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Cost Accounting > Chapter 3 > Flashcards

Chapter 3 Flashcards

1
Q

Incurred when a resource is used for some purpose.

A

Cost

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2
Q

The meaningful groups into which costs are collected.

A

Cost Pools

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3
Q

A factor that causes or relates to a change in the total cost of an activity.

A

Cost Driver

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4
Q

Any product, service, customer, activity, or organizational unit to which costs are accumulated for some management purpose.

A

Cost Object

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5
Q

A group of related products; useful for preparing profitability reports as part of lean accounting; all the activities required to create customer value for a family of products or services.

A

Value Stream

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6
Q

The process of assigning cost to cost pools or from cost pools to cost objects.

A

Cost Assignment

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7
Q

Name the 2 types of cost assignment.

A

Direct Tracing

Allocation

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8
Q

Direct tracing is a cost assignment method used to assign direct costs / indirect costs.

A

Direct Costs

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9
Q

Allocation is a cost assignment method used to assign direct costs / indirect costs.

A

Indirect Costs

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10
Q

A cost that can be conveniently and economically traced directly to a cost pool or cost object.

A

Direct Cost

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11
Q

The cost driver for a direct cost is …

A

The number of units of the object

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12
Q

A cost that is not conveniently or economically traceable to a specific cost pool or cost object.

A

Indirect Cost

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13
Q

If an airline’s cost object is an airline passenger, the cost of fuel is a direct cost / indirect cost.

A

Indirect Cost

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14
Q

If an airline’s cost object is a flight, the cost of fuel is a direct cost / indirect cost.

A

Direct Cost

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15
Q

The cost drivers used to allocate or assign costs to cost objects.

A

Allocation Bases

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16
Q

The cost of the materials in the product and a reasonable allowance for scrap and detective units (less purchase discounts and including freight and related charges).

A

Direct Materials Cost

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17
Q

The cost of materials used in manufacturing that are not part of the product or are not easily or economically traceable to the finished product; a component of total manufacturing overhead.

A

Indirect Materials Cost

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18
Q

The cost of labor used to manufacture the product or provide the service.

A

Direct Labor Cost

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19
Q

Labor costs associated with production that are not considered direct labor: supervision, quality control, inspection, purchasing and receiving, etc.; a component of total manufacturing overhead.

A

Indirect Labor Costs

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20
Q

The cost pool into which all the indirect costs are commonly combined.

A

Overhead / Factory Overhead

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21
Q

The sum of direct materials and direct labor.

A

Prime Costs

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22
Q

The sum of direct labor and factory overhead.

A

Conversion Costs

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23
Q

Name the 4 types of cost drivers.

A

Activity-Based
Volume-Based
Structural
Executional

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24
Q

The range of the cost driver in which the actual value of the cost driver is expected to fall, and for which the relationship between the cost and the cost driver is assumed to be approximately linear.

A

Relevant Range

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25
Q

Linear approximations of total cost behavior that fall outside of the relevant range can / cannot be used to approximate total cost.

A

Cannot

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26
Q

Total cost is made up of ____ costs and ____ costs.

A

Variable

Fixed

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27
Q

A cost that changes in total, both directionally and proportionally, in response to changes in one or more cost drivers.

A

Variable Cost

28
Q

The portion of the total cost that, within the relevant range, does not change with a change in the quantity of a designated cost driver.

A

Fixed Cost

29
Q

True or False

Total fixed costs are expected to remain approximately constant within the relevant range.

A

True

30
Q

True or False

Total variable costs are expected to remain approximately constant within the relevant range.

A

False

31
Q

A cost that includes both variable and fixed cost components.

A

Mixed Cost

32
Q

A cost that varies with the cost driver, but in discrete steps within the relevant range; also called a semi-fixed cost.

A

Step Cost

33
Q

Cost drivers involved in strategic plans and decisions that have a long-term effect with regard to issues such as scale, experience, technology, and complexity.

A

Structural Cost Drivers

34
Q

Cost drivers involved in factors that the firm can manage in the short term to reduce costs such as workforce involvement, design of the production process, and supplier relationships.

