Cost Accounting Flashcards
What is job costing?
A method of recording the costs of a manufacturing job, rather than process.
Job Costing is defined as a method of _______________, rather than process. With job costing systems, a project manager or accountant can keep track of the cost of each job, maintaining data which is often more relevant to the operations of the business
recording the costs of a manufacturing job
Job costing is defined as a method of _____________ of a manufacturing job, rather than process. With job costing systems, a project manager or accountant can keep track of the cost of each job, maintaining data which is often more relevant to the operations of the business.
recording the costs
________. With job costing systems, a project manager or accountant can keep track of the cost of each job, maintaining data which is often more relevant to the operations of the business.
Process
When is job costing used?
in situations where each job is different and is performed to the customer’s specifications.
Job costing is an _____________ costing technique.
Order specific
Job costing is used when in situations where ______________ and is performed to the customer’s specifications.
Each job is different
Job costing is used when in situations where each job is different and is _________________
performed to the customer’s specifications
Job costing involves keeping an account of direct and ____________________.
Indirect costs
Job costing involves keeping an account of ____________ and indirect costs.
Direct
Since both types of costs are usually closely related (a job requiring high input of labour and material is likely to consume more power, machine time, supervision time, inspection time, etc.) indirect costs may be applied as an estimated fraction of ______________.
Direct costs
Since both types of costs are usually closely related (a job requiring high input of labour and material is likely to consume more power, machine time, supervision time, inspection time, etc.) _____________costs may be applied as an estimated fraction of direct costs.
Indirect
Job costing methods are ____________contract costing and batch costing methods, and are used in construction, motion picture, and shipping industries, in fabrication, repair, and maintenance works, and in services such as auditing.
Similar to
Job costing methods are similar to _____________ and batch costing methods, and are used in construction, motion picture, and shipping industries, in fabrication, repair, and maintenance works, and in services such as auditing.
Contract costing
Job costing methods are similar to contract costing and ______________ methods, and are used in construction, motion picture, and shipping industries, in fabrication, repair, and maintenance works, and in services such as auditing.
Batch costing
Job costing methods are similar to contract costing and batch costing methods, and are used in ____________, motion picture, and shipping industries, in fabrication, repair, and maintenance works, and in services such as auditing.
construction
Job costing methods are similar to contract costing and batch costing methods, and are used in construction, _____________, and shipping industries, in fabrication, repair, and maintenance works, and in services such as auditing.
Motion picture
Job costing methods are similar to contract costing and batch costing methods, and are used in construction, motion picture, and shipping industries, in fabrication, repair, and ______________works, and in services such as auditing.
maintenance
Job costing methods are similar to contract costing and batch costing methods, and are used in construction, motion picture, and shipping industries, in fabrication, repair, and maintenance works, and in services such as _____________.
auditing.
Contract costing is a way of providing a ___________ for especially large and long term projects that will usually be performed over a number of accounting periods. For example, large civil engineering projects will often involve a business using contract costing when estimating the cost of participating in the project.
Quotation
Contract costing is a way of providing a quotation for especially ___________ and long term projects that will usually be performed over a number of accounting periods. For example, large civil engineering projects will often involve a business using contract costing when estimating the cost of participating in the project.
large
Contract costing is a way of providing a quotation for especially large and long term projects that will usually be performed over a number of accounting periods. For example, large civil engineering projects will often involve a business using contract costing when estimating the cost of participating in the project.
long term
_______________is a way of providing a quotation for especially large and long term projects that will usually be performed over a number of accounting periods. For example, large civil engineering projects will often involve a business using ____________ when estimating the cost of participating in the project.
Contact costing
_______________involves the accumulation of the costs of materials, labour, and overhead for a specific job. This approach is an excellent tool for tracing specific costs to individual jobs and examining them to see if the costs can be reduced in later jobs. An alternative use is to see if any excess costs incurred can be billed to a customer.
Job costing
Job costing involves the accumulation of the costs of materials, labour, and overhead for a specific job. This approach is an excellent tool for___________specific costs to individual jobs and examining them to see if the costs can be reduced in later jobs. An alternative use is to see if any excess costs incurred can be billed to a customer.
tracing
Job costing involves the accumulation of the costs of materials, labour, and overhead for a specific job. This approach is an excellent tool for tracing specific costs to individual jobs and examining them to see if the costs can be reduced in later jobs. An alternative use is to see if any excess costs incurred can be __________ to a customer.
billed
Job costing is used to accumulate costs at a __________ level. For example, job costing is appropriate for deriving the cost of constructing a custom machine, designing a software program, constructing a building, or manufacturing a small batch of products.
Small-unit
for deriving the cost of constructing a custom machine, designing a software program, constructing a building, or manufacturing a small ______ of products.
Batch
Job costing involves the following accounting activities:
_________. It accumulates the cost of components and then assigns these costs to a product or project once the components are used.
Labour. Employees charge their time to specific jobs, which are then assigned to the jobs based on the labour cost of the employees.
Overhead. It accumulates overhead costs in cost pools, and then allocates these costs to jobs.
Materials
Materials. It accumulates the cost of components and then assigns these costs to a product or project once the components are used.
________. Employees charge their time to specific jobs, which are then assigned to the jobs based on the labour cost of the employees.
Overhead. It accumulates overhead costs in cost pools, and then allocates these costs to jobs.
Labour
Materials. It accumulates the cost of components and then assigns these costs to a product or project once the components are used.
Labour. Employees charge their time to specific jobs, which are then assigned to the jobs based on the labour cost of the employees.
___________. It accumulates overhead costs in cost pools, and then allocates these costs to jobs
Overhead
Job costing results in discrete _______ of information about each job that the cost accountant can review to see if it really should be assigned to that job. If there are many jobs currently in progress, there is a strong chance that costs will be incorrectly assigned, but the very nature of the job costing system makes it highly auditable.
buckets
Job costing results in discrete “buckets” of information about each job that the cost accountant can review to see if it really should be assigned to that job. If there are many jobs currently in progress, there is a strong chance that costs will be incorrectly ___________, but the very nature of the job costing system makes it highly auditable.
assigned
Job costing results in discrete “buckets” of information about each job that the cost accountant can review to see if it really should be assigned to that job. If there are many jobs currently in progress, there is a strong chance that costs will be incorrectly assigned, but the very nature of the job costing system makes it highly ___________.
Auditable
If a job is expected to run for a long period of time, then the cost accountant can periodically compare the costs accumulated in the bucket for that job to its _________, and give management advance warning if costs appear to be running ahead of projections. This gives management time to either get costs under control over the remainder of the project, or possibly to approach the customer about a billing increase to cover some or all of the cost overrun.
budget
If a job is expected to run for a long period of time, then the cost accountant can periodically compare the costs accumulated in the bucket for that job to its budget, and give management advance warning if costs appear to be running ahead of ___________. This gives management time to either get costs under control over the remainder of the project, or possibly to approach the customer about a billing increase to cover some or all of the cost overrun.
projections
If a job is expected to run for a long period of time, then the cost accountant can periodically compare the costs accumulated in the bucket for that job to its budget, and give management advance warning if costs appear to be running ahead of projections. This gives management time to either get costs under _________over the remainder of the project, or possibly to approach the customer about a billing increase to cover some or all of the cost overrun.
control
If a job is expected to run for a long period of time, then the cost accountant can periodically compare the costs accumulated in the bucket for that job to its budget, and give management advance warning if costs appear to be running ahead of projections. This gives management time to either get costs under control over the remainder of the project, or possibly to approach the ___________ about a billing increase to cover some or all of the cost overrun.
