B3/B4

Question 1

How to distinguish what is direct labor

Answer 1

Cost DIRECTLY connected with manufacturing product

Ppl who just work on factories or mechanics are not DL

Question 2

Job order costing

Answer 2

Alllocating production costs to products & srvices that u can identify separately (ex: furniture manufacturing, special order printing, shipbuilding)

Question 3

Estimated NRV method to estimate joint costs, what units do u use

Answer 3

Units produced!! Not units sold

NRV per each product/unit = (units produced * selling price) - seperable cost

Question 4

If you’re given ROA and asset turnover, how to find profit margin

Answer 4

ROA = NI/TA
asset turnover = sales / avg assets

ROA % / asset turnover = profit margin

Question 5

What do product costs consist of

Answer 5

Direct material, direct labor, factory (manufacturing) overhead

Question 6

Conversion costs

Answer 6

Labor and overhead

Question 7

Prime costs

Answer 7

Material and labor

Question 8

Control chart

Answer 8

Shows performance of a particular process in relation to accceptable upper/lower deviation limits

Question 9

Pareto diagram

Answer 9

Individual and cumulative graphical analysis of errors by type

Question 10

Fishbone diagram

Answer 10

Describes a process, contributions to the process, and the potential problems that could occur at each phase

Question 11

When actual overhead expenses are incurred, do you debit or credit

Answer 11

Debit actual, credit applied (estimated) overhead

Question 12

Optimal imputed interest rate used in residual income approach

Answer 12

Target return on investment set by company management

Question 13

Purpose of cost allocation

Answer 13

Measuring income and assets for external reporting

Question 14

Residual income

Answer 14

RI = NI (from income statement) - required return

Required return = NBV (equity) * hurdle rate

Question 15

Comformance costs

Answer 15

Prevention & appraisal costs

Question 16

Nonconformance costs

Answer 16

Internal & external failure costs

Question 17

Engineered cost

Answer 17

Cost that bears an observable and known relationship to a quantifiable activity base
Have DIRECT association to output (if it doesn’t exactly tie to something like # of units produced, odds are it is not an engineered cost)

Question 18

Activity based costing definition

Answer 18

Accounting system that collects financial & operating data on basis of underlying nature & extent of cost driver

Question 19

In joint costing,

Sales price less cost to complete at split off is equal to

Answer 19

Net sales value at split off

Basically this is the additional contribution to income generated by completing the product

Question 20

Static budget is based on what

Answer 20

Budgeted costs for budgeted output

Question 21

Regression equations estimates what

Answer 21

Dependent variables

Regression equation estimates dependent variables based on changes in the independent variable

Question 22

Under variable costing, what costs are assigned to inventory?

Answer 22

only the variable manufacturing costs (direct material, direct labor, variable overhead) are assigned to inventory.

Question 23

when you have a question about a special order & what the minimum sale price should be, how do you solve?

Answer 23

the minimum price for a special order is the sum of the variable costs of current utilization plus the contribution margin from the next best alternative.

Question 24

Cost-based pricing is associated with (3 THINGS)

Answer 24

1. Price stability.
2. Price justification.
3. Fixed-cost recovery.

Question 25

Margin of Safety formulas

Answer 25

Margin of Safety % = (MOS $/ total sales) | MOS $ = Total Sales - BE sales

Question 26

BE SALES & Units formulas

Answer 26

BE $ = Total FC / CM ratio OR BE $ = BE UNITS * sale price BE UNITS = FC/ CM per unit

Question 27

R-squared (in regression analysis) indicates what

Answer 27

R squared is the coefficient of determination! - note: coefficient of determination measures the goodness of fit, which is: the proportion of the total variation in a dependent variable (y) explained by independed variable (x)

Question 28

Monte Carlo simulation

Answer 28

Used to generate individual values for a random variable

Question 29

Regression analysis

Answer 29

Used to separate costs into fixed and variable components by means of least squares. Minimize the distance b/t trend line and actual observations Used to estimate the DEPENDENT cost variable based on changes in the INDEPENDENT variable

Question 30

End Inventory formula

Answer 30

``` Begin Inv + production costs** = MFG costs available - COGS = EI ``` ** production costs include DL, DM, and applied overhead

Question 31

Absorption costing

Answer 31

Charges product costs (DM, DL, VOH/FOH) as inventoriable costs

Question 32

formula for DM used

Answer 32

``` begin DM + purchases - purchase returns + transportation available = DM available - ending DM = DM used ```

Question 33

formula for calculating volume variance

Answer 33

remember standard = "budgeted" [STD rate X standard quantity allowed**] + [std fixed rate * std production] = budgeted/applied [STD rate X standard quantity allowed**] + [std fixed rate * actual production] = actual **standard quantity allowed = # of units actually produced x rate per unit (usually DL hour)

Question 34

in evaluating costs for decision making, a company usually considers what 3 costs

Answer 34

incremental, differential, avoidable variable costs are not considered

Question 35

how are "inventorial costs" classified

Answer 35

``` as assets (inventory) once they are sold they become "COGS" ```

Question 36

quality costs acronym

Answer 36

``` APIE appraisal cost prevention costs (AP = conformance costs) Internal External (IE = nonconformance) ```

Question 37

appraisal costs

Answer 37

quality check, inspection, testing

Question 38

prevention costs

Answer 38

training employees, search for high quality supplier,

Question 39

External failure cost examples

Answer 39

Lost customers, warranty costs, liability claims

Question 40

Profitability ratio that makes it easy to compare companies that differ in size

Answer 40

ROA

Question 41

Economic value added, what is the formula and what is the purpose

Answer 41

Uses the net operating profit after tax (NOPAT) and compares it to the required return for the capital EVA= NOPAT - Required Return Required Return = Investment x WACC

Question 42

Main disadvantage of using ROI as a performance measure

Answer 42

ROI may lead to rejecting projects that yield positive cash flows Managers may not want to pursue investments as it could bring down the ROI ratio

Question 43

Interest rate/hurdle rate used in the residual income approach is characterized as:

Answer 43

Historical weighted average cost of capital for the company HOWEVER, the OPTIMAL hurdle rate is the target return on investment set by the company’s management

Question 44

Primary cause of a sales price variance

Answer 44

** note: sales price variance is also known as revenue variance Usually due to change in unit selling price