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B3 (1/2 BV) Flashcards

1
Q

Inventorable costs are regarded as

A

assets before the products are sold

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2
Q

Conversion costs include

A

indirect labor (Overhead), indirect materials (Overhead) , and direct labor. Can be used when the customer furnishes the material used in manufacturing a product.

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3
Q

Direct labor (Conversion Cost) is both

A

both a product cost and a prime cost

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4
Q

Product costs

A

are direct material, direct labor and overhead

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5
Q

The treatment of sales commissions and abnormal spoilage charges when calculating

A

manufactured goods inventoriable costs are exclude both sales commissions and abnormal spoilage

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6
Q

Product costs is assigned

A

to goods that were either purchased or manufactured for resale

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7
Q

Calculate Prime Cost

A

Beginning Balance direct materials
Plus Purchases
Plus transportation in
Less Purchase returns and allowances
Materials Available
Less cost of materials used
Ending Balance direct materials
Direct Materials
Plus Direct Labor
= Prime Cost

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8
Q

Calculate Conversion Cost

A

Beginning Inventory
+ Material
+ Labor
+ Overhead

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9
Q

Computer programmers who meet customers special requirements pay should be categorized as

A

direct costs and value adding costs

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10
Q

Example of direct labor is __________ , example of indirect labor is __________________

A

Example of direct labor is loom operators (most operators) , example of indirect labor is factory foreman and machine mechanics

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11
Q

The purpose of cost allocation is

A

measuring income and assets for external reporting

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12
Q

Variable costs is

A

is cost that is fixed per unit

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13
Q

Costs would decrease if

A

production levels were increased within the relevant range of fixed costs per unit

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14
Q

Relevant range is the range over

A

which cost relationship are valid

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15
Q

What are:
1)Mixed Cost
2) Carrying Costs
3) Sunk Costs
4) Committed Costs

A

1) Mixed Cost: includes both fixed and variable components
2) Carrying Costs: the costs of carrying the inventory
3) Sunk Costs: in the past and unavoidable
4) Committed Costs future but unavoidable

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16
Q

1) Process Costing
2) Operating Costing
3) Activity Based Costing
4) Job Order Costing

A

1) Process Costing: accumulated by department rather than job
2) Operating Costing: is hybrid system that allows the company to use job order costing for some costs of production and process costing for other costs
3) Activity Based Costing: accumulates all cost overhead for each of the activities of the organization and then allocates those activity costs to the cost objects that caused activity
4) Job Order Costing: allocating production costs to products and services that are identifiable as separate units and require greater or lesser amounts of work to complete

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17
Q

Activity Based Costing can be used in either

A

process costing and job costing. It assigns overhead and indirect costs to related products and services

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18
Q

Activity Based Costing assigns costs to

A

activities or transactions and allocates them to products according to their use of each activity. This method means multiple cause and effect relationships may exist.

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19
Q

Activity Based Costing tends to increase

A

both the number of cost pools and the number of allocation bases because ABC breaks down a production process into many activities. Then accumulates the cost by the activity (cost pool) using appropriate allocation base for each.

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20
Q

Traditional cost would use

A

one cost and one allocation base (factory overhead)

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21
Q

Activity based costing system cost reduction is accomplished by

A

eliminating non value adding activities because that will reduce cost. Don’t eliminate all cost drivers because that would eliminate all activity.

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22
Q

Costs associated with activity based costing is high because

A

determining the amounts that go in which pools and their related costs will likely be more costly than traditional systems

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23
Q

Joint Costs will most likely be allocated based upon

A

relative unit volume, relative sales value at split off, or net realizable value.

