Cost Measurement & Assignment (M46) Flashcards
1
Q
What is the primary objective of the cost accountant?
A
To compute the cost/unit for financial statement presentation of COGS on the income statement and Ending Inventories on the BS
2
Q
What are the 3 components of Manufacturing Costs?
A
1) Direct Materials 2) Direct Labor 3) Factory Overhead, (Variable Overhead & Fixed Overhead)
3
Q
Essentially, the Cost of Goods Manufactured statement is a summary of what 2 accounts?
A
1) Direct Materials 2) Work in Process
4
Q
The result of the CGM statement is used in the _____ statement or the ____ section of the income statement
A
Cost of Goods Sold Statement CoGS
5
Q
T/F Freight out is a cost of goods sold
A
FALSE Freight Out is a selling cost
6
Q
T/F Freight in is a cost of goods sold
A
TRUE
7
Q
What is the difference between the Direct Method & the Step Method when allocating support department costs?
A
The Direct Method ignores costs between service departments. The Step method recognizes costs between service departments, but only from the department with the highest costs to the departments with the lower costs. The lower cost departments ignore the costs between service departments.
8
Q
What is the difference between the Step Method & the Reciprocal Method when allocating support department costs?
A
The Step method recognizes costs between service departments, but only from the department with the highest costs to the departments with the lower costs. The lower cost departments ignore the costs between service departments. The Reciprocal Method provides a way to adjust for the reciprocal services provided among the service departments.
9
Q
These are inferior goods either discarded or sold for disposal value
A
Spoilage (Scraps)
10
Q
These are inferior goods reworked and sold as a normal product
A
Defective Units
11
Q
Normal spoilage is a necessary cost in the production process and therefore is considered ____
A
A Product Cost (Inventoriable Cost)
12
Q
Abnormal spoilage is a ____
A
Period Cost
13
Q
This considers fixed manufacturing overhead to be a product cost
A
Absorption (full) costing
14
Q
This is a cost system that focuses on activities, determines their cost, and then uses appropriate cost drivers to trace costs to the products based on the activities
A
Activity-Based Costing
15
Q
This integrates ABC with other concepts such as total quality management and target costing to produce a management system that strives for excellence through cost reduction, continuous process improvement, and productivity gains
A
Activity-based management (ABM)
16
Q
This is the level of production actually occurring for the period
A
Actual activity level
17
Q
This is a costing system that omits recording some or all of the journal entries to track the purchase and production of goods. goods are costed after they have been completed
A
Backflush costing
18
Q
This is a highly automated an integrated production process that is controlled by computers
A
Computer integrated manufacturing (CIM)
19
Q
These include direct manufacturing labor and manufacturing overhead. They are the cost of converting direct materials into finished products
A
Conversion costs
20
Q
This encompasses both cost tracing and cost allocation. The cost object is the item for which the cost is being determined
A
Cost assignment
21
Q
This is assignment of direct costs to a cost object
A
Cost tracing
22
Q
This is assignment of indirect cost to the cost object
A
Cost allocation
23
Q
This is an item (either a product, department, or process) for which cost is being determined
A
Cost object
24
Q
This is a factor that causes it cost to be incurred. It may be volume related and/or transaction related
A
Cost driver
25
This is the examination of past relationships of costs and level of activity to determine predictions of future costs
Cost estimation
26
This is a planning and control system that measures the cost of significant activities, identifies non-value added costs, and identifies activities that will improve organizational performance
Cost management system (CMS)
27
These are groupings of related costs accumulated together to the allocated to a product or some other cost object
Cost pools
28
This is the time required to complete a good from the start of the production process until the product is finished
Cycle time or throughput time
29
These are costs easily traced to a specific business segment
Direct costs
30
This is the cost of labor directly transforming a product. This theoretically should include fringe benefits, but frequently does not
Direct manufacturing labor
31
This is the cost of supporting labor
Indirect manufacturing labor
32
This includes the cost of materials awaiting entry into the production system
Direct materials inventory
33
This is the cost of materials directly and conveniently traceable to a product. Minor material items are not deemed conveniently traceable
Direct materials
34
These items, along with production supplies and minor material items, are not deemed conveniently traceable to a product
InDirect materials
35
