BEC

Question 1

COSO Internal Control Framework:Components & Principles?

Answer 1

1. Control Environment (EBOCA)
   a. Ethics & Value Commitment
   b. Board Independence & Oversight
   c. Organizational Structure
   d. Competence Commitment
   e. Accountability
2. Risk Assessment (SAFR)
   a. Specific Objectives
   b. Assess Changes (ext. env., business model, leadership)
   c. Fraud Potential (Preassure, Opportunity, Razonalization)
   d. Risk Assesment ID and Analyze
3. Information & Communication (OIE)
   a. Obtain Information
   b. Internally Communicate Information
   c. External Parties Communication
4. Monitoring Activities (DOS)
   a. Deficiencies Communication
   b. Ongoing and Separate Evaluations
5. Existing Activities (CATP)
   a. Control Activities Selection & Development
   b. Technology Selection & Development
   c. Policies and Procedures

Question 2

COSO ERM Components/ Principles?

Answer 2

1. Governance & Culture (DOVES)
   a. Define Culture
   b. Oversight Board
   c. Value Commitment
   d. Employees
   e. Structure organization establishment
2. Objectives & Strategies (SOAR)
   a. Strategies alternatives evaluation
   b. Objectives business formulation
   c. Analyze business context
   d. Risk Appetite define
3. Performance (VAPIR)
   a. View of Portfolio Development
   b. Assess severity of risk
   c. Prioritize risk
   d. Identify risk
   e. Risk responses implementation
4. Review & Revision (SIR)
   a. Substantial Change Assessment
   b. Improvement Pursue ERM
   c. Review risk & performance
5. Ongoing Information, Communication & Reporting (TIP)
   a. Technology & information leverage
   b. Information risk communication
   c. Performance, Risk & Culture reports

Question 3

What is a Cost Accumulation Systems and which are the methods of systems?

Answer 3

* Cost accumulation systems= are used to assign costs to products. The system used is driven by the cost object involved. The methods of systems are as follow:

1. Job Costing = custom order cost object
2. Process Costing= ave. costs and applies them to mass-produced, homogeneous product cost object

other variations are:

1. Operations costing= uses components of both job-order and process costing
2. Backflush consting= accounts for certain costs at the end of the process in circumstances in which there is little need for in-process inventory valuation. (Connected to Just in Time Production & ABC)

Question 4

What is Job-Order Costing?

Answer 4

Is the method of cost accumulation systems that identidies de job as the cost objective and is used when relatively few units are produced and when each unit is unique or easily identifiable.

• Job Cost Records: are maintained for each product and they serve as the primary records used to accumulate all costs for the job. They accumulate the data from the following internal documents:
  a. Materials Requisitions: are documents showing materials requested for use on the job
  b. Labor Time Tickets: are documents​ that show the labor hours and labor rate associated with the time applied to the job.

Question 5

What is Process Costing?

Answer 5

• Is a cost accumulation system method that average costs and applies them to a large number of homogeneous items using the following steps:
  1. Summarize the flow of physical units ( beginning with the production report)
  2. Calculate “equivalent unit” output
  3. Accumulate the total costs to be accounted for (production report)
  4. Calculate the average unit costs based on total costs and equivalent units.
  5. Apply the average costs to the units completed and the units that remaining in work-in-process inventory.

Notes:

• Production report: accumulate costs incurred as well as all units produced for a period. Includes Beg. Inv., the # of units started, # of units completed and # of units remaining in inventory.

Question 6

Process Costing- Which are the Cost Flow Assumptions & how is

Costs per Equivalents Units Calculation.

Answer 6

A. Weighted Average Cost Flow Assumption

1. Beg. WIP Inv. + Units started & completed during the month - 100% complete
2. Add End. WIP Inv. * % completed = Equivalent Units
3. Beginning Cost + Current Cost (Material & Conversion Costs)/ Equivalent Units

B. FIFO Cost Flow Assumption

1. Beg WIP Inv. * % to be completed
2. Add Units completed - Beg WIP Inv. (=units started & completed) = Equivalent Units
3. Current Cost/ Equivalent Units

Question 7

Which are the cost accounting systems cost objects or objectives?

