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BEC > Cost Accounting > Flashcards

Cost Accounting Flashcards

1
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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2
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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3
Q

What are Product Costs

(aka Inventory Costs)?

A

Prime Costs

Conversion Costs

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4
Q

What are included in Prime Costs?

A

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

Direct Labor Used - Employees who worked on product and had direct impact

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5
Q

What is Factory Overhead?

A

All factory costs (except for DM and DL) used in production

including Spoilage (except for Abnormal spoilage = period cost)

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6
Q

What is included in Fixed Factory Overhead?

A

FFO = Estimated Costs

Normal Capacity

Uses Normal Activity

Ex: Depreciation (SL), Utilities, Taxes Under/Over-applied

Fixed OH always goes to COGS

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7
Q

What is included in Variable Overhead?

A

VO = Estimated Activity

Actual Activity

Uses Actual Activity

Ex: Deprecation (Units of Prod)

Indirect materials (supplies & insignificant items)

Indirect labor (factory foreman, janitors, machine maintenance)

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8
Q

Where is

Under/Over-applied Variable OH

recorded?

A

If Immaterial => COGS

If Material => WIP, based on their Ending Balance

Finished Goods,

or COGS

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9
Q

Where is

Under/Over-applied Fixed OH

recorded?

A

It always goes to COGS

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10
Q

What is indicated by a Debit balance

in Actual Factory OH?

How is it corrected?

A

Under-applied OH

If it’s Fixed OH, under-applied => COGS.

If it’s Variable OH, under-applied => COGS

If immaterial => allocated to WIP, FG, or COGS

based on ending balances

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11
Q

What is indicated by a Credit balance

in Applied Factory OH?

How is it corrected?

A

Over-applied OH

If Fixed OH, it is corrected from COGS

If Variable OH, it is corrected through COGS if immaterial

If material, overage => allocated to WIP- FG or COGS

based on ending balances.

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12
Q

Which variables are used to calculate Direct Material balances?

A

Beginning Balance DR

Net purchases (+ freight-in) CR

Direct Materials Used= Ending balance (goes to BS)

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13
Q

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

A

Beginning Balance (End Bal of Previous WIP)DR

Direct Materials Used DR

Direct Labor Used (Conversion Cost)CR

COGM DR

Factory OH Applied (Conversion Cost)= Ending Balance (Goes to BS)

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14
Q

What variables are included in Finished Goods calculations?

A

Beginning BalanceDR

COGM= COGAS (Cost of Goods Avail for Sale)CR

COGS= Ending Balance (Goes to BS)

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15
Q

How does Freight In affect Cost Accounting calculations?

A

Inventory (Product) Cost

Part of DM Purchases

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16
Q

How does Freight Out affect Cost Accounting?

A

Selling (Period) Cost

Not part of inventory

17
Q

When is Job-Order Costing used?

A

Used when costs are easily connected to a specific product / product line / services

Calculation is the same as normal cost accounting

Use T Accounts

DM => WIP => FG => COGS

Likely going to be solving for the last job in the queue

18
Q

What is the Direct Method

for allocating svc dept costs?

A

No services allocated between departments

even if they serve each other.

Only allocate to product(s)

19
Q

What is the Step Method

for allocating service department costs?

A

Services can be allocated to both

other service departments and the product(s)

20
Q

Under process costing

how are the units shipped calculated?

A

Beginning Inventory

+ Units Started

- Ending Inventory

Units Shipped

21
Q

Which two inventory methods are used

under Process Costing?

A

FIFO

Weighted Average

22
Q

What is another name for Process Costing?

A

Equivalent Units of Production

23
Q

How will Equivalent Finished Units under FIFO

compare to EFU under the Weighted Avg method?

A

EFU FIFO will

always be LESS than

EFU Weighted Avg

unless Beginning Inventory = 0

24
Q

How are Direct Materials calculated

under the Weighted Avg Method?

A

Beginning Inventory + Current Costs

EFU WA

25
Q

How are Conversion Costs calculated

under Weighted Average Method?

A

Beginning Inventory + Current Costs

EFU WA

26
Q

How are Equivalent Finished Units calculated

for Direct Materials?

A

Units Shipped + EI x % Complete DM

= EFU (Weighted Average Method) - Beginning Inventory x % Complete= EFU (FIFO)

27
Q

How are Equivalent Finished Units calculated for Conversion Costs?

A

Units Shipped + EI x % Complete CC : EFU (Weighted Average) - Beginning Inventory x % Complete : EFU (FIFO)

28
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

29
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

30
Q

How is WIP calculated?

A

Beginning balance (DM- DL- OH)

+ Current Costs (DM- DL- OH)

  • COGM (Goes to FG)

+ DM EFU x Cost per DM EFU

+ CC EFU x Cost per CC EFU

Ending WIP

31
Q

How do period costs and product costs

relate to net sales, gross margin and operating income?

A

Net Sales Gross Margin

  • Product Costs = - Period Costs

Operating Income Operating Income

32
Q

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

A

Focuses on eliminating non-value-added activities for poor quality/inventory/things customers don’t want/care about

Inventory is expensive to store & storing something is not a value-added expenditure

Uses Cost Pools - Diff depts can have diff OH rates

Uses Several OH rates based on Activity/Cost Pool/Cost Driver

33
Q

How do Cost Pools and Allocations compare

under ABC vs. traditional costing system?

A

Cost Pools and Allocations increase

compared to a traditional costing system

34
Q

What is Backflush Costing?

A
  • Connected to Just-in-Time Production
  • part of ABC and Total Quality Mgmt (TQM)
  • Works backward to flush out COGS
  • Mostly GAAP
35
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 contra expense netted against COGS
  • Can be contra sale netted against Sales
  • Recognition rules are very flexible with valuing and classifying by-products
36
Q

What are Cost Functions?

A
  • Measure how costs change relative to activity levels
  • High-Low Method

Change in Cost (High-Low pts)

Change in Activity (High-Low pts)

BEC (9 decks)

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