BEC 5: Cost Accounting and Performance Measurement

Question 1

What is production volume variance?

Answer 1

• A measure of how overhead is affected by production.
• Observe the change in overhead when volume is changed.
• How does overhead compare to the budget? Under budget is unfavorable.

Question 2

What is the flexible budget equation

Answer 2

Total Costs = Fixed + Variable Cost Per Unit (Variable Units)

Question 3

What costs are allocated to output under the weighted average method?

Answer 3

• Beginning Inventory Costs

- Costs incurred during the period

Question 4

What units are allocated to output under the weighted average method? (Equivalent production)

Answer 4

• Spoiled units
• Units completed
• Ending inventory (% Complete)

Question 5

What costs are transferred to department?

Answer 5

• Costs of completed units

- Costs of spoiled units

Question 6

How is process costing measured?

Answer 6

-Weighted average method
or
-FIFO Method

Question 7

What is the main difference between FIFO and Weighted Average?

Answer 7

• WA: Total Costs / Total Equivalent Units = Cost per unit

- FIFO: Costs this period / Units worked on this period = Cost per unit.

Question 8

What is net realizable value?

Answer 8

• Sales minus additional costs

- Remember to calculate NRV for both products

Question 9

What is proportional net realizable value?

Answer 9

• Product 1 NRV / (Product 1 NRV + Product 2 NRV)

- Assuming there are only 2.

Question 10

How do you calculate joint costs?

Answer 10

-Apply the proportional net realizable value % x joint costs, net of any by-product NRV.

Question 11

How do you calculate equivalent units under FIFO method?

Answer 11

=Beginning (% incomplete) 
\+Completed Units (Includes % Beginning completed)
\+Ending Inventory (% complete)
-Beginning Inventory (Total)
=Equivalent Units

Question 12

Direct Material Price Variance (Purchasing)

Answer 12

• AQ(SP - AP)

- While in the factory, can I control the quantity used? Yes

Question 13

Direct Material Price Variance (Production)

Answer 13

• SP(SQ - AQ)

- While in the factory, can I control the price? No

Question 14

Direct Labor Rate Variance (Personnel)

Answer 14

• AH(SR - AR)

- While in the factory, can I control the hours worked? Yes

Question 15

Direct Labor Efficiency Variance (Production)

Answer 15

• SR(SH - AH)

- While in the factory, can I control the pay rate? No

Question 16

Overhead Applied

Answer 16

Standard Direct Labor Hours x Predetermined Overhead Rate

Question 17

Overhead Spending Variance

Answer 17

(Actual Direct Labor Hours x Predetermined Variable Overhead Rate + Budgeted Fixed Overhead) - Actual Overhead

Question 18

Overhead Efficiency Variance

Answer 18

Predetermined Variable Overhead Rate x (Standard Direct Labor Hours - Actual Direct Labor Hours)

Question 19

Overhead Production Volume Variance

Answer 19

(Standard Direct Labor Hours x Predetermined Fixed Overhead Rate) - Budgeted Fixed Overhead

Question 20

Period Costs

Answer 20

Not a part of inventory costs

Question 21

Fixed Costs

Answer 21

Costs that remain unchanged no matter the activity level (rent, insurance, etc.)

Question 22

Variable Costs

Answer 22

Costs that change based on the level of production volume

Question 23

Controllable Costs

Answer 23

Can be regulated by management.

Question 24

When would you exclude ending work in process from calculating equivalent units?

Answer 24

If there is a requirement that it be a certain percentage complete before being transferred. Stated completion of 80%, completion is only 60%.