Cost Accounting

Question 1

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.

Answer 1

Cost objectives

Question 2

The three characteristics of cost objectives are: (PIE)

Answer 2

Product cost
Income determination
Efficiency

Question 3

Prime costs are:

Answer 3

Direct labor + Direct material

Question 4

Conversion costs are:

Answer 4

Direct labor + Overhead applied

Question 5

All costs related to the manufacture of the product are what? They are also not expensed until product is sold.

Answer 5

Product costs

Question 6

Product costs consist of:

Answer 6

Direct materials, direct labor, and manufacturing overhead applied

Question 7

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.

Answer 7

Period costs

Question 8

These costs include all costs associated with the manufacture of a product. Consist of direct and indirect costs. These costs are capitalized.

Answer 8

Manufacturing costs

Question 9

These costs can be easily traced to a cost pool or object, as the cost directly related to that item:

Answer 9

Direct costs

Question 10

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.

Answer 10

Direct raw materials

Question 11

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)

Answer 11

Direct labor

Question 12

Prime costs is the combination of:

Answer 12

Direct raw materials + direct labor

Question 13

Cleaning supplies used in the manufacturing area and small replacement parts for the manufacturing machines are an example of what?

Answer 13

Indirect materials

Question 14

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?

Answer 14

Indirect labor

Question 15

This overhead allocation method combines all overhead and allocates it to a single pool.

Answer 15

Traditional costing

Question 16

This allocation method combines all overhead and allocates it to multiple cost pools

Answer 16

Activity based costing

Question 17

Calculation for overhead allocation using traditional costing method:

Answer 17

Step one: All budgeted OH costs / Single Estimated Cost Drive = Single OH Rate
Step two: Actual cost driver X Single OH Rate = Applied OH

Question 18

Using variable costs, as volume goes up, what happens to total cost and unit costs?

Answer 18

Total cost goes up, but cost per unit remains constant

Question 19

Using fixed costs, as volume goes up, what happens to total cost and unit costs?

Answer 19

Total cost remains constant and unit cost goes up per unit

Question 20

Costs containing both fixed and variable components are called:

Answer 20

Semi-variable costs (Mixed Costs)

Question 21

Costs accumulation systems are used for what?

Answer 21

To assign costs to products

Question 22

What sort of cost accumulation system uses components of both job-order costing and process costing?

Answer 22

Operations costing

Question 23

What cost accumulation system accounts for certain costs at the end of the process when there is little need for in-process inventory valuation?

Answer 23

Backflush costing

Question 24

Formula to calculate goods available or use:

Answer 24

Beginning raw materials + purchases

Question 25

Formula to calculate cost of goods manufactured:

Answer 25

Beginning WIP + DM Used + DL + OH Applied - Ending WIP

Question 26

Formula to calculate cost of goods sold:

Answer 26

Beginning FG + Cost of Goods Manufactured - Ending FG

Question 27

Job order costing is used when:

Answer 27

Relatively few units are produced and each unit is unique or easily identifiable

Question 28

Process costing is used when:

Answer 28

Costs are averaged an applied to a large number of homogeneous items

Question 29

The flow of inventory from beginning raw materials to ending finished goods inventory:

Answer 29

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.)

Question 30

The Equivalent Units are calculated using 3 elements under FIFO. What are they?

Answer 30

Beginning inventory x (1 - % completed)
+ United completed - beginning inventory
+ Ending inventory x % completed

Question 31

The Equivalent Units are calculated using 2 components under the Weighted Average method. What are they?

Answer 31

Completed units

+ Ending inventory x % completed

Question 32

Cost per Equivalent Unit calculated using FIFO is done by:

Answer 32

Current costs only / Equivalent Units

Question 33

Cost per Equivalent Unit calculated using Weighted Average is done by:

Answer 33

Beginning costs + Current costs / Equivalent Units

Question 34

Normal spoilage and abnormal spoilage are included on the balance sheet or income statement?

Answer 34

Normal - balance sheet (per unit cost is automatically increased)
Abnormal - income statement

Question 35

What costing system assigns overhead as a single cost pool with a single plant-wide overhead application rate using a singe allocation base?

Answer 35

Traditional costing systems

Question 36

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.

Answer 36

Activity based costing systems (ABC)

Question 37

What is a factor that has the ability to change total cost?

Answer 37

Cost driver

Question 38

Service costs can be allocated using what cost system?

Answer 38

ABC

Question 39

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.

Answer 39

Direct method

Question 40

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.

Answer 40

Step down method or sequential method

Question 41

Two or more products generated from a common input:

Answer 41

Joint products

Question 42

Minor products of relatively small value:

Answer 42

By-products

Question 43

The point in the production process at which the joint products can be recognized as individual products:

Answer 43

Split-off-point

Question 44

Costs incurred in producing products up to the split off point:

Answer 44

Joint product costs

Question 45

Costs incurred on a product after the split-off point:

Answer 45

Separable costs

Question 46

Joint costs can be allocated by 3 different characteristics:

Answer 46

Volume
Sales values known at split-off
Sales value not known at split-off