month it is $200. What does this increase signify and what should be done?

12. The credit balance of operating expense Dept. G at the end of the month is $100; at the end of the next month it is $200. What should be done in this case?

13. The trial balance shows but one item of general expense—the distribution account. How would you proceed to analyze the various subdivisions of general expense?

14. Is a department operated at 50% of its productive labor necessarily operated with any less efficiency than another where the expense is but 25%. Why?

15. The operating statement shows increasing percentages each month. What does this condition of affairs reveal and what two ways are at once suggested for improving the situation?

16. A foreman, to have the operating expense of his department show more favorably, diverts his expense charges onto other work. How can such irregularities generally be detected?

17. A workman's wage is 30 cents per hour in a department whose operating expense is 40% of its productive labor and whose general expense is 33?%. How much per hour should the company charge for this man's services on a repair job in order to make a profit of 20%?

18. Calculate the departmental and general expense percentage rates for distribution in a factory whose operating figures are shown as follows:

Operating Expense Productive Labor
Dept. A $2,619. 20 $7,342. 88
" B 1,234. 56 6,439. 71
" C 419. 06 4,206. 83
" D 549. 70 1,070. 30
Distribution Account 6,088. 14
Total Productive Labor 25,281. 49

19. Draw up a form for cost sheet and show thereon the cost of a job done in the above plant whose direct charges are as follows, using the next even percentage in each case:

Labor —— Dept. A —— $125.10
" " B 75.20
" " C 100.30
" " D 25.40
Material 150.50

20. What method should be used by the cost department to collect data showing material and labor costs?


                                                                                                                                                                                                                                                                                                           

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