Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

BEC V > 2-2. Cost Accounting > Flashcards

2-2. Cost Accounting Flashcards

1
Q

Cost-volume-profit analysis: what is also known as?

A

Break-even analysis.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Cost-volume-profit analysis: Define break-even.

A

The sales level at which sales revenues exactly offset total costs, both fixed and variable.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Cost-volume-profit analysis: what does total costs include?

A

Period costs and product costs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Cost-volume-profit (break-even) analysis: what is it usually expressed in?

A

In sales unit or sales dollars.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Cost-volume-profit (break-even) analysis: what is the basic formula?

A

Qty x Sales price = Fixed costs + (Qty x Variable cost per unit)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Cost-volume-profit (break-even) analysis: what is the alternative formula (more recommended) for break-even point in units?

A

Sales revenue - Variable costs = Contribution margin.
Therefore,
Sales price per unit - Variable cost per unit = Contribution margin per unit.
**Break-even point in units = Total fixed costs / Contribution margin per unit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Cost-volume-profit (break-even) analysis: when sales units are not available, what formulas can be used to compute break-even point in sales dollars?

A
  1. Contribution margin ratio = Contribution margin / Sales revenue
  2. Break-even point in sales dollars = Total fixed costs / Contribution margin ratio
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Cost-volume-profit (break-even) analysis: Multiple product analysis: How is it computed when there is more than one product?

A
  1. Sales revenue per unit - Variable cost per unit = Contribution margin per unit
  2. Multiply the response from (1) by weight (given in the question like “product A sells twice more than B)
  3. Sum the answers
  4. Break even point in units = Total fixed cost / Total contribution margin per unit
  5. Multiple the answer from (4) by weight to get break-even point in units for each product in question.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Cost-volume-profit (break-even) analysis: what is margin of safety? Also known as?

A

The difference between the current sales level and the break-even point.
As the difference between budgeted or actual sales and break-even sales.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Cost-volume-profit (break-even) analysis: how is targeted profit incorporated in computing targeted profit sales unit??

A

Sales in units = (fixed costs + targeted profit) / contribution margin per unit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Cost-volume-profit (break-even) analysis: What are 3 elements that must be relevant to perform break-even analysis?

A

Fixed costs
Unit variable costs
Price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Cost-volume-profit (break-even) analysis: what are 3 characteristics to be relevant?

A
  1. All relationships are linear
  2. If multiple products, the product mix remain constant
  3. No change in inventory level = # of units sold = # of units produced
    * Total costs can be divided into a fixed and variable components
    * Volume is the only driver of costs and revenues
    * Model applies to operating income (before tax)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Cost-volume-profit (break-even) analysis: Describe the break even point in units on a standard graph.

A
  • Fixed cost = horizontal
  • Variable cost = upward slope starting from 0
  • Total cost = starts where fixed cost begins on Y-ax and upward slope parallel to variable cost
  • Revenue = starts from 0 and upward slope
  • Break even point = where revenue and total cost cross
  • Losses = Area covered left of break even point between revenue and total costs
  • Profit = Area covered right of break even point
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Cost-volume-profit (break-even) analysis: Describe the break even point in units on an alternative graph.

A
  • Variable cost = area below variable cost line
  • Fixed cost = area between total cost and variable cost line
  • Everything = same as standard graph
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Cost-volume-profit (break-even) analysis: Describe the break even point in units on a volume-profit chart.

A
  • Contribution margin (sales-VC) = begins below 0 point
  • Break even point in units = where Qty (X-ax) line and contribution margin line cross
  • Fixed cost = difference between 0 and where contribution margin line began
  • Losses = area between Qty (X-ax) line and contribution margin line left of break even point
  • Profit: area between Qty (X-ax) line and contribution margin line right of break even point
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are 2 methods of assigning manufacturing costs to inventory?

A

Absorption costing and direct costing.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Absorption costing: what costs are assigned to inventory?

A

Direct material, direct labor, both fixed and variable manufacturing overhead.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Direct costing: Also known as? What costs are assigned to inventory?

A

Variable costing.

Only variable manufacturing costs (direct material, direct labor, and only variable OH).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What costing method for inventory is required for financial reporting and reporting to IRS?

A

Absorption costing.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is direct costing used for?

A

Internal decision-making.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What are 2 types of costs a manufacturing company’s IS typically displays? How are they further divided?

A

Product costs (manufacturing costs) and period costs (Selling and administrative costs).

  • Variable manufacturing costs
  • Fixed manufacturing costs
  • Variable selling and administrative costs
  • Fixed selling and administrative costs
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What are variable manufacturing costs?

A
  • Direct material
  • Direct labor
  • Variable factory overhead (e.g. supplies, repairs, etc).
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What are fixed manufacturing costs?

A

Fixed factory overhead (e.g. depreciation of buildings/equipment, manufacturing supervisor’s salaries/wages, property taxes, ins on building etc).

24
Q

What are variable selling and administrative costs?

A
  • Selling costs: e.g. freight out, sales commission etc

* Admin costs: e.g. office supplies, office utilities, etc

25
Q

What are fixed selling and administrative costs?

A
  • Selling costs: e.g. sales rep’s salaries, depreciation on sales-related equipment
  • Admin costs: e.g. officer’s salaries, depreciation, property taxes, ins on office building and etc
26
Q

Absorption costing IS: List from sales to operating income.

