Cost Accounting Flashcards
Departments responsible for DM issues…
Pay too much = Purchasing
Use too much = Production
Departments responsible for DL issues…
Pay too much = Personnel
Use too many hours = Production
Variance that results from actual costs (standard) being lower than standard costs (actual)
Favorable (Unfavorable)
Variance analysis
[SAD]
Standard minus Actual = Difference
Actual costs are compared with…
Standard costs allowed based on actual production (use DL $ per hour from standard costs and times by actual production, eg. $10/per hour, takes 5 hours to make one unit but actually made 2 units, so apply OH to the 10 hrs of actual production)
DM price Variance
AQ (SP - AP)
- In factory can I control the quantity used? YES, then use Actual quantity [+ is good, - is bad]
- Purchasing dept
DM quantity (usage) Variance
SP (SQ - AQ)
- In factory can I control price? NO, then use Standard Price
- Production [SQ =Stnd allowed for actual production]
DL Rate Variance
AH (SR - AR)
- In factory can I control hours worked? YES, then use Actual
- Personnel
DL Efficiency Variance
SR (SH - AH)
- In factory can I control pay rate?NO, then use Standard
- Production [SH= Stnd allowed for actual production]
- Stnd hrs allowed= Production quantity x stnd hrs of labor per unit
Distinction between fixed and variable costs in relation to one another..
Fixed are fixed in total but variable per Unit (as cost driver inc, fixed costs stay same but fixed per unit decrease)
Variable are fixed in Unit but vary in total (as cost driver inc, variable per unit stay the same but total variable increases)
Explain Job Oder costing..
Allocate costs to groups of unique products. Each job becomes a cost center.
- Expensive, heterogeneous, cost per Job
OH application rate =
Est factory OH / Est activity base
The factory OH control account is….
Debited as actual factory OH costs are incurred. The factory OH applied account is credited as FO is applied to inventory at the POHR
What is the flexible budget equation for OH variance analysis
= Fixed + Variable (x)
where x = actual production x actual Hrs
or.. actual production x Standard hrs allowed for actual production
What are the FBE for OH variance analysis (think SEV)
Actual > FBE@Actual > FBE@Stnd > Applied
Diff between costs included for WA and FIFO methods..
WA calculation includes prior period and current costs
FIFO separates beg inventory costs from current costs
OH efficiency variance
OEV= Pre Variable OH rate x (SDLH - ADLH)
- For SDLH take units actually produced times the standard DL hours to complete or budgeted
- Similar to DL efficiency variance- measures whether units manufactured required more or less than the number of hours expected
Under the 2 variance method for analyzing OH, which consists of both variable and fixed OH elements?
Controllable (budget) variance
Variable OH spending variance
(Standard Var OH rate - Actual Var OH rate) x Actual hours
* Diff in actual and budget variable costs that result from price changes in indirect materials and labor, poor budget est., etc
Describe the OH volume variance and the calculation
When activity level doesn’t match with pre-determined activity used to apply (Budgeted FOH minus FOH applied)
OVV=(SDLH x PFOHR) - Budget FOH
Variable OH efficiency variance
(Standard hrs allowed - Actual hrs worked) x Standard Var OH rate
* Whether units manufactured required more or less than the number of hours expected
Explain ABC costing..
Assigns costs to activities performed and then assigns those costs to the products according to each products use of the activities
4 way OH variance analysis
- Fixed OH budget (spending) variance
- Variable OH spending
- Variable OH efficiency
- Fixed OH volume variance
3 way OH variance analysis
- Spending (Var OH+Fixed OH budget)
- Efficiency (Var OH efficiency)
- Volume (Fixed OH volume)
2 way OH variance analysis
- Budget, Controllable (Var OH efficiency+Var OH spending+Fixed OH budget)
- Volume (Fixed OH)
Fixed OH spending variance
Actual FOH - Budgeted FOH (or FOH standard rate times budgeted production, DL, machine hrs, etc)
Diff between Job Order and Process costing?
Job Order costing is the accumulation of costs by specific jobs, Process costing aggregates production costs by departments or production phases
Basic equations for 4 variances: DM price DM usage DL rate DL efficiency
DM price= (Price)Q actual
DM usage= (Quantity)P, standard
DL rate= (Rate)H, actual
DL efficiency= (Hours)R, standard
Calc equivalent units for WA method
Completed units x % complete
End WIP x % complete
= EU’s
Calc equivalent units for FIFO method
Beg units first x (1-% complete)
+ Completed units
+ End WIP x % completed
Calc CGM costs for FIFO method
Beg and completed EU’s x per unit
+ Beg costs
Calc End WIP costs for FIFO method
End EU’s x per unit
Selling Price variance
(Budgeted selling price - Actual selling price)
x Actual units sold
Sales volume variance for operating income
(Actual units sold - Budgeted unit sales)
x Budgeted CM (or budget profit per unit if absorption costing)
Calc to figure out Fixed OH expensed under absorption costing
(Units sold/Units produced) x Fixed OH
What are the 2 ways to allocate by-products
- The net revenue (sales-cost) reduces the main products CGS and inc overal GP
- NRV of by-products deducted from cost of main product produced (not sold) ie- either minus from joint costs or allocate with the rest, whatever problem says
3 methods of allocating service department costs
- Direct- allocate service costs directly to producing departments
- Step- allocate service to both service and production (most used service first, then next, etc)
- Reciprocal- costs allocated among service departments simultaneously