A

Executional Cost Drivers

35
Q

The cost of the product transferred to the income statement when inventory is sold.

A

Cost of Goods Sold

36
Q

Only the costs necessary to complete the product (direct materials, direct labor, and factory overhead).

A

Product Costs

37
Q

All non-product expenditures for managing the firm and selling the product; also referred to selling, general, and administrative (SG&A) expenses.

A

Period Costs

38
Q

Name the 3 inventory accounts manufacturing companies use.

A

Materials Inventory
Work-in-Process Inventory
Finished Goods Inventory

39
Q

The sum of materials used, labor, and overhead for the period.

A

Total Manufacturing Cost

40
Q

The cost of goods that were finished and transferred out of the Work-in-Process Inventory account during a given period.

A

Cost of Goods Manufactured

41
Q

A set of policies and procedures that restrict and guide activities in the processing of financial data with the objective of preventing or detecting errors and fraudulent acts.

A

Internal Accounting Controls

42
Q

An inventory tracking method that updates the finished goods inventory account for each purchase or sales transaction.

A

Perpetual Inventory System

43
Q

An inventory tracking method that involves a count of inventory at the end of each accounting period to determine the ending balance in inventory.

A

Periodic Inventory System

44
Q

Name the 2 roles of cost drivers.

A
  1. Enabling the assignment of costs to cost objects

2. Explaining cost behavior

45
Q

Name the 2 types of cost drivers a variable cost can have.

A

Volume-based

Activity-based

46
Q

Total cost of resources consumed divided by the number of units of output.

A

Unit Cost / Average Cost

47
Q

Name the 4 categories of strategic issues that structural cost drivers address.

A

Scale
Experience
Technology
Complexity

48
Q

_____-based costs increase with each unit of the volume of output.

A

Volume

49
Q

The determination of whether a cost is variable depends on….

A

The nature of the cost object.

50
Q

Name the 3 categories of operational issues that executional cost drivers address.

A

Workforce Involvement
Design of the Production Process
Supplier Relationships

51
Q

______ analysis can help the firm assess the long-term consequences of its current or planned commitment to a structural cost driver.

A

Value-Chain

52
Q

Over a very broad range of output, the relationship between volume of output and costs tends to be ____ .

A

Nonlinear

53
Q

At low values of the cost driver, costs increase a(n) increasing / decreasing rate.

A

Decreasing

54
Q

At high values of the cost driver, costs increase at a(n) increasing / decreasing rate.

A

Increasing

55
Q

True or False

The law of diminishing marginal productivity occurs at low levels of the cost driver.

A

False

56
Q

The law of diminishing marginal productivity is due to..

A

Inefficiencies when operating near capacity

57
Q

Costs that provide capacity for operations.

A

Fixed Costs

58
Q

Costs that are consumed during operations.

A

Variable Costs

59
Q

The first component on a Statement of Cost of Goods Manufactured is _____ .

A

Beginning Materials Inventory

60
Q

When calculating the Cost of Goods Sold for a manufacturing company, the first component needed is _____ .

A

Beginning Finished Goods Inventory

61
Q

When calculating the Cost of Goods Sold for a merchandising company, the first component needed is _____ .

A

Beginning Merchandise Inventory

62
Q

What is the first set of calculations performed when preparing a Statement of Cost of Goods Manufactured?

A

The change in Materials Inventory to determine the Direct Materials Used

63
Q

On a Statement of Cost of Goods Manufactured, name the 3 components the are totaled to determine the Total Manufacturing Costs Incurred.

A

Direct Materials Used
Direct Labor
Manufacturing Overhead

64
Q

What is the last set of calculations performed when preparing a Statement of Cost of Goods Manufactured?

A

The sum of the Total Manufacturing Costs Incurred and the change in Work-in-Process Inventory to determine the Cost of Goods Manufactured.

65
Q

True or False

The change in the Work-in-Process Inventory is included in the Cost of Goods Manufactured calculation.

A

True

Cost Accounting (6 decks)

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