B1 - Operations Management - Cost Measurement Methods and Techniques Flashcards
What are the three product costs?
Direct labor
Direct materials
Overhead applied
What do prime costs consist of?
Direct labor
Direct materials
What do conversion costs consist of?
Direct labor
Overhead applied
What is the purpose of cost accounting?
PIE
Product costing
Income determination
Efficiency measurements
Under which circumstances is job costing used? Process costing?
Custom order uses job costing and mass-produced uses process costing
How does operations costing vary from job and process costing?
It is a combination of the two
What is the calculation for cost of goods manufactured?
Beginning WIP
+ DMU/DL/OHA
- Ending WIP
What is the calculation for cost of goods sold?
Beginning finished goods
+ Cost of goods manufactured/purchased
- Ending finished goods
What is the purpose of the production report?
It keeps track of the physical flow of units/costs
How are equivalent units of production calculated under weighted-average?
Units completed and transferred out
+ Ending WIP (units x percent complete)
How are equivalent units of production calculated under FIFO?
Beginning WIP (units x percent left to complete)
+ Units completed and transferred out
- Beginning WIP (100%)
+ Ending WIP (units x percent complete)
How is cost per equivalent unit calculated under weighted-average?
(Beginning cost + current cost) / equivalent units
How is cost per equivalent unit calculated under FIFO?
Current cost / equivalent units
T/F: Abnormal spoilage (shrinkage) is capitalized as a cost of inventory
False; it is expensed as a period expense (normal spoilage is capitalized, however)
What is a synonym for activity-based costing?
Transaction-based costing
What are the two types of activity-based costing for service organizations?
Direct (most common and simplest) and step-down (complex)
T/F: For purposes of allocating joint costs to joint products, the sales price at point of sale, reduced by cost to complete after split-off, is assumed to be equal to the relative sales value at split-off
True
What conditions would have to exist for weighted-average and first in, first out (FIFO) equivalent units to be the same?
No beginning work-in-process (WIP)
T/F: Conversion cost pricing places minimal emphasis on the cost of materials used in manufacturing a product
False; it places no (not minimal) emphasis on the cost of materials and could be used if the customer provides the materials
What type of cost bears an observable and known relationship to a quantifiable activity base?
An engineered cost