Customer
Job costing demands a considerable amount of costing precision if costs are to be reimbursed by customers (as is the case in a ______________, where the customer pays all costs incurred, plus a profit). In such cases, the cost accountant must carefully review the costs assigned to each job before releasing it to the billing staff, which creates a customer invoice. This can cause long hours for the cost accountant at the end of a job, since the company controller will want to issue an invoice as soon as possible.
cost-plus contract
Job costing demands a considerable amount of costing precision if costs are to be reimbursed by customers (as is the case in a cost-plus contract, where the customer pays all costs incurred, plus a profit). In such cases, the cost accountant must carefully review the costs assigned to each job before releasing it to the ___________ staff, which creates a customer invoice. This can cause long hours for the cost accountant at the end of a job, since the company controller will want to issue an invoice as soon as possible.
billing
Job Costing Allocation of Materials
In a job costing environment, materials to be used on a product or project first enter the facility and are stored in the warehouse, after which they are picked from stock and issued to a specific job. If ________or scrap is created, then normal amounts are charged to an overhead cost pool for later allocation, while abnormal amounts are charged directly to the cost of goods sold. Once work is completed on a job, the cost of the entire job is shifted from work-in-process inventory to finished goods inventory. Then, once the goods are sold, the cost of the asset is removed from the inventory account and shifted into the cost of goods sold, while the company also records a sale transaction.
spoilage
Job Costing Allocation of Materials
In a job costing environment, materials to be used on a product or project first enter the facility and are stored in the warehouse, after which they are picked from stock and issued to a specific job. If spoilage or scrap is created, then normal amounts are charged to an overhead cost pool for later allocation, while __________amounts are charged directly to the cost of goods sold. Once work is completed on a job, the cost of the entire job is shifted from work-in-process inventory to finished goods inventory. Then, once the goods are sold, the cost of the asset is removed from the inventory account and shifted into the cost of goods sold, while the company also records a sale transaction.
abnormal
Job Costing Allocation of Materials
In a job costing environment, materials to be used on a product or project first enter the facility and are stored in the warehouse, after which they are picked from stock and issued to a specific job. If spoilage or scrap is created, then normal amounts are charged to an overhead cost pool for later allocation, while abnormal amounts are charged directly to the cost of goods sold. Once work is completed on a job, the cost of the entire job is shifted from work-in-process inventory to finished goods inventory. Then, once the goods are sold, the cost of the asset is removed from the inventory account and shifted into the cost of goods sold, while the company also records a sale transaction.
sale transaction
Job Costing Allocation of Labour
In a job costing environment, labour may be charged directly to individual jobs if the labour is directly ____________ to those jobs. All other manufacturing-related labour is recorded in an overhead cost pool and is then allocated to the various open jobs. The first type of labour is called direct labour, and the second type is known as indirect labour. When a job is completed, it is then shifted into a finished goods inventory account. Then, once the goods are sold, the cost of the asset is removed from the inventory account and shifted into the cost of goods sold, while the company also records a sale transaction.
traceable
Job Costing Allocation of Labour
In a job costing environment, labour may be charged directly to individual jobs if the labour is directly traceable to those jobs. All other manufacturing-related labour is recorded in an overhead cost pool and is then allocated to the various open jobs. The first type of labour is called direct labour, and the second type is known as ________labour. When a job is completed, it is then shifted into a finished goods inventory account. Then, once the goods are sold, the cost of the asset is removed from the inventory account and shifted into the cost of goods sold, while the company also records a sale transaction.
indirect
Job Costing Allocation of Labour
In a job costing environment, labour may be charged directly to individual jobs if the labour is directly traceable to those jobs. All other manufacturing-related labour is recorded in an overhead cost pool and is then allocated to the various open jobs. The first type of labour is called direct labour, and the second type is known as indirect labour. When a job is completed, it is then shifted into a finished goods inventory account. Then, once the goods are sold, the cost of the asset is removed from the inventory account and shifted into the cost of goods sold, while the company also records a ____________.
Sales transaction
In a job costing environment, non-direct costs are accumulated into one or more overhead cost pools, from which you allocate costs to ________ jobs based upon some measure of cost usage. The key issues when applying overhead are to consistently charge the same types of costs to overhead in all reporting periods and to consistently apply these costs to jobs. Otherwise, it can be extremely difficult for the cost accountant to explain why overhead cost allocations vary from one month to the next.
open
In a job costing environment, non-direct costs are accumulated into one or more overhead cost pools, from which you allocate costs to open jobs based upon some measure of cost usage. The key issues when applying overhead are to __________ charge the same types of costs to overhead in all reporting periods and to ____________ apply these costs to jobs. Otherwise, it can be extremely difficult for the cost accountant to explain why overhead cost allocations vary from one month to the next.
consistently
In a job costing environment, non-direct costs are accumulated into one or more overhead cost pools, from which you allocate costs to open jobs based upon some measure of cost usage. The key issues when applying overhead are to consistently charge the same types of costs to overhead in all reporting periods and to consistently apply these costs to jobs. Otherwise, it can be extremely difficult for the cost accountant to explain why overhead cost ______________ vary from one month to the next.
allocations
The accumulation of ____________costs into overhead pools and their allocation to jobs can be a time-consuming process that interferes with closing the books on a reporting period. To speed up the process, an alternative is to allocate standard costs that are based on historical costs. These standard costs will never be exactly the same as actual costs, but can be easily calculated and allocated.
actual
The accumulation of actual costs into overhead pools and their allocation to jobs can be a time-consuming process that interferes with closing the books on a reporting period. To speed up the process, an alternative is to allocate ______________ that are based on historical costs. These standard costs will never be exactly the same as actual costs, but can be easily calculated and allocated.
Standard costs
The accumulation of actual costs into overhead pools and their allocation to jobs can be a time-consuming process that interferes with closing the books on a reporting period. To speed up the process, an alternative is to allocate standard costs that are based on ______________. These standard costs will never be exactly the same as actual costs, but can be easily calculated and allocated.
historical costs
The accumulation of actual costs into overhead pools and their allocation to jobs can be a time-consuming process that interferes with closing the books on a reporting period. To speed up the process, an alternative is to allocate standard costs that are based on historical costs. These standard costs will never be exactly the same as actual costs, but can be easily calculated and ___________.
Allocated
The ______________ for standard costs is to use historical cost information to arrive at a standard rate per unit of activity, and then allocate this standard amount to jobs based on their units of activity. You then subtract the total amount allocated from the overhead cost pool (which contains actual overhead costs), and dispose of any remaining amount in the overhead cost pool. You can use any of the following methods to dispose of the remaining amount:
Charge to cost of goods sold. Charge the entire variance to the cost of goods sold. This is the simplest method.
Allocate the variance. Allocate the variance to the accounts for finished goods, work-in-process, and cost of goods sold, based on the ending balances in these accounts. This approach is slightly more time-consuming, but is the most theoretically correct method under generally accepted accounting principles.
Charge to jobs. Allocate the variance to those jobs that were open during the reporting period. This approach is the most time-consuming. It essentially reverts a company back to an actual costing system, since the results of this method will approximate those created under an actual cost allocation system.
