Cost Accounting 2 Flashcards
What is the Step Method for allocating service department costs?
Services can be allocated to both other service departments and the product(s)
Under process costing- how are the units shipped calculated?
Beginning Inventory+ Units Started- Ending Inventory
: No. Units Shipped
Which two inventory methods are used under Process Costing?
FIFO
Weighted Average
What is another name for Process Costing?
Equivalent Units of Production
How will Equivalent Finished Units under FIFO compare to EFU under the Weighted Average method?
EFU FIFO will always be LESS than EFU Weighted Avg (unless Beginning Inventory is Zero)
How are Direct Materials calculated under the Weighted Average Method?
Beginning Inventory + Current Costs / EFU WA
How are Conversion Costs calculated under Weighted Average Method?
Beginning Inventory + Current Costs / EFU WA
How are Equivalent Finished Units calculated for Direct Materials?
Units Shipped + EI x % Complete DM
: EFU (Weighted Average Method)
- Beginning Inventory x % Complete
: EFU (FIFO)
How are Equivalent Finished Units calculated for Conversion Costs?
Units Shipped+ EI x % Complete CC
: EFU (Weighted Average)
- Beginning Inventory x % Complete
: EFU (FIFO)
How are Direct Materials calculated under the FIFO method?
Current Costs / EFU FIFO
Note: FIFO method uses Current Period costs only and ignores Beginning Inventory
How are Conversion Costs calculated under the FIFO method?
Current Costs / EFU FIFO
FIFO method uses Current Period costs only and ignores Beginning Inventory
How is WIP calculated?
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
How do period costs and product costs relate to net sales- gross margin and operating income?
Net Sales - Product Costs
: Gross Margin
- Period Costs
: Operating Income
What is the focus of Activity Based Costing (ABC)?
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
How do Cost Pools and Allocations compare under ABC versus traditional costing system?
Cost Pools and Allocations increase compared to a traditional costing system
What is Backflush Costing?
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
What are the characteristics of By-Products?
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
Recognition rules are very flexible with valuing and classifying by-products
What are Cost Functions?
Measure how costs change relative to activity levels
High-Low Method
Change in Cost (High-Low pts) / Change in Activity (High-Low pts)
