B1 - Operations Management - Cost Measurement Methods and Techniques

Question 1

What are the three product costs?

Answer 1

Direct labor
Direct materials
Overhead applied

Question 2

What do prime costs consist of?

Answer 2

Direct labor

Direct materials

Question 3

What do conversion costs consist of?

Answer 3

Direct labor

Overhead applied

Question 4

What is the purpose of cost accounting?

Answer 4

PIE

Product costing
Income determination
Efficiency measurements

Question 5

Under which circumstances is job costing used? Process costing?

Answer 5

Custom order uses job costing and mass-produced uses process costing

Question 6

How does operations costing vary from job and process costing?

Answer 6

It is a combination of the two

Question 7

What is the calculation for cost of goods manufactured?

Answer 7

Beginning WIP
+ DMU/DL/OHA
- Ending WIP

Question 8

What is the calculation for cost of goods sold?

Answer 8

Beginning finished goods
+ Cost of goods manufactured/purchased
- Ending finished goods

Question 9

What is the purpose of the production report?

Answer 9

It keeps track of the physical flow of units/costs

Question 10

How are equivalent units of production calculated under weighted-average?

Answer 10

Units completed and transferred out

+ Ending WIP (units x percent complete)

Question 11

How are equivalent units of production calculated under FIFO?

Answer 11

Beginning WIP (units x percent left to complete)
+ Units completed and transferred out
- Beginning WIP (100%)
+ Ending WIP (units x percent complete)

Question 12

How is cost per equivalent unit calculated under weighted-average?

Answer 12

(Beginning cost + current cost) / equivalent units

Question 13

How is cost per equivalent unit calculated under FIFO?

Answer 13

Current cost / equivalent units

Question 14

T/F: Abnormal spoilage (shrinkage) is capitalized as a cost of inventory

Answer 14

False; it is expensed as a period expense (normal spoilage is capitalized, however)

Question 15

What is a synonym for activity-based costing?

Answer 15

Transaction-based costing

Question 16

What are the two types of activity-based costing for service organizations?

Answer 16

Direct (most common and simplest) and step-down (complex)

Question 17

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

Answer 17

True

Question 18

What conditions would have to exist for weighted-average and first in, first out (FIFO) equivalent units to be the same?

Answer 18

No beginning work-in-process (WIP)

Question 19

T/F: Conversion cost pricing places minimal emphasis on the cost of materials used in manufacturing a product

Answer 19

False; it places no (not minimal) emphasis on the cost of materials and could be used if the customer provides the materials

Question 20

What type of cost bears an observable and known relationship to a quantifiable activity base?

Answer 20

An engineered cost