B3 - Operations Management: Cost Accounting and Performance Management Flashcards
Cost object
Resources or activities that serve as the basis for management decisions
What is an example of a cost object?
Product lines, departments, or geographic territories
Product costs
Relate to manufacturing the product
Inventoriable
considered assets before the product is sold
What are the three components of product costs?
Direct materials, direct labor, manufacturing overhead
Period costs
Expensed in the period in which they are incurred
T/F Period costs are inventoriable
F
T/F Product costs are inventoriable
T
Period cost expenses
Selling, general, and administrative expenses, interest
Period cost components
Cost of selling the product and administering and managing operations of the firm
Manufacturing costs
direct and indirect costs associated with manufacturing a product
How are manufacturing costs treated?
Capitalized to the cost of the manufactured product
Nonmanufacturing costs
Period costs that are expensed in the period incurred
Objectives of cost accounting systems
inventory and COGS, Profitability, comparison to standards
Direct cost
Easily traced to a cost object or pool
Direct raw materials
Materials purchased to be used in production (including freight in) plus a reasonable amount for normal scrap
Direct labor
Cost of labor that is directly related to the production of a product or the performance of a service plus breaks
Indirect costs
Not easily traceable to a cost pool or cost object and incurred to benefit two or more cost pools/objects
How are indirect costs determined?
Allocation methods
Where are indirect costs classified?
Manufacturing overhead
Direct labor + Direct material
Prime Cost
Direct labor + Manufacturing Overhead
Conversion Cost
Which costing method is applied:
1. Overhead rate = budgeted overhead costs/estimated cost driver
2. Applied overhead = actual cost driver X overhead rate
Traditional costing
Traditional costing overhead rate
budgeted overhead costs/estimated cost driver
Traditional applied overhead
actual cost driver x overhead rate
T/F Variable costs change proportionally with cost driver
T
T/F Variable costs change in total but remain constant per unit
T
T/F Fixed costs changes when the cost driver changes
F
T/F Fixed costs remain constant in total but vary per unit
T
T/F costs are considered variable in the long run
T
What kind of cost is depreciation
fixed
Relevant range
range for which assumption that the cost driver has a linear relationship with costs incurred are valid
Cost of goods manufactured formula
Beginning WIP
+Manufacturing Costs
-Ending WIP
Cost of goods sold formula
Beg FG
+COGM
-End FG
Cost accumulation
Assigns costs to products
What is cost accumulation driven by
Cost object
What type of cost accumulation would be used?
Custom order
Job costing
What type of cost accumulation would be used?
Mass produced, homogenous
Process costing
What type of cost accumulation would be used?
little need for in-process inventory valuation
backflush costing
What type of cost accumulation would be used?
manufacturing phase of product’s life
Life cycle costing
Manufacturing costs are increased or decreased by the net change in ___________.
WIP
Job order costing
Product costing that identifies the job as the cost objective and is used when there are relatively few units produced or each unit is separately identifiable
Job cost records
accumulate costs from material requisition, labor time ticket, and job order costing
material requistion
documents showing materials requested for use on the job
labor time ticket
documents that show labor hours and labor rate associated with the time applied to job
Process costing
averages costs and applies them to a large number of homogenous items
Step 1 of process costing
Summarize the flow of physical units
Step 2 of process costing
calculate the equivalent unit output
Step 3 of process costing
Accumulate the total costs to be accounted for
Step 4 of process costing
Calculate the average unit costs based on total costs and equivalent units
Step 5 of process costing
Apply the average costs to the units completed and the units remaining in ending WIP
What are the two process costing assumptions?
Transfers in are 100%
Timing of addition of DM include: beginning of period - 100% or partially complete, end of period - not WIP inventory at month end
Equivalent units
Units completed during the month
Units partially completed at the end of the period
How is normal spoilage accounted for?
Capitalized as part of inventory costs
How is abnormal spoilage accounted for?
Period expense
Underapplied manufacturing overhead
Actual costs exceed estimated (unfavorable)