The allocation of an overhead cost pool is by definition inherently inaccurate, since the underlying costs cannot be directly associated with a job. Consequently, it is best to use the simplest of the above methods to dispose of any residual amounts in the overhead cost pool.
overhead allocation process
The overhead allocation process for standard costs is to use historical cost information to arrive at a standard rate per unit of activity, and then allocate this standard amount to jobs based on their units of activity. You then subtract the total amount allocated from the overhead cost pool (which contains actual overhead costs), and dispose of any remaining amount in the overhead cost pool. You can use any of the following methods to dispose of the remaining amount:
____________________. Charge the entire variance to the cost of goods sold. This is the simplest method.
Allocate the variance. Allocate the variance to the accounts for finished goods, work-in-process, and cost of goods sold, based on the ending balances in these accounts. This approach is slightly more time-consuming, but is the most theoretically correct method under generally accepted accounting principles.
Charge to jobs. Allocate the variance to those jobs that were open during the reporting period. This approach is the most time-consuming. It essentially reverts a company back to an actual costing system, since the results of this method will approximate those created under an actual cost allocation system.
The allocation of an overhead cost pool is by definition inherently inaccurate, since the underlying costs cannot be directly associated with a job. Consequently, it is best to use the simplest of the above methods to dispose of any residual amounts in the overhead cost pool.
Charge to cost of goods sold
The overhead allocation process for standard costs is to use historical cost information to arrive at a standard rate per unit of activity, and then allocate this standard amount to jobs based on their units of activity. You then subtract the total amount allocated from the overhead cost pool (which contains actual overhead costs), and dispose of any remaining amount in the overhead cost pool. You can use any of the following methods to dispose of the remaining amount:
Charge to cost of goods sold. Charge the entire variance to the cost of goods sold. This is the simplest method.
____________. _____________ to the accounts for finished goods, work-in-process, and cost of goods sold, based on the ending balances in these accounts. This approach is slightly more time-consuming, but is the most theoretically correct method under generally accepted accounting principles.
Charge to jobs. Allocate the variance to those jobs that were open during the reporting period. This approach is the most time-consuming. It essentially reverts a company back to an actual costing system, since the results of this method will approximate those created under an actual cost allocation system.
The allocation of an overhead cost pool is by definition inherently inaccurate, since the underlying costs cannot be directly associated with a job. Consequently, it is best to use the simplest of the above methods to dispose of any residual amounts in the overhead cost pool.
Allocate the variance
The overhead allocation process for standard costs is to use historical cost information to arrive at a standard rate per unit of activity, and then allocate this standard amount to jobs based on their units of activity. You then subtract the total amount allocated from the overhead cost pool (which contains actual overhead costs), and dispose of any remaining amount in the overhead cost pool. You can use any of the following methods to dispose of the remaining amount:
Charge to cost of goods sold. Charge the entire variance to the cost of goods sold. This is the simplest method.
Allocate the variance. Allocate the variance to the accounts for finished goods, work-in-process, and cost of goods sold, based on the ending balances in these accounts. This approach is slightly more time-consuming, but is the most theoretically correct method under generally accepted accounting principles.
___________. Allocate the variance to those jobs that were open during the reporting period. This approach is the most time-consuming. It essentially reverts a company back to an actual costing system, since the results of this method will approximate those created under an actual cost allocation system.
The allocation of an overhead cost pool is by definition inherently inaccurate, since the underlying costs cannot be directly associated with a job. Consequently, it is best to use the simplest of the above methods to dispose of any residual amounts in the overhead cost pool.
Charge to jobs.
The overhead allocation process for standard costs is to use historical cost information to arrive at a standard rate per unit of activity, and then allocate this standard amount to jobs based on their units of activity. You then subtract the total amount allocated from the overhead cost pool (which contains actual overhead costs), and dispose of any remaining amount in the overhead cost pool. You can use any of the following methods to dispose of the remaining amount:
Charge to cost of goods sold. Charge the entire variance to the cost of goods sold. This is the simplest method.
Allocate the variance. Allocate the variance to the accounts for finished goods, work-in-process, and cost of goods sold, based on the ending balances in these accounts. This approach is slightly more time-consuming, but is the most theoretically correct method under generally accepted accounting principles.
Charge to jobs. Allocate the variance to those jobs that were open during the reporting period. This approach is the most time-consuming. It essentially reverts a company back to an actual costing system, since the results of this method will approximate those created under an actual cost allocation system.
The allocation of an overhead cost pool is by definition inherently inaccurate, since the underlying costs cannot be directly associated with a job. Consequently, it is ___________ to use the simplest of the above methods to dispose of any residual amounts in the overhead cost pool.
Best
Job order costing or job costing is a system for assigning manufacturing costs to an individual product or batches of products. Generally, the job order costing system is used only when the products manufactured are sufficiently different from each other. (When products are identical or nearly identical, the process costing system will likely be used.)
Since there is a significant variation in the products manufactured, the job order costing system will create a job cost record for each item, job or special order. The job cost record will report the direct materials and direct labour actually used plus the manufacturing overhead assigned to each job.
An example of an industry where job order costing is used is the building construction industry since each building is unique. The manufacturers of custom equipment or custom cabinetry are also examples of companies that will keep track of production costs by item or job.
The job cost records also serve as the subsidiary ledger or documentation for the cost of the work-in-process inventory, the finished goods inventory, and the cost of goods sold.
different
Job order costing or job costing is a system for assigning manufacturing costs to an individual product or batches of products. Generally, the job order costing system is used only when the products manufactured are sufficiently different from each other. (When products are identical or nearly identical, the process costing system will likely be used.)
Since there is a significant variation in the products manufactured, the job order costing system will create a job cost record for each item, job or special order. The job cost record will report the direct materials and direct labour actually used plus the manufacturing overhead assigned to each job.
An example of an industry where job order costing is used is the building construction industry since each building is unique. The manufacturers of custom equipment or custom cabinetry are also examples of companies that will keep track of production costs by item or job.
The job cost records also serve as the subsidiary ledger or documentation for the cost of the work-in-process inventory, the finished goods inventory, and the cost of goods sold.
manufacturing
Job order costing or job costing is a system for assigning manufacturing costs to an individual product or batches of products. Generally, the job order costing system is used only when the products manufactured are sufficiently different from each other. (When products are identical or nearly identical, the process costing system will likely be used.)
Since there is a significant variation in the products manufactured, the job order costing system will create a job cost record for each item, job or special order. The job cost record will report the direct materials and direct labour actually used plus the manufacturing overhead assigned to each job.
An example of an industry where job order costing is used is the building construction industry since each building is unique. The manufacturers of custom equipment or custom cabinetry are also examples of companies that will keep track of production costs by item or job.
