Before Test Flashcards
What is the main difference between management and financial accounting?
Financial accounting is concerned with providing information to external users ie shareholders, creditors, and other stakeholders. Management accounting is providing info to internal people in organisation.
Prepare a schedule of cost of goods manufactured
1- Direct materials Materials (Beginning) Purchases minus materials (ending) xxxxxx
Direct Labour
OHead
Total manufacturing cost xxxxxxx
+WIP (begin)
- WIP (end)
= COGM
Prepare COG section of income statement for manufacturing company
Finished goods begin Plus COGM = goods available for sale Minus Finished goods = Cost of goods sold
What are product costs?
Product costs include direct labour, direct materials, and manufacturing o/h
What are period costs?
These are costs not included in product costs. They are expensed on the income statement.
What is job order costing?
A measure used for every product
What is a predetermined overhead rate, and how is it calculated?
A predetermined overhead rate is used to apply overhead to jobs. It is determined before a period
begins by dividing the estimated total manufacturing overhead for the period by the estimated total
units in the allocation base. Thereafter, overhead is applied to jobs by multiplying the predetermined overhead rate by the actual amount of the allocation base that is incurred for each job. The most common allocation base is direct labour hours.
Why do firms use predetermined overhead rates rather than actual manufacturing overhead costs in applying overhead to jobs?
If actual manufacturing overhead cost is applied to jobs, then either the firm must wait until the end of the period to apply overhead or it must compute actual overhead rates more frequently.
What factors should be considered in selecting a base to be used in calculating the predetermined overhead rate?
The measure of activity that is used as the allocation base should drive the overhead cost; that is, the
base should cause the overhead cost. If the allocation base does not really cause the overhead, then costs will be incorrectly attributed to products and jobs and their costs will be distorted
How do you calculate the Operating Leverage?
OL= Total CM / Net Profit
When reconciling the differences between Absorption & Variable what do you need to do? Title Headers and Row Headers
Title headers, Quantity & Cost Difference
Row headers, Absorption profit, deferred ending xxx, released (opening) xxx, Variable profit
What is a relevant Cost?
A cost that can be eliminated (in whole or in part)
What are unavoidable costs?
Unavoidable costs are never relevant. They are sunk costs and future costs that do not differ between alternatives
State the hypothesis for a two-sided (tailed test)
Ho: M = Mo v H1 : M (dshthingy) Mo
State the hypothesis for one-sided (tailed test)
Ho:M (less than or equal to) v H1 : M (less than) Mo
Is Fixed Manufacturing Overhead incorporates in the COGS or listed underneath?
It’s incorporated into the COGS. It is only the Fixed and Variable selling and admin expenses that are listed underneath separately.
Where are the variable selling and admin expenses listed in a variable income statement? Where is the Fixed M/O/H listed?
Not in the COGS! however below it. It’s listed below the COGS and that is what is the CM (total).. Then all fixed expenses grouped including the F M/OH
Key differences between traditional and ABC costing
ABC includes manufacturing and non-manufacturing costs
Traditional uses a single average, where as ABC uses a more than one
