BEC 1 - Topic 3 Flashcards
What is cost objects?
They are defined as resources or activities that serve for management decisions in
1) Product cost
2) Income determination
3) Efficiency
What is Prime cost?
Direct Material (DM) Direct Labor (DL)
What is Conversion Costs?
DL + O/H applied
When can product costs be expense?
Not expensed until product is sold - matching principle and inventoriable.
What is Product Costs?
DM + DL + Manufacturing Overhead
What are period costs?
They are expensed in the period in which they incurred and not inventoriable.
Selling, general and admin expenses and interest (financing expense)
What are direct costs?
They are easily traceable by product, department, geographic area.
What are indirect costs?
In the factory - product - manufacturing O/H
In the office- period - SG&A.
What are cost drivers?
Costs that have strong relationship to the incurrence of these costs with increase in activity.
What is traditional costing
O/H rate = Budgeted O/H Costs / Estimated Cost Driver
Applied O/H = Actual cost driver x Overhead rate
What kind of costing is used?
If custom cost object, job order costing is used.
If mass-produced homogeneous product, process costing is used
What is cost of goods manufactured?
Work in process inventory (Beginning) + Direct materials used + Direct labor + Manufacturing O/H - Work in process inventory (Ending) = Cost of goods manufactured
What of COGS?
Finished Goods inventory (Beginning) + Cost of goods manufactured - Finished goods inventory (Ending)
What is Inventory: Work in Process?
Beginning inventory of work in process + Raw Materials used + DL + O/H - Inventory transferred to finished goods
What is Inventory: Finished Goods?
Beginning Inventory + Inventory transferred from work in process - COGS.
How is Equivalent units of production calculated?
Weighted Average
Units Completed + Ending WIP x % completed
FIFO
Beginning WIP x % to be completed +
Units Completed - Beginning WIP +
Ending WIP x % completed = Equivalent costs
How is cost per equivalent unit computed?
Weighted Average
Beginning Cost + Current cost/ Equivalent Units
FIFO
Current Costs only / Equivalent Units
What is accounting treatment of normal spoilage?
It is capitalized as part of inventory cost.
What is accounting treatment of abnormal spoilage?
It is not included in the standard cost of a manufactured product.
What is activity based costing?
Uses multiple O/H rates by department. It improves cost allocation by emphasizing long term product analysis.
Also called transaction based costing
Assigns cost based on usage of a resource. It removes cost distortion by traditional, volume based O/H systems.
What is activity centers?
Cost pools:
Traditional - one for factory
ABD - multiple by department
What is Split off point?
Point in the production process where the joint products can be recognized as individual products.
What is Separable costs?
Costs incurred after the split-off point.