The job cost records also serve as the _______________ or documentation for the cost of the work-in-process inventory, the finished goods inventory, and the cost of goods sold.
subsidiary ledger
Lucey (1993) defines costing methods as the methods of costing designed to suit the way goods are processed or manufactured or the way that services are provided. It therefore refers to the various methods that can be used to come out with the cost of an activity. It appears that the _______________ must suit the product or service to cost. This is the reason why we may have two broad categories of costing methods, namely:
- Specific order costing:
This is a costing method applicable where the work consists of separate jobs or batches. The main sub-divisions of specific order costing are: job costing, contract costing and batch costing. - Continuous operation or process costing:
This costing method applies where the goods or service produced result from a sequence of conditions or repetitive operations or processes to which costs are charged before being averaged over the units produced during the period. Its main sub-divisions are: process costing including joint product and by-product, and service/function costing.
costing method
Lucey (1993) defines costing methods as the methods of costing designed to suit the way goods are processed or manufactured or the way that services are provided. It therefore refers to the various methods that can be used to come out with the cost of an activity. It appears that the costing method must suit the product or service to cost. This is the reason why we may have two broad categories of costing methods, namely:
- ___________________:
This is a costing method applicable where the work consists of separate jobs or batches. The main sub-divisions of specific order costing are: job costing, contract costing and batch costing. - Continuous operation or process costing:
This costing method applies where the goods or service produced result from a sequence of conditions or repetitive operations or processes to which costs are charged before being averaged over the units produced during the period. Its main sub-divisions are: process costing including joint product and by-product, and service/function costing.
specific order costing
Lucey (1993) defines costing methods as the methods of costing designed to suit the way goods are processed or manufactured or the way that services are provided. It therefore refers to the various methods that can be used to come out with the cost of an activity. It appears that the costing method must suit the product or service to cost. This is the reason why we may have two broad categories of costing methods, namely:
- Specific order costing:
This is a costing method applicable where the work consists of separate jobs or batches. The main sub-divisions of specific order costing are: job costing, contract costing and batch costing. - ___________________________:
This costing method applies where the goods or service produced result from a sequence of conditions or repetitive operations or processes to which costs are charged before being averaged over the units produced during the period. Its main sub-divisions are: process costing including joint product and by-product, and service/function costing.
Continuous operation or process costing
What is another name for process costing?
Continuous operation costing
a) ______________
This is a traditional method of accounting for cost. This is a method where the costs incurred are allocated, apportioned and absorbed by the cost unit, which is the object to cost.
Here the company production is divided into jobs, which may be of the same nature, but generally they are all different. The purpose here is to determine the profit made on each job, as this will be helpful for future planning.
b) Batch costing.
Being another type of specific order costing method, it is one which applies when a quantity of identical items are manufactured as a batch. It is very similar to job costing but the main feature of batch costing is that the unit cost is the ratio of the total cost of the batch to the number of units in the batch. This method is widely used in the footwear and clothing industries where similar items are manufactured.
c) Process costing.
This is a costing method, which is used when the production is essentially made of homogenous products, which are being produced on a continuous basis. It is very close to job costing in that:
· They have the same basic purposes, the determination of the unit cost.
· They use the same basic accounts
· The flow of costs through these accounts is quite the same for the two methods.
job costing
a) Job costing
This is a traditional method of accounting for cost. This is a method where the costs incurred are allocated, apportioned and absorbed by the cost unit, which is the object to cost.
Here the company production is divided into jobs, which may be of the same nature, but generally they are all different. The purpose here is to determine the profit made on each job, as this will be helpful for future planning.
b) __________ costing.
Being another type of specific order costing method, it is one which applies when a quantity of identical items are manufactured as a ___________. It is very similar to job costing but the main feature of ____________ costing is that the unit cost is the ratio of the total cost of the batch to the number of units in the batch. This method is widely used in the footwear and clothing industries where similar items are manufactured.
c) Process costing.
This is a costing method, which is used when the production is essentially made of homogenous products, which are being produced on a continuous basis. It is very close to job costing in that:
· They have the same basic purposes, the determination of the unit cost.
· They use the same basic accounts
· The flow of costs through these accounts is quite the same for the two methods.
batch
a) Job costing
This is a traditional method of accounting for cost. This is a method where the costs incurred are allocated, apportioned and absorbed by the cost unit, which is the object to cost.
Here the company production is divided into jobs, which may be of the same nature, but generally they are all different. The purpose here is to determine the profit made on each job, as this will be helpful for future planning.
b) Batch costing.
Being another type of specific order costing method, it is one which applies when a quantity of identical items are manufactured as a batch. It is very similar to job costing but the main feature of batch costing is that the unit cost is the ratio of the total cost of the batch to the number of units in the batch. This method is widely used in the ____________and clothing industries where similar items are manufactured.
c) Process costing.
This is a costing method, which is used when the production is essentially made of homogenous products, which are being produced on a continuous basis. It is very close to job costing in that:
· They have the same basic purposes, the determination of the unit cost.
· They use the same basic accounts
· The flow of costs through these accounts is quite the same for the two methods.
footwear
a) Job costing
This is a traditional method of accounting for cost. This is a method where the costs incurred are allocated, apportioned and absorbed by the cost unit, which is the object to cost.
Here the company production is divided into jobs, which may be of the same nature, but generally they are all different. The purpose here is to determine the profit made on each job, as this will be helpful for future planning.
b) Batch costing.
Being another type of specific order costing method, it is one which applies when a quantity of identical items are manufactured as a batch. It is very similar to job costing but the main feature of batch costing is that the unit cost is the ratio of the total cost of the batch to the number of units in the batch. This method is widely used in the footwear and ___________ industries where similar items are manufactured.
c) Process costing.
This is a costing method, which is used when the production is essentially made of homogenous products, which are being produced on a continuous basis. It is very close to job costing in that:
· They have the same basic purposes, the determination of the unit cost.
· They use the same basic accounts
· The flow of costs through these accounts is quite the same for the two methods.
clothing
a) Job costing
This is a traditional method of accounting for cost. This is a method where the costs incurred are allocated, apportioned and absorbed by the cost unit, which is the object to cost.
Here the company production is divided into jobs, which may be of the same nature, but generally they are all different. The purpose here is to determine the profit made on each job, as this will be helpful for future planning.
b) Batch costing.
Being another type of specific order costing method, it is one which applies when a quantity of identical items are manufactured as a batch. It is very similar to job costing but the main feature of batch costing is that the unit cost is the ratio of the total cost of the batch to the number of units in the batch. This method is widely used in the footwear and clothing industries where similar items are manufactured.
c) ___________________.
This is a costing method, which is used when the production is essentially made of homogenous products, which are being produced on a continuous basis. It is very close to job costing in that:
· They have the same basic purposes, the determination of the unit cost.
· They use the same basic accounts
· The flow of costs through these accounts is quite the same for the two methods.
process costing
The differences are due to two main factors:
· In process costing the flow of units is quite ___________ while job costing is concerned with separate and distinct processes.
· Under process costing there is no need to try to identify materials, labour or overhead costs with particular order since that order is only part of the many that continuously flow.
continuous
The differences are due to two main factors:
· In process costing the flow of units is quite continuous while job costing is concerned with ________________ processes.
· Under process costing there is no need to try to identify materials, labour or overhead costs with particular order since that order is only part of the many that continuously flow.
separate and distinct
The differences are due to two main factors:
· In __________the flow of units is quite continuous while job costing is concerned with separate and distinct processes.
· Under _______________ there is no need to try to identify materials, labour or overhead costs with particular order since that order is only part of the many that continuously flow.
process costing
Cost accountant types use these cost accounting basics to organize costs into three basic categories:
Direct material costs
Direct labour costs
Burden costs
But, don’t let this confuse you. Accountants have an easier way to look at these costs. They think of each of these costs as a _________. Think of three ________s on the floor. One labelled direct material, one labelled direct labour and one labelled burden. Now let’s throw our costs to make a birdhouse into the correct bucket:
bucket
_______ is a term in business and finance related to the grouping of assets or categories. _________s can receive risk assets such as equities, lower risk or risk-free assets such as cash and short-term securities, fixed income securities with similar maturities or swaps or derivatives with proximate maturities. In managerial accounting, cost ___________s are created to track unit-level
bucket
What is mental accounting?
One euro is identical to any other euro, or is it?
