Cost Accounting Flashcards
Prime Costs - Formula
DL + DM
Conversion Costs - Formula
DL + OH Applied
Product Costs
All costs related to the manufacturing of the product
**Not expensed until the product is sold
Period Costs
Expensed in the period in which they are incurred and are not inventoriable.
Cost Objectives
Mnemonic: PIE
P - Product costing (inventory and cost of goods mfd and sold)
I - Income determination (profitability)
E - Efficiency measurements (comparison to standards)
Split-Off Point
Definition
Point in the production process where the joint products can be recognized as individual products
Allocation of Overhead
2 Steps
Step 1: Calculate OH Rate
Budg OH Costs/Est Cost Driver
Step 2: Apply OH
Act Cost Driver*OH Rate (step1)
Inventory: Raw Materials
Formula: BASE
B - Beginning RM
A - Add: RM Purchases
S - Subtract: RM Used
E - Ending RM
Inventory: WIP
Formula: BASE
B - Beginning WIP
A - RM Used + DL & OH Used
S - Inventory xferred to FG
E - Ending WIP
Inventory: FG
Formula: BASE
B - Beginning FG
A - Inventory xferred from WIP
S - COGS
E - Ending FG
Equivalent Units Formulas
- Weighted Average
- FIFO
Weighted Average
- Two Steps
1. Units Completed
2. Ending WIP * % Complete
FIFO
- Three Steps
1. Beg WIP * to be Complete
2. Units completed - Beg WIP
3. End WIP * % Completed
Cost per EU
Weighted Avg vs FIFO
Weighted Average:
(Beg. Costs + Current Costs)/ Equivalent Units
FIFO”
(Current Costs ONLY)/ Equivalent Units
Quality Reporting
A-P-I-E
A - Appraisal includes costs incurred to identify defective products/services
P - Prevention includes costs incurred to prevent defective products/services
I - Internal Failure - cost of defective products or lost production time
E - External failure is cost of returns and lost customer loyalty due to defective products/services
A&P = Conforming: Cost of Quality I&E = Non-conforming: Cost of Failure
Six Sigma: Existing Product & Business Process Development
D-M-A-I-C
D - Define the problem M - Measure key aspects of current processes A - Analyze data I - Improve/optimize current processes C - Control
Six Sigma: New Product & Business Process Development
D-M-A-D-V
D - Define design goals M - Measure critical to quality issues A - Analyze design alternatives D - Design optimization V - Verify the design
Project Management
Name the 5 Major Processes
- Budget
- Risk
- Time
- Quality
- Resources
Quality of Deliverables
S-M-A-R-T
S - Specific M - Measurable A - Attainable R - Relevant T - Time-based
Central Costing Issue
5 Steps to Resolve
- Summarize the flow of physical units
- Calculate “equivalent units” output
- Accumulate total costs to be accounted for
- Calculate the unit costs based on total costs and equivalent units
- Apply the average costs to the units completed and units remaining ending WIP
Absorption Costing
- Direct materials
- Direct labor
- Mfg OH, both variable and fixed
Variable (Direct) Costing
- DM
- DL
- Variable mfg OH variable and fixed - all fixed mfg treated as period costs
When does the break even point occur?
When sales equal total cost (variable plus fixed costs)
High-Low Method
A simple technique used to estimate the fixed and variable portions of costs, usually production costs
Contribution Approach
NOT GAAP
- Expense immediately
- AKA Variable Costing
- All fixed factory OH is treated as a period cost and expensed in the period incurred
Absorption Approach
USES GAAP
- Product Cost
- Expense when sold
- All FIXED factory OH is treated as a product cost and included in the inventory value
COGS includes both FC & VC
Costs included in Absorption Costing
- DM
- DL
- Manufacturing OH, both variable and fixed
Variable (Direct) Costing
- DM
- DL
- Variable mfg OH variable and fixed - all fixed mfg costs are treated as period costs
Capacity Issues (Accept/Reject special orders) - 2
- Presumed Excess Capacity:
Accept if SP > VC (i.e. relevant costs) - Presumed Full Capacity
Accept if SP > VC + Opportunity Costs