Answer 7

1. Product Costing
2. Income Determination (Profitability)
3. Efficiency Measurements (comparisions to standards)

Question 8

Which are the types of overhead costing systems, their operational cost drivers & steps for calculating OH applied?

Answer 8

1. Traditional Costing System (volume-based cost drivers): assign overhead as a single cost pool with a single plant-wide overhead appliaction rate using a single allocation base.

• Step 1:OH rate=Est. All Overhead Cost/Estimated Cost Driver
• Step 2: Actual Cost Driver * Overhead rate (Step 1)

2. Activity-Based Costing System (Activity-based cost drivers): assign overhead based on consumption of resources with multiple overhead application rate. Attempts ro improve cost allocation by emphasising long-term product analysis.

• Step 1: Identify Activity Centers ( DM + Orders, redisign, etc.)
• Step 2: Accumulated costs by activity centers
• Step 3: Cost drivers= factor that has the ability to change total costs (lbs, # order & change) by Activity Center
• Step 4: Determine Activity Levels by Cost Drivers
• Step 5: OH rate by each activity center= Costs by Activity Center/ Cost Driver by Activity Center
• Step 6: Actual Level of Cost Driver Activity of each activity center * OH rate by each activity center

Question 9

Which are the Joint Product Costing Allocation methods?

Answer 9

1. Allocation by Unit Volume Relationships

Example: Product A 10,000 gal

Product B 20,000 gal.

Total Production: 30,000 gal.

Joint Cost Allocation: $10,000

• Product A: (10,000/30,000)* $10,000 Joint Cost= $3,333
• Product B: (20,000/30,000)*$10,000 Joint Cost= $6,667

2. Allocation by Net Realizable Values at Split-Off Point
   a. Option 1: Relative NRV: SP Quotations Available at Split-Off

Ex: Product A: 100 units @ $20 = $ 2,000

Product B: 400 units @ $15 = $ 6,000

Total Revenue= $8,000

• Joint Cost Allocation: $1,000

Product A: ($2,000/$8,000)* $1,000 (Joint Cost) = $ 250

Product B: ($6,000/$8,000)* $1,000 (Joint Cost) = $ 750

b. Option 2: NRV: No Values at Split-Off (costs after Split-Off)

Ex: Product A:

• 1,600 units @ $25 = $ 40,000
• Further Processing Costs = ($ 16,000)

Net Relizable Value = $ 24,000

Product B:

• 800 units @ $50 = $ 40,000
• Further Processing Costs = ($ 24,000)

Net Relizable Value = $ 16,000

Total Net Reliazable Value= $40,000

• Joint Cost Allocation: $30,000

Product A: ($24,000/$40,000)* $30,000 (Joint Cost) = $ 18,000

Product B: ($16,000/$40,000)* $30,000 (Joint Cost) = $ 12,000

Question 10

What is By-Product Costing and how is revenue accounted?

Answer 10

By- Products represent outputs of relatively minor value that are incidental to process. Have relatively low sales that aren’t sufficient to cover their share of common costs. Revenue can take two forms:

1. Applied to Main Product= Proceeds reduce common costs for joint product costing
2. Miscellaneous Income

Question 11

What is Performance Measures and what is included in each type?

Answer 11

Performance Measures are designed to provide feedback that will motivate approporate employee behaviors. The types of Performance Measures are as fallow:

1. Financial Measures: financial & balanced scorecards, cost of quality, ROI, ROA, ROE, Residual Income and Economic Value Added(EVA).

2. Non Financial Measures- Operacional Effectiveness: Total Factor Productivity Ratios (TFP), Control Charts (Statistical Quality Control),Pareto Diagrams (frequency of defects), Fishbone Diagram (cause-effect)