This is determined from industrial engineering studies that examine how activities are performed and if or how performance can be improved
Engineered costs
36
This normally includes indirect manufacturing labor costs, supplies costs, and other production facility costs such as plant depreciation, taxes, etc. It is comprised of all manufacturing costs that are not direct materials or direct manufacturing labor
Factory manufacturing overhead
37
This includes the cost of units completed but unsold
Finished goods inventory
38
These are costs that do not vary with the level of activity within the relevant range for a given period of time, usually one year. for example: plant depreciation
Fixed costs
39
This is a series of computer-controlled manufacturing processes that can be easily changed to make a variety of products
Flexible manufacturing system (FMS)
40
This is a system that blends the characteristics of both the job order and process costing system. Firms using the system typically produce large numbers of closely related products
Hybrid costing
41
These costs are not easily traceable to specific segments and include factory overhead
Indirect costs
42
This is a system for allocating cost to groups of unique products made to customer specifications
Job order costing
43
These are cost common to multiple products that emerge at a split off point
Joint costs
44
This is a system of assigning joint costs to joint products who's overall sales values are relatively significant
Joint costing
45
This is a function that demonstrates how productivity improves as workers become more proficient at producing the product
Learning curve
46
These are costs that have a fixed component and a variable component. These components are separated by using the scattergraph, high-low, or linear regression methods
Mixed costs (semi-variable)
47
This is a cost function that is not described by a straight line over the relevant range
Non-linear cost function
48
This is the cost of activities that can be illuminated without the customer perceiving a decline in product quality or performance
Non-value added costs
49
This is the production level expected to be achieved over a number of periods or seasons under normal circumstances
Normal activity level
50
These are cost that cannot be associated or matched with manufactured goods. Period costs become expenses when incurred
Period Costs
51
These costs are easily traceable to specific units of production and include direct manufacturing labor and direct materials
Prime costs
52
This is a system for allocating cost to homogenous units of a mass produced products
Process costing
53
These costs can be associated with the production of specific goods. These costs attach to a physical unit and become an expense in the period in which the unit to which they attach is sold. They normally include direct manufacturing labor, direct materials, and factory overhead
Product costs
54
This tracks the accumulation of costs that occur starting with the research and development for product and ending with the time at which sales and customer support are withdrawn
Product lifecycle costing
55
This is the operating range of activity in which cost behavior patterns are valid. It is the production range for which fixed costs remain constant
Relevant range
56
This is the sequence of business functions in which value is added to a firms products or services. This sequence includes research and development, product design, manufacturing, marketing, distribution, and customer service
Value chain
57
This is the cost of activities that cannot be eliminated without the customer perceiving a decline in product quality or performance
Value added cost
58
This costing considers all fixed manufacturing overhead as a period cost rather than as a product cost
Variable (direct) costing
59
This includes the cost of units being produced but not yet completed
Work in process inventory
60
These costs are fixed over relatively short ranges of production levels.
Stepped costs or semi fixed costs
61
What is entailed in the Direct Materials or Raw Materials T-Account?
62
What is entailed in the Direct Labor T-Account, aka Payroll Account?
63
What is entailed in the Variable & Fixed Factor Overhead T-Account?
64
What is entailed in the Work in Process T-Account?
65
What is entailed in the Finished Goods Inventory T-Account?
66
What are the 4 steps in a Process-Costing Problem? (Equivalent Units of Production, EUPs, or Equivalent Finished Units, EFUs)
1) Calculate the # Shipped (in whole units)
2) Calculate the Equivalent Finished Units
3) Calculate the Cost per EFU
4) Complete the WIP T-Account
67
The first step in a process-costing problem is to calculate the number shipped (in whole units). How do you do that?
Beginning Inventory
+ Units Started
= Units to be Accounted For
- Ending Inventory
= Units Shipped
68
The second step in a process-costing problem is to calculate the equivalent finished units. How do you do that using the FIFO method?
Units Shipped
+ End Inv (EFUs)
- Beg Inv (EFUs)
= FIFO EFUs
69
The second step in a process-costing problem is to calculate the equivalent finished units. How do you do that using the weighted average method?