People often behave as if money meant to be spent one way cannot simply be repurposed according to need. For example, if a couple gets a payout for a lost package of food – and then goes for an expensive dinner. This very scenario opens a famous paper about “mental accounting”, the way people tend to separate money into separate “________” for food, shelter, transport and other expenses.
bucket
Mental accounting goes against the idea of fungibility, that one euro or dollar or pound is identical to another. It can explain why people might feel they can splurge in certain circumstances and not in others. This has broad implications for the way individuals budget and manage money (as well as how stores price and market products).
But I’d never spend that much on a meal
Research by Richard Thaler, co-author of behavioural economics book Nudge, suggests that because the couple in the anecdote got a $300 financial windfall in the “food” category, they felt comfortable spending it on a lavish dinner, as that is also in the “food” category. He writes: “The extravagant dinner would not have occurred had each couple received a yearly salary increase of $150, even though that could have been worth more in present value terms.”
Another example involves a couple earning 10% interest on money they have saved to buy a holiday home, but who also borrowed a smaller amount at 15% interest to buy a car. It is a “violation of fungibility (at obvious economic costs)” because they are effectively paying to borrow for the car despite having money saved for the house. Mental accounting is used widely but only about a third in an eZonomics poll knew what it was and how it related to managing money.
Use your ____________s wisely
This tendency to divide money into separate buckets has implications for individuals and their budgeting. Research summarised on the Brown University website explains how mental accounting can have big influences on household spending.
Examining petrol price rises, associate professor of economics Justine Hastings writes that people typically changed their petrol-buying habits when prices went up, rather than cutting back in a different area of spending, such as food. She says an equivalent fall in household income had a much smaller effect on petrol-buying habits – which is consistent with the mental accounting idea.
“A clear pattern emerged,” the researcher says. “People behaved as if they were much poorer, buying cheaper gasoline as if a $2 increase in gasoline prices had decreased their annual income by tens of thousands of dollars.”
bucket
Mental accounting can help – and hinder
In his 2011 book Thinking, Fast and Slow, psychologist Daniel Kahneman writes that mental accounting can be an easy way to control spending. Like Thaler’s couple who borrowed to buy a car (despite having the money saved for a holiday home), people can use the method to avoid spending on indulgences, such as barista-made coffee or to limit building debt on credit cards.
However, the petrol-price research suggests it might pay to revise the household budget as a whole if prices noticeably rise. Perhaps savings can be made in other areas – and money moved from one “__________” to another – to help ease the pain of price hikes.
bucket
When goods moved to finished goods and before sale what are the costs called?
Cost of goods manufactured
What is the acronym for cost of goods manufactured?
COGM
What are prime costs?
The costs of what we need for production
What are prime costs made up of?
Direct Materials and Direct Labour
What are Conversion Costs made up of?
Direct Labour plus overhead
What are product costs?
The costs associated with making the products.
Where are product costs on the balance sheet?
As part of finished goods / inventory
On a per unit basis, fixed costs ___________ and variable costs remain the same
Vary
What do mixed costs consist of?
Both variable and fixed costs
A period cost is any cost that cannot be ________ into prepaid expenses, inventory, or fixed assets. A period cost is more closely associated with the passage of time than with a transactional event. … Instead, it is typically included within the selling and administrative expenses section of the income statement.
capitalized
A ___________ is any cost that cannot be capitalized into prepaid expenses, inventory, or fixed assets. A ___________ is more closely associated with the passage of time than with a transactional event. … Instead, it is typically included within the selling and administrative expenses section of the income statement.
period cost
According to U.S. generally accepted accounting principles, or _________, all selling and administrative costs are treated as period costs. Common examples of period costs include marketing expenses, rent, office depreciation and indirect labour. Even if physical inventories are composed of items that are treated as product costs, the actual administration of warehouses and inventory management expenses are considered period costs.
GAAP
Under the high low method, how is the variable cost calculated?
(Total cost at the highest level of activity – total cost at the lowest level of activity) / (number of units / labour hour at the highest level of activity - number of units / labour hour at the lowest level of activity)
Under the high low method, how is fixed cost calculated?
By subtracting total variable cost from total cost
Under what method is variable cost calculated the following way?
(Total cost at the highest level of activity – total cost at the lowest level of activity) / (number of units / labour hour at the highest level of activity - number of units / labour hour at the lowest level of activity)
The high low method
Under what method is fixed cost calculated the following way?
By subtracting total variable cost from total cost
The high low method
How is the predetermined rate calculated for job order costing?
Estimated total manufacturing cost overhead / Estimated total amount of the allocation base
How is the predetermined rate different from machine overhead rate per machine hour?
It also includes a portion of the fixed cost allocated to the unit.
What is over applied overhead?
What is over applied overhead?
Overapplied overhead is excess amount of overhead applied during a production period over the actual overhead incurred during the period. In other words, it’s the amount that the estimated overhead exceeds the actual overhead incurred for a production period.
What happens to over applied overhead?
It is credited against cost of goods sold.
How is over applied overhead treated in the balance sheet?
Excess of overhead applied to work-in-process inventory over the amount of overhead actually incurred. … Overapplied overhead is reported on the balance sheet and is reported as unearned revenue. At the end of the year, overapplied overhead is balanced by creating a credit to Cost of Goods Sold.
What sort of products is process costing used for?
Products which are exactly the same eg Coca Cola bottles or tennis balls
What is the main difference between job order costing and process costing?
In job order costing we have different products (jobs) and in process costing we have the same product but different departments.
Will the problem always tell you or if you are at a job, will you always know the percentage of completion?
For example that materials are completed 90% and conversion cost 50%
Yes
Beginning ___________ is ignored for this method.
WIP
We are working on 10 units. Each unit is 30% complete. How many equivalent units do we have under weighted average cost?
a) 10 equivalent units;
b) 3 equivalent units;
c) 5 equivalent units.
3 equivalent units
A job cost system is one of a number of methods to determine the cost to manufacture a good (_______). Other methods include process costing and activity-based costing.
(EA Study Guide)
cost of job
A job cost system is one of a number of methods to determine the cost to manufacture a good (cost of job). Other methods include _________ and activity-based costing.
(EA Study Guide)
Process costing
A job cost system is one of a number of methods to determine the cost to manufacture a good (cost of job). Other methods include process costing and __________.
(EA Study Guide)
activity-based costing
A job cost system is the method used to cost a specific __________ job for a particular customer e.g. a custom-made piece of furniture. Each job (custom-made piece of furniture) has different amounts of raw material, labour and overhead in its manufacture.
(EA Study Guide)
custom-made
This _____________ can be used on small batches of production. A process-costing method could be used when large numbers of identical items are manufactured e.g. bottles of cola.
(EA Study Guide)
subsystem
This subsystem can be used on small batches of production. A process-costing method could be used when large numbers of identical items are manufactured e.g. bottles of cola.
(EA Study Guide)
process-costing
This subsystem can be used on small batches of production. A process-costing method could be used when large numbers of identical items are manufactured e.g. bottles of cola.
(EA Study Guide)
identical items
A well-designed job cost system is essential for the __________ of the business i.e. its viability. The business needs to accurately record the cost for each job to help ensure the marked-up price it is sold for covers all costs of its manufacture. The mark-up must also be enough to cover all non-manufacturing costs and to provide sufficient profit.
survival
A well-designed job cost system is essential for the survival of the business i.e. its _______. The business needs to accurately record the cost for each job to help ensure the marked-up price it is sold for covers all costs of its manufacture. The mark-up must also be enough to cover all non-manufacturing costs and to provide sufficient profit.
viability
A well-designed job cost system is essential for the survival of the business i.e. its viability. The business needs to ___________ record the cost for each job to help ensure the marked-up price it is sold for covers all costs of its manufacture. The mark-up must also be enough to cover all non-manufacturing costs and to provide sufficient profit.
accurately
A well-designed job cost system is essential for the survival of the business i.e. its viability. The business needs to accurately record the cost for each job to help ensure the ____________ price it is sold for covers all costs of its manufacture. The mark-up must also be enough to cover all non-manufacturing costs and to provide sufficient profit.
