Cost Final Exam Flashcards
What are the 3 vital activities performed by managerial accountants?
Planning
Controlling
Decision Making
What are the 5 skills managers need to be successful?
Strategic management skills
Enterprise risk management skills
Process management skills
Measurement skills
Leadership skills
What are the 4 principles in the code of conduct for management accountants?
honesty
fairness
objectivity
responsibility
What are the 4 standards in the code of conduct for management accountants?
Competence
Confidentiality
Integrity
Credibility
What are the 3 components of the customer value proposition?
Customer intimacy
Operational excellence
Product leadership
What are the 3 types of manufacturing costs?
Direct materials
Direct Labor
Manufacturing overhead
What type of manufacturing cost is indirect labor?
Manufacturing overhead
What are the 2 types of non manufacturing costs?
Selling costs
Administrative costs
On which financial statement can product costs be found initially?
Balance sheet (inventory)
When do product costs move from the balance sheet to the income statement?
When products are sold
What is another term for manufacturing costs?
Product costs
What is another term for non manufacturing costs?
Period costs
On which financial statement can period costs be found?
Income statement
What are the 2 components of prime cost?
Direct Materials
Direct Labor
What are the 2 components of conversion cost?
Direct Labor
Manufacturing Overhead
2 other terms for cost driver are
Activity base
Allocation base
Direct labor-hours and machine-hours are types of cost _____.
drivers
The relevant range is a range of activity within which the ____ assumption is reasonably valid.
linearity
What is the equation for a mixed cost?
Y = a + bx
In the Y = a + bx equation, what does Y represent?
The total amount of mixed cost
What is the high-low method equation?
(Cost at high activity level - cost at low activity level) / (High activity level - low activity level)
What does a traditional (absorption) format income statement look like?
Sales - COGS = Gross Margin - selling & admin expenses = net operating income
What does a contribution (variable) format income statement look like?
Sales - variable COGS - variable selling expenses = Contribution Margin - fixed expenses = net operating income
The thing for which cost data is desired is called the __ ___.
cost object
What is the difference between direct and indirect costs?
Direct costs can be easily and conveniently traced to a specific cost object
Costs that cannot be traced to individual cost objects because they support a number of cost objects are ____ costs.
common
When a product cost includes all manufacturing costs, this is called ____ costing.
absorption
When is job-order costing used?
When many different products are produced
What is the formula for predetermined overhead rate?
Estimated total manufacturing overhead cost / estimated total amount of allocation base
When is a predetermined overhead rate calculated?
Before the period begins
What is the formula for applying manufacturing overhead to a job?
Predetermined overhead rate x amount of allocation base actually incurred
What are the 3 inventory accounts on the balance sheet?
Raw Materials
Work in Process
Finished Goods
When goods are moved from work in process to finished goods, what cost is computed?
Cost of goods manufactured
What are the 3 components of work in process?
Direct materials used
Direct labor
Manufacturing overhead
Adding something to an inventory account requires a debit or credit?
Debit
Removing something from an inventory account requires a debit or credit?
Credit
What account is debited as manufacturing costs are incurred?
Manufacturing overhead
When is manufacturing overhead moved to work in process?
At the end of a job or period
What account is debited when indirect labor or materials are used?
Manufacturing overhead
If at the end of a job or period, there is a debit balance in manufacturing overhead, then the overhead must have been under/over applied.
underapplied
If manufacturing overhead is under applied, then COGS is over/under stated.
understated
A simple way to dispose of the balance in Manufacturing Overhead is to close it out to _____.
COGS
An accurate way to dispose of the balance in Manufacturing Overhead is to allocated it between what 3 accounts?
Work in Process
Finished Goods
COGS
When is process costing used?
When there is a continuous flow of indistinguishable units
Process costing computes unit costs by ____ rather than by job.
department
What is the formula for cost per equivalent unit using the weighted-average method?
(cost of beginning WIP inventory + cost added during the period) / equivalent units
What is the formula to calculate equivalent units?
Number of partially completed units x % completed
Using the FIFO method, units transferred out is divided into what two parts?
Units from beginning inventory that were completed during the period
Units that were both started and completed during the period
Using the FIFO method, what 2 inventories are converted to equivalent units?
Beginning WIP
Ending WIP
Which method blends work and costs from prior periods with the current period?
(FIFO, Weighted Average)
Weighted Average
What is the formula for cost per equivalent unit using the FIFO method?
cost added during the period / equivalent units
How is contribution margin calculated?
Sales revenue - variable expenses
Selling price per unit - variable expenses per unit =
Unit Contribution Margin
(Unit CM x Quantity Sold) - Fixed Expenses =
Profit
The horizontal (x) axis in a CVP graph represents what?
Units
The vertical (y) axis in a CVP graph represents what?
