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BEC > Cost Accounting > Flashcards

Cost Accounting Flashcards

2
Q

What is Cost Accounting?

A

Cost Accounting is a component of GAAP that records Ending Inventory on the Balance Sheet for:

  • Direct Materials
  • Direct Labor
  • Work in Process
  • Finished Goods

Cost Accounting also records for the Income Statement

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3
Q

What is the difference between Cost Accounting and Managerial Accounting?

A

Cost Accounting - External Focus- GAAP

Managerial Accounting - Internal Focus- Not GAAP

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4
Q

What are Product Costs (aka Inventory Costs)?

A

Prime Costs

Conversion Costs

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5
Q

What are included in Prime Costs?

A

DM USED - Have become part of the product or had a direct impact on the product

DL Used - Employees who worked on product and had direct impact

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6
Q

What is Factory Overhead?

A

All factory costs except for DM and DL used in production

including Spoilage

(except for abnormal spoilage- which is a period cost and not included in OH).

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7
Q

What is included in Fixed Factory Overhead?

A

FFO = Est Costs / Normal Capacity

Uses Normal Activity

Ex: Depreciation (SL), Utilities, Taxes

Under/Over-applied Fixed OH always goes to COGS

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8
Q

What is included in Variable Overhead?

A

VO = Est Activity / Actual Activity

Uses Actual Activity

Examples of VOH: Depr (Units of Prod), Ind materials (supplies), Indirect labor (foreman, janitors, maintenance)

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9
Q

Where is Under/Over-applied VARIABLE OH recorded?

A

Immaterial - COGS

Material - WIP, F Goods, or COGS

  • based on their Ending Balance
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10
Q

Where is Under/Over-applied FIXED OH recorded?

A

It always goes to COGS

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11
Q

What is indicated by a Debit balance in Actual Factory Overhead?

How is it corrected?

A

Under-applied overhead.

Fixed OH - COGS.

Var OH - allocated to WIP- FG or COGS

based on ending balances if material.

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12
Q

What is indicated by a Credit balance in Applied Factory Overhead?

How is it corrected?

A

A credit balance indicates over-applied overhead.

Fixed overhead- it is corrected from COGS.

Var overhead- allocated to WIP- FG or COGS based on ending balances if material

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13
Q

Which variables are used to calculate Direct Material balances?

A

db Beginning Balance

db Net purchases (plus freight-in)

cr DM Used

Ending balance (goes to BS)

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14
Q

What variables are used to calculated Work in Process (WIP)?

A

db Beginning Balance

db Direct Materials Used (prime)

db Direct Labor Used (prime/conversion)

db Factory Overhead Applied (conversion)

cr COGM

Ending Balance (Goes to BS)

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15
Q

What variables are included in Finished Goods calculations?

A

db Beginning Balance

db COGM

= COGAS (Cost of Goods Avail for Sale)

cr COGS

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16
Q

How does Freight In affect Cost Accounting calculations?

A

Inventory (Product) Cost

Part of DM Purchases

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17
Q

How does Freight Out affect Cost Accounting?

A

Selling - Period Cost

Not part of inventory

18
Q

When is Job-Order Costing used?

A

Costs are easily connected to a specific product or product line

Can be applied to services

Calculation is the same as normal cost accounting – just use your T Accounts

You’re likely going to be solving for the last job in the queue

19
Q

What is the Direct Method for allocating service department costs?

A

No services allocated between service departments- even if they serve each other.

Only allocate to product(s)

20
Q

What is the Step Method for allocating service department costs?

A

Services can be allocated to

Other service departments

and Product(s)

21
Q

Under process costing

How are the units shipped calculated?

A

Beginning Units Inventory

+ Units Started

  • Ending Inventory

= No. Units Shipped

22
Q

Which two inventory methods are used under Process Costing?

A

FIFO

Weighted Average

23
Q

What is another name for Process Costing?

A

Equivalent Units of Production

24
Q

How will Equivalent Finished Units under FIFO

compare to EFU under the Weighted Average method?

A

EFU FIFO will always be LESS than

EFU Weighted Avg (unless Beginning Inventory is Zero)

25
Q

How are Direct Materials calculated under the Weighted Average Method?

A

(Beg Inv + Current Costs) / (EFU WA)

26
Q

How are Conversion Costs calculated under Weighted Average Method?

A

(Beg Inv + Current Costs) / (EFU WA)

27
Q

How are Equivalent Finished Units calculated for Direct Materials?

A

(Units Shipped)

+ End Inv x (% Complete DM)

= EFU (Weighted Average Method)

  • (Beg Inv x % Complete)

= EFU (FIFO)

28
Q

How are Equivalent Finished Units calculated for Conversion Costs?

A

(Units Shipped)

+ EI x % Complete CC

= EFU (Weighted Average)

  • Beg Inv x % Complete

= EFU (FIFO)

29
Q

How are Direct Materials calculated under the FIFO method?

A

(Current Costs) / EFU

FIFO Note: FIFO method uses Current Period costs only and ignores Beginning Inventory

30
Q

How are Conversion Costs calculated under the FIFO method?

A

Current Costs / EFU FIFO

FIFO method uses Current Period costs only and ignores Beginning Inventory

31
Q

How is WIP calculated?

A

Beginning balance (DM- DL- OH)

+ Current Costs (DM- DL- OH)

  • COGM (Goes to Finished Goods)

+ DM EFU x Cost per DM EFU

+ CC EFU x Cost per CC EFU

= Ending WIP

32
Q

How do period costs and product costs relate to net sales- gross margin and operating income?

A

Net Sales

  • Product Costs

= Gross Margin

  • Period Costs

= Operating Income

33
Q

What is the focus of Activity Based Costing (ABC)?

A
  • Focuses on eliminating non-value-added activities for poor quality and inventory and things customers don’t want or don’t care about
  • Inventory is expensive to store and storing something is not a value-added expenditure
  • Uses Cost Pools - Different departments can have different OH rates
  • Uses Several OH rates based on Activity - Cost Pool / Cost Driver
34
Q

How do Cost Pools and Allocations compare under ABC versus traditional costing system?

A

Cost Pools and Allocations increase compared to a traditional costing system

35
Q

What is Backflush Costing?

A

Connected to Just-in-Time Production- which is part of Activity-Based Costing and Total Quality Management (TQM)

Works backward to “flush out” COGS

‘Mostly’ GAAP

36
Q

What are the characteristics of By-Products?

A
  • Usually immaterial and common costs aren’t allocated to them
  • Low Market Value
  • Can be valued at NRV
  • Can be treated as a contra expense and netted against COGS
  • Can be treated as a contra sale and netted against Sales o Recognition rules are very flexible with valuing and classifying by-products
37
Q

What are Cost Functions?

A

Measure how costs change relative to activity levels

High-Low Method (activity)

Change in Cost (High-Low pts) / Change in Activity (High-Low pts)

BEC (9 decks)

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