Units Shipped
+ End Inv (EFUs)
= W/A EFUs
70
The third step in a process-costing problem is to calculate the cost per EFU. How do you do that using the FIFO method?
Cost per EFU = Current Costs Only / EFUs
71
The third step in a process-costing problem is to calculate the cost per EFU. How do you do that using the Weighted Average method?
Cost per EFU = [Beg Inv + Curent Costs] / EFUs
72
The fourth step in a process-costing problem is to complete the WIP T-Account. What do you do?
Using the number of Ending Inventory EFUs from Step 2 & Cost per EFU in Step 3, calculate the $ value of ending inventory in WIP
Plug the CoGM
73
Abnormal spoilage is a ____ (period/product) cost.
Period Cost. Do not include in WIP
74
Normal Spoilage is a _____ (period/product) cost.
Product Cost. The costs are spread over the good units, usually as part of OH
75
What do the Traditional Cost Flows look like?
76
What is the Backflush Costing Method I?
JIT Inventory Methods with Vendors/Suppliers. Combine DM & WIP, Combine DL & OH
77
What does the Backflush Costing Method I look like?
78
What is the Backflush Costing Method II?
JIT Inventory Methods with Vendors/Suppliers. Same as Method I, but also no FGI
79
What does the Backflush Costing Method II look like?
80
In the Traditional Cost Flow system, what is the JE when Purchasing Raw Materials?
Dr: Materials
Cr: A/P
81
In the Backflush Method I, what is the JE when Purchasing Raw Materials?
Dr: Materials & In-Process
Cr: A/P
82
In the Backflush Method II, what is the JE when Purchasing Raw Materials?
Same as Method I:
Dr: Materials & In-Prcess
Cr: A/P
83
In the Traditional Cost Flows Method, what is the JE when issuing materials to production?
Dr: WIP
Cr: Materials
84
In the Backflush Method I, what is the JE when issuing materials to production?
None
85
In the Backflush Method II, what is the JE when issuing materials to production?
Same as Method I: None
86
In the Traditional Cost Flow Method, what is the JE when incurring direct labor costs?
Dr: WIP
Cr: Payroll
87
In the Traditional Cost Flow Method, what is the JE when incurring overhead costs?
Dr: Variable OH Control
Dr: Fixed OH Control
Cr: A/P
88
In the Backflush Method I, what is the JE when incurring direct labor costs?
This is combined with the entry when incurring overhead costs:
Dr: Conversion Cost Control
Cr: Payroll
Cr: A/P
89
In the Backflush Method I, what is the JE when incurring overhead costs?
This is combined with the entry when incurring direct labor costs:
Dr: Conversion Cost Control
Cr: Payroll
Cr: A/P
90
In the Backflush Method II, what is the JE when incurring direct labor costs?
Same as Method I, this is combined with the entry when incurring overhead costs:
Dr: Conversion Cost Control
Cr: Payroll
Cr: A/P
91
In the Backflush Method II, what is the JE when incurring overhead costs?
Same as Method I, this is combined with the entry when incurring direct labor costs:
Dr: Conversion Cost Control
Cr: Payroll
Cr: A/P
92
In the Traditional Cost Flows Method, what is the JE when applying overhead?
Dr: WIP
Cr: Variable OH Control
Cr: Fixed OH Control
93
In the Backflush Method I, what is the JE when applying overhead?
None
94
In the Backflush Method II, what is the JE when applying overhead?
Same as Method I - None
95
In the Traditional Cost Flows Method, what is the JE when completing goods?
Dr: FGI
Cr: WIP
96
In the Backflush Method I, what is the JE when completing goods?
Dr: FGI
Cr: Conversion Cost Control
Cr: Materials & In-Process
97
In the Backflush Method II, what is the JE when completing goods?
This is combined with the entry when selling goods.
Dr: CoGS
Cr: Conversion Cost Control
Cr: Materials & In-Process
98
In the Traditional Cost Flows Method, what is the JE when selling goods?
Dr: CoGS
Cr: FGI
99
In the Backflush Method I, what is the JE when Selling Goods?
Same as Traditional Cost Flows -
Dr: CoGS
Cr: FGI
100
In the Backflush Method II, what is the JE when selling goods?