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24
Q

Flexible budget amounts are not used to

A

to allocate joint costs

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25
Sales Value at split off is recognized method of
allocating joint costs
26
Physical measures such as
weights or volume are recognized method of allocating joint costs
27
Constant gross margin percentage net realizable value method is recognized method of
allocating joint costs
28
1) Sales Price less the cost to complete 2) Sales Price at point of sale reduced by cost to complete is 3) Sales Price at point of sale reduced by cost to complete 4) Selling price less a normal profit margin
1) Sales Price less the cost to complete: is defined as the relative sales value at split off. In other words, this is the additional contribution to income generated by completing the product 2) Sales Price at point of sale reduced by cost to complete: is the additional contribution to income generated by completing the product. Its not equal to total costs 3) Sales Price at point of sale reduced by cost to complete: is the additional contribution to income generated by completing the product. Its not equal to joint costs (this is zero profit situation) 4) Selling price less a normal profit margin: is generally a cost figure. It is not equal to sales price less the cost to complete, which is the additional contribution to income generated by completing the product (this is zero profit situation)
29
1) Units of electrical power consumed is a 2) Units sold 3) Salaries of service department 4) Direct materials
1) Units of electrical power consumed is a base that would be great indication of producing departments demand on the service department 2) Units sold is a base of allocation relates more to the sales department 3) Salaries of service department is not a base of allocation it’s a cost 4) Direct materials is not the best base for a service department because it doesn’t have a direct relationship to the service department
30
Benefit management can expect from traditional costing includes
using a common department or factory wide measure of activity using direct labor hours to distribute manufacturing overhead to products
31
Activity based costing refines
PRODUCT COST because the cost system emphasizes long term product analysis (when fixed costs become variable costs)
32
1) Activity based costing 2) Job Costing is 3) Variable costing is 4) Process Costing is
1) Activity based costing: acceptable for internal reporting not external reporting 2) Job Costing: is acceptable for both internal reporting and external reporting 3) Variable costing: is acceptable for internal reporting not acceptable for external reporting 4) Process Costing: is acceptable for both internal reporting and external reporting
33
Activity based costing collects
financial and operating data on the basis of the underlying nature and extent of the cost drivers
34
Engineered Cost bears an observable and known
relationship to a quantifiable (measured) activity base
35
Activity based costing products or services require the
performance of activities, and activities consume resources
36
Activity based costing normally results in
substantially greater unit costs for low volume products than is reported by traditional product costing
37
Activity based costing is recommended when
more than one product is produced and those products do not uniformly consume indirect resources
38
Overhead costs are
employee salaries and employee benefit expense
39
Behavioral effects, costs of measurement and degree of correlation are all factors that should be considered when
selecting appropriate cost drivers to apply for activity based costing
40
Activity based costing is very beneficial for allocating
indirect costs when there are multiple activities that is evaluated independently and assigned to cost drivers which results in allocation rate unique to activity
41
Value added costs are those resource uses that_________________ Examples of Nonvalue adding costs are _________________
Value added costs are those resource uses that provide value to the consumer Examples of Nonvalue adding costs are moving and handling costs
42
To encourage the use of nonfinancial measures you should
tie incentives to the managers individual effort
43
Benchmarking is the process by which
products and services of a business entity are measured and evaluated relative to the best possible levels of performance
44
Total productivity ratios (TPRs) consider
all inputs simultaneously as well as the prices of the inputs
45
Benchmarking involves comparing a company's
internal processes that need to be improved to those of external companies identified as best in class
46
Benchmark compares and contrasts
its financial information to published information to determine optimal results (identifying standards)
47
Control Chart quality programs normally include
a number of techniques to find and analyze problems used to determine zero defects and goalpost conformance
48
1) Pareto diagram 2) Fishbone diagram 3) Kanban
1) Pareto diagram: is a quality control tool used to evaluate error rates and process improvement issues in a manner that combines both a histogram and a line graph 2) Fishbone diagram: analyzes cause and effect and does not display the relationship between errors and process issues contemplated by Pareto Diagram 3) Kanban: is Japanese for card and is used as a supply chain and inventory control mechanism
49
Pareto diagram displays
the individual and cumulative frequency of quality issues, defects, or problems
50
The elements of manufacturing process typically presented
on a cause and effect Fishbone are manpower, machinery, method and materials because it helps identify defects
51
1) Cost SBU 2) Revenue SBU 3) Profit SBUs 4) Investment SBUs
1) Cost SBU: only have responsibility for one dimension of financial performance and it is one that they control entirely, the level of costs incurred. 2) Revenue SBU: represents a greater responsibility than cost SBUs. Managers of revenue SBU only have responsibility for one dimension of financial performance. 3) Profit SBUs: represent a greater responsibility than either cost or revenue SBU because managers maintain control of revenues and costs and the relationship between them 4) Investment SBUs: represent the organizational segment with the highest level of responsibility managers consider cost, revenue and their relationship between profits generated and assets invested
52
A successful responsibility accounting reporting system is dependent upon