Dollars
The first step to make a CVP graph is to draw a horizontal line to represent ___ ___.
fixed expenses
The second step to make a CVP graph is to plot a point that represents ____ ___ at a selected ___ ___.
total expense
sales volume
The third step to make a CVP graph is to draw a line through the point plotted in the previous step back to where the fixed expense line intersects the vertical axis. This is the ___ ___ line.
total expense
The fourth step to make a CVP graph is to plot a second point, then draw a line through that point back to the origin. This is the ___ ___ line.
total revenue
In a CVP graph, the vertical distance between the total revenue line and the total expense line is the anticipated ____ or ____ at any given level of sales.
profit
loss
In a CVP graph, the ___ ___ ___ is where the total revenue and total expense lines cross.
break-even point
Contribution margin / sales =
CM ratio
Unit contribution margin / unit selling price =
CM ratio
CM ratio x change in sales =
Change in CM
(CM ratio x sales) - fixed expenses =
Profit
(Sales - Variable Expenses) / Sales =
CM ratio
1 - variable expense ratio =
CM ratio
Variable expenses / sales =
variable expense ratio
Unit CM x Quantity Sold - Fixed Expenses =
Profit
(Target profit + fixed expenses) / unit CM =
Unit sales to attain target profit
(Target profit + fixed expenses) / CM ratio =
Dollar sales to attain target profit
Fixed expenses / Unit CM =
Unit sales to break even
Fixed expenses / CM ratio =
Dollar sales to break even
Total sales - Break Even Sales =
Margin of safety in dollars
Margin of safety in dollars / selling price per unit =
Margin of safety in units
Margin of safety in dollars / total sales in dollars =
Margin of safety percentage
The relative proportion of fixed and variable costs in an organization is its ___ ___.
cost structure
A measure of how sensitive net operating income is to a given percentage change in dollar sales is ___ ____.
Operating leverage
Contribution margin / net operating income =
Degree of operating leverage
degree of operating leverage x percentage change in sales =
percentage change in net operating income
Net income varies from variable costing to absorption costing because of the treatment of what?
fixed manufacturing overhead
Should selling and admin expenses ever be treated as product costs, even if variable?
No
Fixed manufacturing overhead is expensed as incurred in variable/absorption costing
variable
Fixed manufacturing overhead is allocated to each unit of product in variable/absorption costing
absorption
When inventories increase, net operating income is higher under variable/absorption costing.
absorption
When inventories decrease, net operating income is higher under variable/absorption costing.
variable
When is net operating income the same under both variable and absorption costing?
When units processed = units sold
The theory of constraints treats direct labor as a ___ cost.
fixed
A fixed cost that is incurred because of the existence of a segment is a ____ fixed cost.
traceable
A fixed cost that supports the operations of more than one segment is a ____ fixed cost.
common
How is segment contribution margin calculated?
Sales - variable expenses
How is segment margin calculated?
Segment contribution margin - traceable fixed costs
What is the best gauge of the long-run profitability of a segment?
Segment contribution margin
GAAP requires absorption/variable costing
Absorption
Any event that causes the consumption of overhead resources is an ____.
Activity
A bucket in which costs are accumulated that relate to a single activity is an ___ ___ ____.
Activity cost pool
What are the 5 levels of activity?
Unit-level Batch-level Product-level Customer-level Organization-sustaining
Assigning organized costs to activity cost pools is known as ___ ____ _____.
first stage allocation
Applying overhead costs and activity costs to products and customers is known as ___ ___ ____.
second stage allocation
Holding a manager responsible for only the items that he or she can actually control is called ____ ____.
Responsibility accounting
What are the 4 sections of a cash budget?
Receipts
Disbursements
Cash excess or deficiency
Financing
An estimate of what revenues and costs should have been, given the actual level of activity is a ___ ___.
Flexible budget
The differences between the planning budget and the flexible budget are ____ variances.
Activity
The differences between the flexible budget and actual results are ___ and ____ variances.
Revenue and spending
Investigating discrepancies in cost or quantity that depart significantly from standards is known as ____ ___ _____.
Management by exception
Materials Quantity Variance =
SP (AQU - (SQ x output))
Materials Price Variance =
AQP (AP - SP)
Labor Efficiency Variance and Variable Overhead Efficiency Variance =
SR ( AH - (SH x output))
Labor Rate Variance and Variable Overhead Rate Variance =
AH (AR - SR)
What is the formula for budget variance?
Actual fixed overhead - budgeted fixed overhead
What is the formula for volume variance?
Budgeted fixed overhead - fixed overhead applied to WIP
Avoidable costs are relevant/irrelevant costs
Relevant
Sunk costs are relevant/irrelevant costs
irrelevant
IRR factor =
investment required / annual net cash inflow
Payback period =
investment required / annual net cash inflow
Project profitability index =
NPV / Investment required
Simple rate of return =
Annual incremental net operating income / initial investment