Marked-up
A well-designed job cost system is essential for the survival of the business i.e. its viability. The business needs to accurately record the cost for each job to help ensure the marked-up price it is sold for covers all costs of its manufacture. The mark-up must also be enough to cover all non-manufacturing costs and to provide sufficient profit.
Mark-up
A well-designed job cost system is essential for the survival of the business i.e. its viability. The business needs to accurately record the cost for each job to help ensure the marked-up price it is sold for covers all costs of its manufacture. The mark-up must also be enough to cover all non-manufacturing costs and to provide sufficient _______.
profit
______________s can be incurred at different times in the year. It is often uncertain when in the year a cost will happen, e.g. when repairs and maintenance on machinery will be needed. This creates the problem of when to charge customers for these costs. Some __________s are for a full year, e.g. insurance or depreciation on factory machinery, but it does not make sense to charge the entire _____________ against the jobs in the month the ____________ is incurred. The insurance is for the year so should be charged against all jobs in the year. The _____________ incurred for repairs and maintenance is likely to be the result of previous months’ manufacturing, so it should be to jobs other than in the current month.
Such ___________ costs must be charged out to customer otherwise the viability of the business is at risk. This is because the business has to pay the costs, but if the business is not charging the customers for them in the price of the job then the business might not earn enough to pay all its costs.
ESA Study guide
Factory overhead
Factory overheads can be incurred at different times in the year. It is often uncertain when in the year a cost will happen, e.g. when repairs and maintenance on machinery will be needed. This creates the problem of when to charge customers for these costs. Some factory overheads are for a full year, e.g. insurance or depreciation on factory machinery, but it does not make sense to charge the entire factory overhead against the jobs in the month the factory overhead is incurred. The insurance is for the year so should be charged against all jobs in the year. The factory overhead incurred for repairs and maintenance is likely to be the result of previous months’ manufacturing, so it should be to jobs other than in the current month.
Such factory overhead costs must be charged out to customer otherwise the v________ of the business is at risk. This is because the business has to pay the costs, but if the business is not charging the customers for them in the price of the job then the business might not earn enough to pay all its costs.
ESA Study guide
viability
Factory overheads can be incurred at different times in the year. It is often uncertain when in the year a cost will happen, e.g. when repairs and maintenance on machinery will be needed. This creates the problem of when to charge customers for these costs. Some factory overheads are for a full year, e.g. insurance or depreciation on factory machinery, but it does not make sense to charge the entire factory overhead against the jobs in the month the factory overhead is incurred. The insurance is for the year so should be charged against all jobs in the year. The factory overhead incurred for repairs and maintenance is likely to be the result of __________ months’ manufacturing, so it should be to jobs other than in the current month.
Such factory overhead costs must be charged out to customer otherwise the viability of the business is at risk. This is because the business has to pay the costs, but if the business is not charging the customers for them in the price of the job then the business might not earn enough to pay all its costs.
ESA Study guide
previous
To help ensure factory overhead costs are included in each job, factory overhead is ___________ to each job using a factory overhead allocation rate.
ESA Study Guide
allocated
To help ensure factory overhead costs are included in each job, factory overhead is allocated to each job using a factory ________ allocation rate.
ESA Study Guide
overhead
To help ensure factory overhead costs are included in each job, factory overhead is allocated to each job using a factory overhead ___________ rate.
allocation
To help ensure factory overhead costs are included in each job, factory overhead is allocated to each job using a factory overhead allocation ______.
ESA Study Guide
rate
To help ensure factory overhead costs are included in each job, factory overhead is allocated to each job using a factory overhead ___________.
ESA Study Guide
Allocation Rate
To help ensure factory overhead costs are included in each job, factory overhead is allocated to each job using a _________________________.
ESA Study Guide
factory overhead allocation rate
A manufacturer has a number of options for a cost driver. Any of the following could be used: • \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_; • Direct labour cost; • Material hours; • Material usage.
Direct labour hours
A manufacturer has a number of options for a cost driver. Any of the following could be used: • Direct labour hours; • \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_; • Material hours; • Material usage.
Direct labour cost
A manufacturer has a number of options for a cost driver. Any of the following could be used: • Direct labour hours; • Direct labour cost; • \_\_\_\_\_\_\_\_\_\_\_\_\_\_; • Material usage.
Material hours
A manufacturer has a number of options for a cost driver. Any of the following could be used: • Direct labour hours; • Direct labour cost; • Material hours; • \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
Material usage
The __________ chosen for allocating factory overhead should be the activity that generates the most overhead.
cost driver
The cost driver chosen for _______________ should be the activity that generates the most overhead.
allocating factory overhead
The cost driver chosen for allocating factory overhead should be the __________ that generates the most overhead.
activity
The cost driver chosen for allocating factory overhead should be the activity that ___________ the most overhead.
generates
The cost driver chosen for allocating factory overhead should be the activity that generates the most _____________.
overhead
An example of determining where the appropriate cost driver is machine hours is as follows:
Maintenance cost for machinery (a _____________) with increased use of the machinery; therefore the number of hours the machine is in use (machine hours) will largely determine the maintenance cost; i.e. if the machine is idle for long periods it will not require much maintenance, but if it is used for most of the job then maintenance costs will increase.
factory overhead
An example of determining where the appropriate cost driver is machine hours is as follows:
Maintenance cost for machinery (a factory overhead) with increased use of the machinery; therefore the number of hours the machine is in use (____________) will largely determine the maintenance cost; i.e. if the machine is idle for long periods it will not require much maintenance, but if it is used for most of the job then maintenance costs will increase
machine hours
An example of determining where the appropriate cost driver is machine hours is as follows:
Maintenance cost for machinery (a factory overhead) with increased use of the machinery; therefore the number of hours the machine is in use (machine hours) will largely determine the maintenance cost; i.e. if the machine is idle for long periods it will ________ require much maintenance, but if it is used for most of the job then maintenance costs will increase.
not
An example of determining where the appropriate cost driver is machine hours is as follows:
Maintenance cost for machinery (a factory overhead) with increased use of the machinery; therefore the number of hours the machine is in use (machine hours) will largely determine the maintenance cost; i.e. if the machine is idle for long periods it will not require much maintenance, but if it is used for most of the job then maintenance costs will ___________.
increase
The factory _______________ is
Estimated factory overhead cost / estimated direct cost driver
overhead allocation rate formula
The factory overhead allocation rate formula is
__________ factory overhead cost / __________ direct cost driver
estimated
The factory overhead allocation rate formula is
Estimated ___________ / estimated direct cost driver
factory overhead cost
The factory overhead allocation rate formula is
Estimated factory overhead cost / estimated ____________
direct cost driver
What is the acronym for cost-volume profit analysis?
CVP
What does CVP stand for in management accounting?
Cost volume profit analysis
____________ is a series of equations that help a business to analyse how well the business is meeting its profit margins, or to calculate if a new product would be profitable to make.
