Cost Exam 1 (Ch 1-4) Flashcards
Who is the audience in managerial accounting?
Internal management
What are the 3 purposes of managerial accounting?
Planning
Controlling
Decision Making
The control process of managerial accounting involves gathering, evaluating, and responding to ______.
feedback
What are 3 uses for managerial accounting reports?
planning for the future
making progress toward goals
making strategic decisions
Strategic management involves coming up with a _____ ______ ______ (a plan for satisfying customers)
customer value proposition
What are the 3 types of customer value propositions?
Customer intimacy
Operational excellence
Product leadership
What are the two goals of risk management?
Identify risks
Develop responses
Adding products that add value and removing products that don’t is known as ____ _______.
Process management
When products are produced in response to customer orders, this is known as Just-in-Time production, or ______ production.
Lean
The weakest link, or “constraint” is also known as the ______.
Bottleneck
6 traits of a good leader:
Technically competent Person of integrity Effective in implementing organizational change Strong communicator Capable of motivating Effective manager
What are the 4 principles in the Statement of Ethical Professional Practice?
Honesty
Fairness
Objectivity
Responsibility
What are the 4 standards in the Statement of Ethical Professional Practice?
Competence
Confidentiality
Integrity
Credibility
Corporate social responsibility considers the needs of all ________.
Stakeholders
The way the company is directed and controlled is known as _____ _______.
Corporate governance
Internal controls can be either _____ or ______.
preventative
detective
What is the difference between indirect materials and direct materials?
Direct materials can be traced to the product. Indirect materials are not cost effective to trace.
What is the difference between indirect labor and direct labor?
Direct labor is provided by the people who actually touch the product.
What are the 3 components of manufacturing overhead?
Indirect labor
Indirect materials
Other overhead
What are the two types of non manufacturing costs?
Selling costs
Administrative costs
What is another term for non manufacturing costs?
Period costs
What does Prime Cost consist of?
Direct materials and direct labor
What does Conversion Cost consist of?
Direct labor and overhead
The way a cost reacts to a change in activity level is known as ____ _____.
Cost behavior
What is another term for activity base?
Cost driver
How is total variable cost calculated?
Variable cost per unit times quantity
With fixed costs, when the activity level increases, what happens to the fixed cost per unit?
It decreases
A cost that cannot be avoided, even if the product is discontinued, is known as a _____ fixed cost.
Committed
A cost that can be controlled in the short-term is known as a _____ fixed cost.
Discretionary
Costs are only linear in the _____ ______.
Relevant range
What is a mixed cost?
A cost that contains both fixed and variable components
What is the formula for the high-low method of estimating variable costs?
(cost at high level - cost at low level) / (high level - low level)
What is the formula for the slope of a line?
Y = mx + b
In the formula Y = mx + b, what represents “total cost”?
Y
In the formula Y = mx + b, what represents “variable cost per unit”?
m
In the formula Y = mx + b, what represents “quantity”?
x
In the formula Y = mx + b, what represents “fixed costs”?
b
In the formula Y = mx + b, what represents the independent variable?
x
What is multicolinearity?
When variables are highly correlated with each other
What are the components of a traditional format income statement?
Sales - COGS -------- Gross margin -Selling and administrative expenses --------- Net income
What are the components of a contribution format income statement?
Sales - COGS & variable selling & administrative expenses ---------- Contribution margin -Fixed selling & administrative expenses ---------- Net income
The thing costs are connected with is known as the ____ _____.
cost object
A difference in costs between any two alternatives is a _____ ______.
differential cost
A difference in revenues between any two alternatives is a ____ _____.
differential revenue
A differential cost is known as an _______ ______ when the cost increases from one alternative to another.
incremental cost
A differential costs is known as a ____ ______ when the cost decreases from one alternative to another.
decremental cost
The potential benefit given up when one alternative is selected over another is known as ____ ____.
opportunity cost
A _____ cost should never be used in decision making.
sunk
When should job order costing be used?
When each job is unique, high cost, and built-to-order
When jobs are done one at a time or at a low volume, this is known as ___ ____ operations.
Job shop
When jobs are done in batches of small quantities, this is known as ___ ____ operations.
Batch production
What document tracks materials, labor, and overhead for a particular job?
A job cost sheet
What document specifies the type and quantity of materials needed for a job?
A materials requisition form
What document summarizes an employee’s activities by job?
A direct labor time ticket
In the formula Y = mx + b, which is the allocation base?
x
When should the predetermined overhead rate be determined?
At the beginning of the period
What is the formula for calculating predetermined overhead rate?
budgeted overhead / budgeted allocation base
What is an allocation base?
The cost driver (machine hours, etc.)
What is the formula for applying predetermined overhead rate?
Predetermined overhead rate times the quantity/cost driver incurred by the job
What are the stages in 2-stage allocation?
- Assign costs to departments
2. Apply costs to products using the predetermined overhead rate
Why should actual overhead rates only be computed once per year?
To account for seasonal fluctuations
What are the 3 components of work in process inventory?
Direct labor, direct materials, manufacturing overhead
When is cost of goods manufactured calculated?
When the goods move from work in process inventory to finished good inventory
When is cost of goods sold calculated?
When the goods in finished goods inventory are sold
The manufacturing overhead account operates as a ____ account.
clearing
When should the manufacturing overhead account be debited?
When actual overhead costs are incurred
When should the manufacturing overhead account be credited?
When the overhead is applied to work in process using the predetermined overhead rate
When overhead is over-applied, the manufacturing overhead account will have a credit/debit balance?
credit
When overhead is over-applied, COGS will be overstated/understated?
overstated
When overhead is over-applied, income will be overstated/understated?
understated
If there is a small credit balance in the manufacturing overhead account at the end of the period, what should be done?
Manufacturing overhead should be debited and Cost of Goods Sold should be credited
If there is a small debit balance in the manufacturing overhead account at the end of the period, what should be done?
Manufacturing overhead should be credited and Cost of Goods Sold should be debited
If overhead is significantly over or under-applied, how should it be allocated?
Between work in process, finished goods, and cost of goods sold depending on the dollar amounts in each inventory
When should the raw materials account be debited?
When materials are purchased
When should the raw materials account be credited?
When direct materials are added to work in process or indirect materials are added to manufacturing overhead
When should salaries and wages payable be credited?
When direct labor is added to work in process or indirect labor is added to manufacturing overhead
When should work in process be debited?
When the cost of direct materials, direct labor, and manufacturing overhead are applied
When should work in process be credited?
When the goods are finished
When should finished goods be debited?
When the goods are finished
When should finished goods be credited?
When the goods are sold
When should COGS be debited?
When the goods are sold
When should process costing be used?
For homogeneous, low-cost products that cannot be traced to individual units
In _____ costing, costs are accumulated for each department and then transferred out
Process
The number of complete units that could have been obtained from the materials and effort that went into the partially complete units are called _____ _____.
Equivalent units
The ____ method of process costing considers only the costs of the work done during the current period.
FIFO
The ____ method of process costing blends the costs of the work done during the current period with the costs of the work done in the prior period.
Weighted Average
