Becker BEC 1 Flashcards
Conversion Costs
Direct Labor + Manufacturing O/H Applied
Prime Costs
Direct Materials + Direct Labor
What is the most significant nonvalue-added cost associated with Manufactured WIP Inventory?
The cost of moving, handling, and storing any individual product
Product Cost (formula)
DM + DL + Manufacturing O/H
Engineered Cost (definition)
Engineered Cost: a cost that bears an observable and known relationship to a quantifiable activity base
Process Costing (definition)
Process Costing is a method of allocating production costs to products and services by averaging the cost over the total units produced. Costs are usually accumulated by department rather than by job.
Operation Costing (definition)
Operation Costing is a hybrid system that allows the company to use the job order costing for some costs of production and process costing for other costs.
Activity-Based Costing “ABC” (definition)
Activity-Based Costing is a system that accumulates all costs of overhead for each of the activities of the organization and then allocates those activity costs to the cost objects that caused the activity.
An accounting system that collects financial and operational data on the basis of the underlying nature and extent of the cost drivers.
Job Order Costing
Job Order Costing is a method of product costing that identifies the job (or individual units or batches) as the cost objective and is used when there are relatively few units produced and when each unit is unique or easily identifiable.
Cost is allocated to a specific job as it moves (SEQUENTIALLY) through the manufacturing process.
Job Order Costing is used in the making of taylor-made/CUSTOM goods.
Cost allocation is essential for measuring _____.
Cost allocation is essential for measuring income and assets for external reporting.
The benefit management can expect from traditional costing includes ____.
The benefit management can expect from traditional costing includes using a common departmental or factory wide measure of activity, such as Direct Labor Hours or dollars, to distribute Manufacturing O/H to products.
Job Costing is used in the production of ….
Job Costing is used in the production of tailor-made or unique goods, including:
- Construction of buildings or ships
- Aircraft assembly
- Printing
- Special-purpose machinery
- Public accounting firm
- Management consulting firm
- Repair shops
- Industrial research projects
Process Costing is used where the product…
Process Costing is used where the product is composed of mass produced homogeneous units such as:
- Gasoline and oil
- Chemicals
- Steel
- Textiles
- Plastics
- Paints
- Flour
- Meatpacking
- Canneries
- Rubber
- Lumber
- Food processing (e.g. beverage companies)
- Glass
- Mining
- Cement
- Check clearing in banks
- Mail sorting in post offices
- Food preparation in fast-food outlets
- Premium handling in insurance companies
What is the normal effect on the number of cost pools when an activity-based cost system replaces a traditional cost system?
An activity-based cost system tends to increase the number of cost pools
What is the normal effect on the number of allocation bases when an activity-based cost system replaces a traditional cost system?
An activity-based cost system tends to increase the number of allocation bases