ESA Study Guide
Cost volume profit analysis
Cost volume profit analysis is a series of equations that help a business to analyse how well the business is meeting its ___________, or to calculate if a new product would be profitable to make.
ESA Study Guide
Profit margins
Cost volume profit analysis is a series of equations that help a business to analyse how well the business is meeting its profit margins, or to calculate if a new product would be ____________ to make.
ESA Study Guide
profitable
_____________ is used to determine how changes in costs and volume affect a company’s operating income and net income. In performing this analysis, there are several assumptions made, including:
• Sales price per unit is constant.
• Variable costs per unit are constant.
• Total fixed costs are constant.
• Everything produced is sold.
• Costs are only affected because activity changes.
• If a company sells more than one product, they are sold in the same mix.
Cost-volume-profit (CVP) analysis
Cost-volume-profit (CVP) analysis is used to determine how changes in ______________ affect a company’s operating income and net income. In performing this analysis, there are several assumptions made, including:
• Sales price per unit is constant.
• Variable costs per unit are constant.
• Total fixed costs are constant.
• Everything produced is sold.
• Costs are only affected because activity changes.
• If a company sells more than one product, they are sold in the same mix.
costs and volume
Cost-volume-profit (CVP) analysis is used to determine how changes in costs and volume affect a company’s ________________. In performing this analysis, there are several assumptions made, including:
• Sales price per unit is constant.
• Variable costs per unit are constant.
• Total fixed costs are constant.
• Everything produced is sold.
• Costs are only affected because activity changes.
• If a company sells more than one product, they are sold in the same mix.
operating income and net income
_____________ is used to determine how changes in costs and volume affect a company’s operating income and net income. In performing this analysis, there are several assumptions made, including:
• Sales price per unit is constant.
• Variable costs per unit are constant.
• Total fixed costs are constant.
• Everything produced is sold.
• Costs are only affected because activity changes.
• If a company sells more than one product, they are sold in the same mix.
Cost-volume-profit (CVP) analysis
Cost-volume-profit (CVP) analysis is used to determine how changes in ______________ affect a company’s operating income and net income. In performing this analysis, there are several assumptions made, including:
• Sales price per unit is constant.
• Variable costs per unit are constant.
• Total fixed costs are constant.
• Everything produced is sold.
• Costs are only affected because activity changes.
• If a company sells more than one product, they are sold in the same mix.
costs and volume
Cost-volume-profit (CVP) analysis is used to determine how changes in costs and volume affect a company’s ________________. In performing this analysis, there are several assumptions made, including:
• Sales price per unit is constant.
• Variable costs per unit are constant.
• Total fixed costs are constant.
• Everything produced is sold.
• Costs are only affected because activity changes.
• If a company sells more than one product, they are sold in the same mix.
operating income and net income
What is _______________________?
________________ is based upon determining the breakeven point of cost and volume of goods and can be useful for managers making short-term economic decisions. Cost-volume profit analysis makes several assumptions in order to be relevant including that the sales price, fixed costs and variable cost per unit are constant. Running this analysis involves using several equations using price, cost and other variables and plotting them out on an economic graph.
Cost-Volume Profit Analysis
What is ‘Cost-Volume Profit Analysis’
Cost-volume profit (CVP) analysis is based upon determining the __________ of cost and volume of goods and can be useful for managers making short-term economic decisions. Cost-volume profit analysis makes several assumptions in order to be relevant including that the sales price, fixed costs and variable cost per unit are constant. Running this analysis involves using several equations using price, cost and other variables and plotting them out on an economic graph.
breakeven point
Cost-volume profit (CVP) analysis is based upon determining the breakeven point of cost and volume of goods and can be useful for managers making _________ economic decisions. Cost-volume profit analysis makes several assumptions in order to be relevant including that the sales price, fixed costs and variable cost per unit are constant. Running this analysis involves using several equations using price, cost and other variables and plotting them out on an economic graph.
short-term
Cost-volume profit (CVP) analysis is based upon determining the breakeven point of cost and volume of goods and can be useful for managers making short-term economic decisions. Cost-volume profit analysis makes several assumptions in order to be relevant including that the sales price, fixed costs and variable cost per unit are __________. Running this analysis involves using several equations using price, cost and other variables and plotting them out on an economic graph.
constant
Cost-volume profit (CVP) analysis is based upon determining the breakeven point of cost and volume of goods and can be useful for managers making short-term economic decisions. Cost-volume profit analysis makes several assumptions in order to be relevant including that the sales price, fixed costs and variable cost per unit are constant. Running this analysis involves using several equations using price, cost and other variables and ___________ out on an economic graph.
plotting them
______________, in managerial economics, is a form of cost accounting. It is a simplified model, useful for elementary instruction and for short-run decisions.
Cost–volume–profit (CVP)
Cost–volume–profit (CVP), in managerial economics, is a form of cost accounting. It is a simplified model, useful for elementary instruction and for _______________.
short-run decisions
__________ employs the same basic assumptions as in breakeven analysis. The assumptions underlying CVP analysis are:
The behaviour of both costs and revenues are linear throughout the relevant range of activity. (This assumption precludes the concept of volume discounts on either purchased materials or sales.)
Costs can be classified accurately as either fixed or variable.
Changes in activity are the only factors that affect costs.
All units produced are sold (there is no ending finished goods inventory).
When a company sells more than one type of product, the product mix (the ratio of each product to total sales) will remain constant.
CVP analysis
CVP analysis employs the same basic assumptions as in breakeven analysis. The assumptions underlying CVP analysis are:
The behaviour of both costs and revenues are _________ throughout the relevant range of activity. (This assumption precludes the concept of volume discounts on either purchased materials or sales.)
Costs can be classified accurately as either fixed or variable.
Changes in activity are the only factors that affect costs.
All units produced are sold (there is no ending finished goods inventory).
When a company sells more than one type of product, the product mix (the ratio of each product to total sales) will remain constant.
Linear
__________ is a short run, marginal analysis: it assumes that unit variable costs and unit revenues are constant, which is appropriate for small deviations from current production and sales, and assumes a neat division between fixed costs and variable costs, though in the long run all costs are variable. For longer-term analysis that considers the entire life-cycle of a product, one therefore often prefers activity-based costing or throughput accounting.
CVP
CVP is a short run, marginal analysis: it assumes that unit variable costs and unit revenues are constant, which is appropriate for ___________ from current production and sales, and assumes a neat division between fixed costs and variable costs, though in the long run all costs are variable. For longer-term analysis that considers the entire life-cycle of a product, one therefore often prefers activity-based costing or throughput accounting
small deviations
CVP is a short run, marginal analysis: it assumes that unit variable costs and unit revenues are constant, which is appropriate for small deviations from current production and sales, and assumes a neat division between fixed costs and variable costs, though in the long run all costs are _________. For longer-term analysis that considers the entire life-cycle of a product, one therefore often prefers activity-based costing or throughput accounting
variable
CVP is a short run, marginal analysis: it assumes that unit variable costs and unit revenues are constant, which is appropriate for small deviations from current production and sales, and assumes a neat division between fixed costs and variable costs, though in the long run all costs are variable. For longer-term analysis that considers the entire ____________ of a product, one therefore often prefers activity-based costing or throughput accounting
life-cycle
______________is a principle-based and simplified management accounting approach that provides managers with decision support information for enterprise profitability improvement. TA is relatively new in management accounting. It is an approach that identifies factors that limit an organization from reaching its goal, and then focuses on simple measures that drive behaviour in key areas towards reaching organizational goals. TA was proposed by Eliyahu M. Goldratt[1] as an alternative to traditional cost accounting. As such, _______________ is neither cost accounting nor costing because it is cash focused and does not allocate all costs (variable and fixed expenses, including overheads) to products and services sold or provided by an enterprise. Considering the laws of variation, only costs that vary totally with units of output (see definition of T below for TVC) e.g. raw materials, are allocated to products and services which are deducted from sales to determine Throughput.[3] ______________ is a management accounting technique used as the performance measure in the Theory of Constraints (TOC).[4] It is the business intelligence used for maximizing profits, however, unlike cost accounting that primarily focuses on ‘cutting costs’ and reducing expenses to make a profit, _____________ primarily focuses on generating more throughput. Conceptually, ___________ seeks to increase the speed or rate at which throughput (see definition of T below) is generated by products and services with respect to an organization’s constraint, whether the constraint is internal or external to the organization. ____________ is the only management accounting methodology that considers constraints as factors limiting the performance of organizations.