This is combined with the entry when completing goods?Dr: CoGS
Cr: Conversion Cost Control
Cr: Materials & In-Process
101
In the Traditional Cost Flows Method, what is the JE when recognizing overhead variance (underapplied)
Dr: CoGS
Cr: Overhead Control
102
In the Backflush Method I, what is the JE when recognizing overhead variances (underapplied)
Dr: CoGS
Cr: Conversion Cost Control
103
In the Backflush Method I, what is the JE when recognizing overhead variances (underapplied)
Same as Method I.
Dr: CoGS
Cr: Conversion Cost Control
104
This is the Cost Measurement & Assignment method that is not following US GAAP
Direct or Variable Costing
105
This is the Cost Measurement & Assignment method that is following US GAAP
Absorption or Full Costing
106
This is the Cost Measurement & Assignment method that is used for internal decision making
Direct or Variable Costing
107
This is the Cost Measurement & Assignment method that is used for external financial reporting
Absorption or Full Costing
108
This is the Cost Measurement Method that treats FMOH as a Period Cost
Direct or Variable Costing
109
This is the Cost Measurement Method that treats FMOH as a Product Cost
Absorption or Full Costing
110
This is the Cost Measurement Method that has this Income Statement Outline
Direct or Variable Costing
111
This is the Cost Measurement Method that has this Income Statement Outline
Absorption or Full Costing
112
When Production is \> Sales, then Ending Inventory Increases. How does this affect Net Income in the Direct or Variable Costing Method?
Lower NI than Absorption or Full Costing
113
When Production is \> Sales, then Ending Inventory Increases. How does this affect Net Income in the Absorption or Full Costing Method?
Higher NI than Direct or Variable Costing
114
When Production is less than Sales, then Ending Inventory decreases. How does this affect Net Income in the Direct or Variable Costing Method?
Higher NI than Absorption or Full Costing
115
When Production is less than Sales, then Ending Inventory decreases. How does this affect Net Income in the Absorption of Full Costing Method?
Lower NI than Direct or Variable Costing
116
When Production is = Sales, then Ending Inventory does not change. How does this affect Net Income in the Direct or Variable Costing Method?
Same NI as Absorption or Full Costing
117
When Production is = Sales, then Ending Inventory does not change. How does this affect Net Income in the Absorption of Full Costing Method?
Same NI as Direct or Variable Costing
118
How do you calculate the difference in NI between the Direct or Variable Costing and the Absorption of Full Costing?
Difference in NI = Change in Ending Inventory \* (FMOH/Unit)
119
T/F
The cost of electricity for a manufacturing plant, whether fixed or variable, is included in factory overhead and therefore is a product cost
TRUE
120
In a job-costing system, issuing indirect materials to production will increase and decrease what accounts?
Increase: Manufacturing Overhead Control
Decrease: Materials Control
121
In a job-costing system, issuing direct materials to production will increase what account?
Increase: Work in Process Control
122
In a job-costing system, Manufacturing Overhead Allocated is _____ (dr/cr) when overhead is allocated to WIP and ______ (dr/cr) when it is closed out at the end of the period
Credited
Debited
123
When an ABC sysem replaces a traditional cost system, what is the normal effect on the number of cost pools?
Increase
124
When an ABC sysem replaces a traditional cost system, what is the normal effect on the number of allocation bases?
Increase
125
T/F
ABC should not be used with process or job costing
FALSE
126
T/F
ABC can be used with either process or job costing
TRUE
127
T/F
In an ABC system, a single cause-and-effect relationship should be used to assign a department's manufacturing overhead costs to procuts produced in varying lot sizes
FALSE
128
T/F
In an ABC system, multiple cause-and-effect relationships should be used to assign a department's manufacturing overhead costs to procuts produced in varying lot sizes
TRUE
129
T/F
ABC systems are founded upon cause-and-effect allocation of costs to products
TRUE
130
The formula used in developing the variable rate for the high-low method of analysis is....
Cost at high point - Cost at low pont /
High activity point - Low Activity Point
= Variable Rate
131
In regression analysis, the ____ (higher/lower) Rsquared, (the coefficient of determination), the _____ the correlation
Higher
Better
