Cost Accounting Flashcards
Resources or activities that serve as the basis for management decisions. May be product lines, departments, geographic territories or any other classification that aids in decision making.
Cost objectives
The three characteristics of cost objectives are: (PIE)
Product cost
Income determination
Efficiency
Prime costs are:
Direct labor + Direct material
Conversion costs are:
Direct labor + Overhead applied
All costs related to the manufacture of the product are what? They are also not expensed until product is sold.
Product costs
Product costs consist of:
Direct materials, direct labor, and manufacturing overhead applied
These costs are expensed in the period in which they are incurred and are not inventorial. They also include selling, general, administrative expenses, and interest expense.
Period costs
These costs include all costs associated with the manufacture of a product. Consist of direct and indirect costs. These costs are capitalized.
Manufacturing costs
These costs can be easily traced to a cost pool or object, as the cost directly related to that item:
Direct costs
These costs are of materials purchased to be used in production. Includes freight-In (net of any purchase discounts) and reasonable amount of normal scrap.
Direct raw materials
The costs of the labor that is directly related to the production of a product or the performance of a service plus a reasonable amount of expected “downtime” for the labor (breaks, setup, training)
Direct labor
Prime costs is the combination of:
Direct raw materials + direct labor
Cleaning supplies used in the manufacturing area and small replacement parts for the manufacturing machines are an example of what?
Indirect materials
Forklift drivers, maintenance workers, shift supervisors, workers in the receiving department, janitorial staff, inspectors, engineers, training, and other human resource staff are examples of what?
Indirect labor
This overhead allocation method combines all overhead and allocates it to a single pool.
Traditional costing
This allocation method combines all overhead and allocates it to multiple cost pools
Activity based costing
Calculation for overhead allocation using traditional costing method:
Step one: All budgeted OH costs / Single Estimated Cost Drive = Single OH Rate
Step two: Actual cost driver X Single OH Rate = Applied OH
Using variable costs, as volume goes up, what happens to total cost and unit costs?
Total cost goes up, but cost per unit remains constant
Using fixed costs, as volume goes up, what happens to total cost and unit costs?
Total cost remains constant and unit cost goes up per unit
Costs containing both fixed and variable components are called:
Semi-variable costs (Mixed Costs)
Costs accumulation systems are used for what?
To assign costs to products
What sort of cost accumulation system uses components of both job-order costing and process costing?
Operations costing
What cost accumulation system accounts for certain costs at the end of the process when there is little need for in-process inventory valuation?
Backflush costing
Formula to calculate goods available or use:
Beginning raw materials + purchases
Formula to calculate cost of goods manufactured:
Beginning WIP + DM Used + DL + OH Applied - Ending WIP
Formula to calculate cost of goods sold:
Beginning FG + Cost of Goods Manufactured - Ending FG
Job order costing is used when:
Relatively few units are produced and each unit is unique or easily identifiable
Process costing is used when:
Costs are averaged an applied to a large number of homogeneous items
The flow of inventory from beginning raw materials to ending finished goods inventory:
Beginning RM + RM Purchases - RM Used = Ending RM (B.S.)
Beginning WIP + RM Used + DL + OH Applied - Inventory transferred to FG = Ending WIP (B.S.)
Beginning FG + Inventory transferred from WIP - Cost of Goods Sold = Ending FG (B.S.)
The Equivalent Units are calculated using 3 elements under FIFO. What are they?
Beginning inventory x (1 - % completed)
+ United completed - beginning inventory
+ Ending inventory x % completed
The Equivalent Units are calculated using 2 components under the Weighted Average method. What are they?
Completed units
+ Ending inventory x % completed
Cost per Equivalent Unit calculated using FIFO is done by:
Current costs only / Equivalent Units
Cost per Equivalent Unit calculated using Weighted Average is done by:
Beginning costs + Current costs / Equivalent Units
Normal spoilage and abnormal spoilage are included on the balance sheet or income statement?
Normal - balance sheet (per unit cost is automatically increased)
Abnormal - income statement
What costing system assigns overhead as a single cost pool with a single plant-wide overhead application rate using a singe allocation base?
Traditional costing systems
What costing system uses multiple cost pools, drivers, and rates to assign OH to its products? This system focuses on multiple activities and costs and has a more focused and detailed approach.
Activity based costing systems (ABC)
What is a factor that has the ability to change total cost?
Cost driver
Service costs can be allocated using what cost system?
ABC
What method is the most widely used method to allocate service costs? This method allocates total costs from each service department directly to the production departments without recognizing that service departments may use services from other service department.
Direct method
Another method for allocating service costs is? This method is more sophisticated and the service department costs are also allocated to other service departments as well as production departments.
Step down method or sequential method
Two or more products generated from a common input:
Joint products
Minor products of relatively small value:
By-products
The point in the production process at which the joint products can be recognized as individual products:
Split-off-point
Costs incurred in producing products up to the split off point:
Joint product costs
Costs incurred on a product after the split-off point:
Separable costs
Joint costs can be allocated by 3 different characteristics:
Volume
Sales values known at split-off
Sales value not known at split-off