Throughput Accounting (TA)
Throughput Accounting (TA) is a principle-based and simplified management accounting approach that provides managers with decision support information for enterprise profitability improvement. TA is relatively new in management accounting. It is an approach that identifies factors that ___________an organization from reaching its goal, and then focuses on simple measures that drive behaviour in key areas towards reaching organizational goals. TA was proposed by Eliyahu M. Goldratt[1] as an alternative to traditional cost accounting. As such, Throughput Accounting[2] is neither cost accounting nor costing because it is cash focused and does not allocate all costs (variable and fixed expenses, including overheads) to products and services sold or provided by an enterprise. Considering the laws of variation, only costs that vary totally with units of output (see definition of T below for TVC) e.g. raw materials, are allocated to products and services which are deducted from sales to determine Throughput.[3] Throughput Accounting is a management accounting technique used as the performance measure in the Theory of Constraints (TOC) It is the business intelligence used for maximizing profits, however, unlike cost accounting that primarily focuses on ‘cutting costs’ and reducing expenses to make a profit, Throughput Accounting primarily focuses on generating more throughput. Conceptually, Throughput Accounting seeks to increase the speed or rate at which throughput (see definition of T below) is generated by products and services with respect to an organization’s constraint, whether the constraint is internal or external to the organization. Throughput Accounting is the only management accounting methodology that considers constraints as factors limiting the performance of organizations.
limit
TA is relatively new in management accounting. It is an approach that identifies factors that limit an organization from reaching its goal, and then focuses on simple measures that drive behavior in key areas towards reaching organizational goals. TA was proposed by Eliyahu M. Goldratt[1] as an alternative to traditional cost accounting. As such, Throughput Accounting[2] is neither cost accounting nor costing because it is cash focused and does not allocate all costs (variable and fixed expenses, including overheads) to products and services sold or provided by an enterprise. Considering the laws of variation, only costs that vary totally with units of output (see definition of T below for TVC) e.g. raw materials, are allocated to products and services which are deducted from sales to determine Throughput.[3] Throughput Accounting is a management accounting technique used as the performance measure in the Theory of Constraints (TOC).[4] It is the business intelligence used for maximizing profits, however, unlike cost accounting that primarily focuses on ‘c___________’ and reducing expenses to make a profit, Throughput Accounting primarily focuses on generating more throughput. Conceptually, Throughput Accounting seeks to increase the speed or rate at which throughput (see definition of T below) is generated by products and services with respect to an organization’s constraint, whether the constraint is internal or external to the organization. Throughput Accounting is the only management accounting methodology that considers constraints as factors limiting the performance of organizations.
cutting costs
Throughput Accounting (TA) is a principle-based and simplified management accounting approach that provides managers with decision support information for enterprise profitability improvement. TA is relatively new in management accounting. It is an approach that identifies factors that limit an organization from reaching its goal, and then focuses on simple measures that drive behavior in key areas towards reaching organizational goals. TA was proposed by Eliyahu M. Goldratt[1] as an alternative to traditional cost accounting. As such, Throughput Accounting[2] is neither cost accounting nor costing because it is cash focused and does not allocate all costs (variable and fixed expenses, including overheads) to products and services sold or provided by an enterprise. Considering the laws of variation, only costs that vary totally with units of output (see definition of T below for TVC) e.g. raw materials, are allocated to products and services which are deducted from sales to determine Throughput.[3] Throughput Accounting is a management accounting technique used as the performance measure in the Theory of Constraints (TOC).[4] It is the business intelligence used for maximizing profits, however, unlike cost accounting that primarily focuses on ‘cutting costs’ and reducing expenses to make a profit, Throughput Accounting primarily focuses on _______________. Conceptually, Throughput Accounting seeks to increase the speed or rate at which throughput (see definition of T below) is generated by products and services with respect to an organization’s constraint, whether the constraint is internal or external to the organization. Throughput Accounting is the only management accounting methodology that considers constraints as factors limiting the performance of organizations.
generating more throughput
Under the___________ by Eliyahu M. Goldratt the solution for finance and accounting is to apply holistic thinking to the finance application. This has been termed throughput accounting.[15] Throughput accounting suggests that one examine the impact of investments and operational changes in terms of the impact on the throughput of the business. It is an alternative to cost accounting.
Theory of Constraints
Under the Theory of Constraints by Eliyahu M. Goldratt the solution for finance and accounting is to apply holistic thinking to the finance application. This has been termed ____________ . ___________ suggests that one examine the impact of investments and operational changes in terms of the impact on the throughput of the business. It is an alternative to cost accounting.
throughput accounting
Under the Theory of Constraints by Eliyahu M. Goldratt the solution for finance and accounting is to apply holistic thinking to the finance application. This has been termed throughput accounting.[15] Throughput accounting suggests that one examine the impact of investments and operational changes in terms of the impact on the throughput of the business. It is an alternative to _____________.
cost accounting
Under ______, the relevant range is the range of output possible, using the firm’s resources / over which costs are being measured if production is greater than this range of output then additional costs can be incurred.
CVP
Under CVP, the ___________ is the range of output possible, using the firm’s resources / over which costs are being measured if production is greater than this range of output then additional costs can be incurred.
relevant range
Under CVP, the relevant range is the range of ___________, using the firm’s resources / over which costs are being measured if production is greater than this range of output then additional costs can be incurred.
output possible
Under CVP, the relevant range is the range of output possible, using the firm’s resources / over which costs are being measured if production is greater than this range of output then additional _______ can be incurred.
costs
The ________________ is the difference between the selling price and variable costs per item (or hour of service). The margin is what remains to cover the fixed costs in order to make a profit.
contribution margin
The contribution margin is the difference between the _________ and variable costs per item (or hour of service). The margin is what remains to cover the fixed costs in order to make a profit.
selling price
The contribution margin is the difference between the selling price and _________ per item (or hour of service). The margin is what remains to cover the fixed costs in order to make a profit.
variable costs
The contribution ________ is the difference between the selling price and variable costs per item (or hour of service). The _________ is what remains to cover the fixed costs in order to make a profit.
margin
The contribution margin is the difference between the selling price and variable costs per item (or hour of service). The margin is what remains to cover the ________ in order to make a profit.
fixed costs
The contribution margin is the difference between the selling price and variable costs per item (or hour of service). The margin is what remains to cover the fixed costs in order to make a ______.
profit
Put it another way, the ______________ is the amount left from each sale after variable costs have been accounted for. The larger the ______________, the easier it is for the business to cover fixed costs and make a profit.
contribution margin