responsibility for costs, the authority to do something about them, are necessary for a successful responsibility accounting system
53
Controllable Margin is computed as
contribution margin net of controllable costs. Controllable costs represent those fixed costs that managers can impact in less than one year
54
Balanced Scorecard is
performance measurement tool generally associated with the display of information evaluating multiple dimensions of business outcomes
55
The balance scorecard typically defines
organizational performance in four dimensions including innovation, customer satisfaction, internal business processes and finance
56
1) Measurement of customer value 2) Measures of financial performance 3) Learning and innovation
1) Measurement of customer value: such as discount prices compared to competitors prices for a cost leader, would most likely be included in the customer section of the balanced scorecard 2) Measures of financial performance: would focus more on results of operations and utilization of assets Internal business processes would focus more on internal efficiencies and cost structure than external comparisons to competitor pricing 3) Learning and innovation: would focus more on the effective use of personnel in improving business processes and linking rewards with recognition as opposed to external comparisons to competitor costs
57
Financial and Non financial features of an organization that contribute to its success in achieving strategy are referred to as critical success factors and are normally classified as
1) Financial solvency and return 2) Customer Satisfaction 3) Internal business process 4) Human resource innovation
58
Sales are reported on company financial statements and are often used as a measure of
financial performance
59
Balance scorecard provides information on several aspects of an organizations performance capturing success factors such as
financial performance, internal business process, innovation/ hr advancements, and customer satisfaction
60
1) Rework is an ____________ 2) Maintenance is ______________ 3) Inspection is a __________ 4) Product recalls is an ________________
1) Rework is an internal failure cost 2) Maintenance is prevention cost 3) Inspection is a prevention cost 4) Product recalls is an external failure cost
61
Appraisal costs would detect _______________________________ Examples of appraisal costs include: __________________________
Appraisal costs would detect individual products that do not conform to specifications. Examples of appraisal costs include: statistical quality checks, inspections, testing, maintenance of lab
62
The four categories of cost associated with product quality are
1) Prevention 2) Appraisal 3) Internal Failure 4) External Failure
63
External failure examples are_________________________ Internal failure example are____________________________
External failure examples are: lost customers, warranty costs, liability claims Internal failure example are: tooling changes, rework, scrap
64
Tracking the number of products reworked effectively measures
improvements in product quality when results of internal failure occurs
65
Prevention costs
are redesign of processes
66
Costs incurred in shortening product lead times and achieving on time deliveries are measures of
performance and not a cost of quality
67
Employee satisfaction and retention measures are used under
"learning and growth"
68
Total debt ratio:
Total liabilities --------------------- Total assets
69
Times interest earned
Earnings before interest and taxes ------------------------------------------------------ Interest expense
70
Return on sales
Income before interest income, interest expense, and taxes --------------------------------------------------------------- Sales (net)
71
Return on equity
Net income ----------------------------- Average total equity
72
Return on assets
Net income ---------------------------- Average total assets
73
Quick ratio
Cash and cash equivalents + Short-term marketable securities + Receivables (net) -------------------------------------------------------------------------- Current liabilities
74
Profit Margin
Net income ---------------------- Sales (net)
75
Price earnings ratio
Price per share ----------------------------------- Basic earnings per share
76
Operating cash flow ratio
Cash flow from operations -------------------------------------- Ending current liabilities
77
Inventory turnover
Cost of goods sold --------------------------- Average inventory
78
Gross margin (Gross profit margin)
Sales (net) – Cost of goods sold ----------------------------------------------- Sales (net)
79
Equity multiplier
Total assets ------------------- Total equity
80
Dividend payout
Cash dividends ------------------------- Net income
81
Debt to equity
Total liabilities ---------------------- Total equity
82
Days sales in accounts receivable
Ending accounts receivable (net) ------------------------------------------------- Sales (net) / 365
83
Days of payables outstanding
Ending accounts payable ------------------------------------- Cost of goods sold / 365
84
Days in inventory
Ending inventory Cost of goods sold / 365
85
Current ratio
Current assets --------------------------- Current liabilities
86
Basic earnings per share
Income available to common shareholders -------------------------------------------------------------- Weighted average common shares outstanding
87
Asset turnover
Sales (net) ----------------------------- Average total assets
88
Accounts receivable turnover
Sales (net) ------------------------------------------------- Average accounts receivable (net)
89
Traditional Overhead Rate
Budget manufacturing overhead costs ________________________________________ Estimated Cost Driver
90
Cost of Goods Manufactured
91
Cost of Goods Sold
92
Equivalent Units and Total Cost Calculated using FIFO
(Beginning WIP x % to be completed) + Units started and completed + (Ending WIP x % completed)
93
Equivalent Units and Total Cost Calculated using Weighted Average Method
Units completed and transferred out + (Ending WIP x % completed)
94
ROI
1) Profit Margin: (Income / Sales) 2) Investment Turnover: (Sales/ assets)
95
DuPont ROE Formula
Net Profit Margin x Asset Turnover x Financial Leverage 1) Net Profit Margin = Net Income/ Sales 2) Asset Turnover = Sales / Average Total Assets 3) Financial leverage = Average total assets/ Equity
96
Residual Income
1) Net Income - Required Return 2) Net Book Value x Hurdle Rate = Required Return
97
Required Return
Investment x Cost of Capital

BEC Flashcards (40 decks)

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