A

Sales
- Variable manufacturing costs (for units sold)
- Fixed manufacturing costs (for units sold)
=Gross margin
- Variable selling and admin ( for units sold)
- Fixed selling and admin (always for total)
= Operating income

27
Q

Direct costing IS: List from sales to operating income.

A

Sales
- Variable manufacturing costs (for units sold)
- Variable selling and admin (for units sold)
= Contribution margin
- Fixed manufacturing costs (always for total)
- Fixed selling and admin (always for total)
= Operating income

28
Q

Direct costing: what is the classification of variable/fixed selling and admin and fixed manufacturing costs?

A

Selling and admin: Period costs (regardless of costing methods).
Fixed manufacturing: Period cost.

29
Q

Absorption and direct costing: What is the comparison? Why is that?

A

Inv valuation under absorption costing > Direct costing.
ALWAYS.
Direct costing understates assets on BS.
Because direct costing does not include fixed manufacturing costs as a product cost.

30
Q

Absorption and direct costing: When is the income same?

A

When # of units sold = # of units produced (assume fixed cost remains the same).

31
Q

Absorption and Direct Costing: how is the difference of income computed? What is this equation known as?

A

Ending inv units x Fixed cost per unit - Beg inv units x Fixed cost per unit.
As income reconciliation rule.

32
Q

Absorption and Direct Costing: list the general relational differences in income.

A
  • Units sold = Units produced: Abs costing NI = Direct NI
  • Units sold > Units produced: Abs NI < Direct NI
  • Units sold < Units produced: Abs NI > Direct NI
33
Q

Job costing: when is it used?

A

Used to accumulate costs related to the production of large, relatively expensive, heterogeneous (custom-ordered) items.

34
Q

Job costing: Where are costs first accumulated? Then where?

A

Individual WIP accounts called job order cost sheets.

Then, the total is moved in WIP control account.

35
Q

Job costing: is this compatible with normal, std, variance costing?

A

Yes.

36
Q

Job costing: how is OH applied?

A

Based on a predetermined OH rate.

37
Q

Job costing: how is POR computed?

A

POR = Estimated total OH costs / Estimated activity volume

38
Q

Process Costing: when is it used?

A

to accumulate costs for mass-produced, continuous, homogeneous items, which are often small and inexpensive.

39
Q

Process Costing: why is it complicated?

A
  • There may be partially completed items in beg and end inventories
  • Each of 3 factors of production (labor, material, OH) may be at different level of completion and must separately computed
  • Some costs, particularly DM, do not occur uniformly across the process. Therefore, 2 categories, DM and conversion costs (labor and OH) are used
40
Q

Process Costing: is it compatible with normal, std, and variance analysis?

A

Yes.

41
Q

Process Costing: List the steps to compute.

A
  1. Compute physical units
  2. Compute EU (equivalent units) for DM and conversion costs
  3. Compute cost per EU
  4. Determine (a) cost of goods transferred out of WIP and (b) ending WIP inventory
42
Q

Process Costing: what is EU? Is it equivalent on what?

A

The number of whole units that could have been produced during the period in terms of cost incurred.
E.g. Cost with 6 units and 50% complete = Cost with 3 units and 100% compete.
*Only on the basis of cost!!

43
Q

Process Costing: what methods are used to compute EU?

A
  • Weighted average or First In

* First out (FIFO)

44
Q

Process Costing: EU: How is computed using weighted average?

A

Goods completed x % of completion + ending inventory x % of completion.

45
Q

Process Costing: EU: what categories does it use?

A

(1) Beg inv from (2) the new or current period completed work (called “units started and finished”), while (3) end inv is treated the same as with weighted average.

= Beg WIP x (100%-%) + Units started and finished (units added - end inv) x 100% (always will be 100%) + End WIP x %

46
Q

Process Costing: what is the term often used for cost of goods finished?

A

Cost of goods transferred out.

47
Q

Process Costing: why % completion for Beg WIP must be subtracted from 100%?

A

Because FIFO is interested only in the beg inv for current period and Beg WIP is what have been done in the prior period.

48
Q

Process Costing: what will % completion for units transferred out always be?

A

100%.

49
Q

Process Costing: Describe flow of physical chart and T account for WIP inventory.

A 
Units in Beg. WIP
\+ Units added to production
= Total units to account for
- Units in ending WIP
= Units transferred to finished goods

DR: Beg Inventory CR: Units transferred out
DR: Units added

Dr: End Inventory

50
Q

Process Costing: How is total costs to account for computed?

A
  • Beg WIP costs
  • Transferred-in-costs
  • Current-period costs
  • *Total costs to account for = total of all above
51
Q

Process Costing: What are 2 methods used to compute total costs to account for?

A

Weighted average cost flow.

FIFO cost flow.

52
Q

Process Costing: WA cost flow: what is the total cost? Do you need to consider %?

A

Beg WIP inv costs + Current period costs (include transfer in costs if any).
No.

53
Q

Process Costing: FIFO: what is the total costs?

A

Only current period costs - the cost related to prior period work on beg WIP are transferred to FG.

54
Q

Process Costing: how is ending inventory value computed?

A

EU per unit cost x (End inv units x completion%)

55
Q

Process Costing: WA: how is value of cost of goods transferred out computed?

A

EU per unit cost x Goods completed and transferred out units

56
Q

Process Costing: FIFO: how is the value of cost of goods transferred computed?

A

EU per unit cost x (Beg inv + Units started and finished) + Prior period costs.

BEC V (7 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions