EXAM 1 Flashcards
What’s the goal of cost accounting?
- to assist 1) ___ in achieving the 2) m___ ____ for their 3) or___
1) managers
2) maximum value
3) organizations
Define the value chain
- Set of 1) ac____ that transforms 2) r___ r__ into the 3) g___ and s___ (ex. 4 _____) that end users 5) p___ and c___
it also includes the 6) tr__/di___ of any 7) w__ generated by end users
1) activities
2) raw resources
3) goods and services
4) households
5) purchase and consume
6) treatment/disposal
7) waste
1) M___the effects of 2) d__ on the 3) ___ of the organization is one of the fundamental services of cost accounting
1) measuring
2) decisions
3) value
In cost acct we will be concerned with the part of the value chain that comprises the activities of a 1) ___ organization
and the important objective is to ensure that the entire value chain is 2) ___ as possible
1) single
2) efficient
Define value-added activities
Those activities that 1) cu___ perceive as adding 2) u___ to the 3) ___ or ____ they purchase
1) customers
2) utility
3) goods/services
The value chain comprises activities from 1) r____ and d___ through the production process to 2) c___ service
Managers evaluate these activities to determine how they contribute to the final product’s 3) s___, ____, and ___
1) research and development
2) customer
3) service, quality, and cost
What are the 7 components of the value chain?
1) ____ and ___
2) D___
3) ____ing
4) Pro___
5) M___ and S__
6) ___ion
7) C___ Se___
1) Research and Development
2) Design
3) Purchasing
4) Production
5) Marketing and Sales
6) Distribution
7) Customer Service
Define the Supply Chain
Set of 1) f__ and i___ that 2) ___ goods and services to the firm
1) firms and individuals
2) sells
Firms buy resources from supplies (other companies, employees, etc)
Is this supply chain or distribution chain?
Supply chain
Define Distribution Chain
Set of firms and individuals that 1) b__ and 2) di___ goods and services from the firm.
1) buys
2) distributes
Firms that sell their products to distributors and customers
Supply Chain or Distribution Chain?
Distribution Chain
Define Financial Acct Information
- designed for 1) d____ who 2) a__ directly 3) in___ in the daily management of the firm
-these users of the information are often 4) ___ to the firm
1) decision makers
2) aren’t
3) involved
4) external
Financial Acct is info primarily used by
-cr___
-inv__
-go___ a__
- creditors
- investors
- government agencies
Does cost acct use any standards or follow GAAP or IFRS
no
What does standards does Financial acct info use?
Generally Accepted Accounting Principles (GAAP) in the US and International Financial Reporting Standards (IFRS)
An important characteristic of financial accounting data is that it be ____ across firms
- comparable
Cost accounting information is designed for ___
managers
Cost acct information is designed for managers because the managers are
- making decisions only for their 1) __ organization, there’s 2) __ need for the info to be 3) ____ to similar info in other organizations
1) own
2) no
3) comparable
An important characteristic for cost acct information is the information be to 1) ___ for the decisions that managers operating in a particular business environment with a particular strategy make
1) relevant
Cost accounting information is commonly used in developing 1) ____ ac_____ in__, but we are focused to use it for managers to make decisions
1) financial accounting information
The primary purpose of financial accounting is to provides 1) ___ (ex. 2) ___) or creditors (ex. banks) information regarding company/management 3) ___
1) investors
2) shareholders
3) performance
Financial Accounting: Users of the information (decison makers)
________
External (investors, creditors, etc.)
Cost Accounting: Users of the information (decison makers)
_____
Internal (managers)
Financial Accounting: Important Criteria
it has c_____, ____ relevance (for investors)
comparability, decision relevance
Cost Accounting: Important Criteria
de___ ____ (for managers), ti____
decision relevance, timeliness
Financial Accounting: Who establishes or defines the system?
_______ standard _____ group (____ in the US)
External standard setting group (FASB in the US)
Cost Accounting: Who establishes or defines the system?
managers
Financial Accounting: How to determine accounting treatment
sta____ (____)
standard (rules)
Cost Accounting: How to determine accounting treatment
re_____ for ______ making
relevance for decison making
Financial data prepared for financial accounting is governed by 1) __ in the US and 2) __ in other countries
1) Generally Accepted Accounting Principles (GAAP)
2) International Financial Reporting Standards (IFRS)
Cost data for managerial use (within the organization)
- is not designed for ___
- defined by ___
- focuses on __ costs
- doesn’t need to follow ___ and ___
- is not designed for shareholders
- defined by management
- focuses on future costs
- doesn’t need to follow GAAP and IFRS
Managers seek to identify and eliminate _____ activities
non-value added
Define Non-Value Added Activities
Activities that 1) ______ to the good or service
1) do not add value
Define Cost Benefit Analysis
- The concept of considering whether the 1) s___ or in___ profits of a proposed 2) c___ are 3) g___ than what is required to implement the change
1) savings or increased
2) change
3) greater
The most serious problems with accounting systems is when managers attempt to use accounting information that was developed for 1) _____ reporting for 2) d___ m___
1) external
2) decision making
Why is it important for managers to eliminate nonvalue added activities ?
- an important concept in cost accounting is that actitvies cause 1) __
and what are the benefits of doing it?
-2) __ advantage over 3) ___
-reducing 4) __ without 5) re___ v___ to customers
1) cost
2) cost
3) competitors
4) costs
5) reducing value
Managerial Decisions (What are the 4 things they do)
-1) _____ make 2) ____
-decisions 3) ____ the 4) ____ of the organization
-Managers use 5) ____ from the accounting system to make 6) ____
-7) ___ evaluate 8) ____ and 9) ___ performance with account information
1) individuals
2) decisions
3) determine
4) performance
5) information
6) decisions
7) owners
8) organizational
9) managerial
Cost Data for Managerial Decisions
-costs for 1) _____
-cost for 2) __ and ___
-different 3) ___ for different 4) ____
1) decision making
2) control and evaluation
3) data
4) decisions
Managers perform ____ analysis to assess whether proposed changes in an organization are worthwhile
cost benefit
Cakes by Jacki is considering adding a line of sugar-free cake options. Current sales revenue is $5,000 per month. With the new line added, revenues are estimated to be $6,500 per month. Ingredients and labor are currently $2,200 a month. Estimated total ingredient and labor costs with the new line are expected to be $3,000 per month. Jacki estimates that the utilities will increase from $500 to $575. Rent and other costs of $1,200 per month are not expected to change. Using differential analysis, the expected change in net profit from implementing the new line is __
625
Differential Revenues (6,500 - 5,000)
-Differential Costs (3,000 - 2,200) + (575 -500)
=625 Differential Net Profit
Define Differential Costs
With two or more 1) _____, costs that 2) ___ ____ or ___ alternatives.
-changes in response to a particular course of action
1) alternatives
2) differ among or between
Define Differential Revenues
Revenues that 1)____ in response to a 2) ____ of action
1) change
2) particular course
Define responsibility center
A 1) s___ unit of an organization assigned to a 2) ma___ who is held accountable for its 3) ope__ and res___
1) specific
2) manager
3) operations and resources
SB 2-1
Define cost
1) ___ of 2) r___
1) sacrifice
2) resources (ex cash)
Define Expense
cost 1) c__ 2) a_____ re___ in an accounting period
expense is only referring to ____ financial reports
show up on income statement as expense s
1) charged
2) against revenue
expense is only referring to 3) external financial reports
What are the 2 major categories on cost?
outlay and opportunity costs
Define outlay cost
1) __, ____ or f___ cash outflow
1) Past, present, or future
What’s an example of outlay cost?
A college student
-they sacrifice cash outflows for tuition, books, and fees
-sacrifice time for their education
Define opportunity cost
the 1) for__ b__ from the best (forgone) 2) a___e course of action
1) forgone benefit
2) alternative
Example of opportunity cost
College student
-sacrifice time for their education
1) _____ can sometimes be not considered. Accounting systems typically record 2) ____ but not opportunist costs.
Managers can easily 3) ____ ____opportunity costs when making 4) ____
1) opportunity costs
2) outlay costs
3) overlook or ignore
4) decisions
Define operating profit
1) E__ of operating 2) r___s over the operating 3) ___necessary to generate those 4) re___.
1) excess
2) revenues
3) costs
4) revenues
Service Organizations
-a service company provides customers with 1) ____
What is the most significant cost category for service organizations?
2) ___
1) intangible products
2) labor
Retail and Wholesale Companies
-retail and wholesale firms 1) __ but 2) ___ make a tangible product.
What’s an added category of cost information for retail and wholesale companies? It helps them track the cost of tangible goods they buy and sell
3) ___
1) sell
2) dont
3) COGS
What are the 2 types of manufacturing costs
Product and Period Costs
Define product cost
Costs assigned to the 1) ____ of products and recognized for financial reporting when 2) ____
costs related to 3) ___ and ____
costs that are recorded as an 4) ___ in 5) ___ when incurred then later is 6) ___ as 7) ____
1) manufacture
2) sold
3) inventory and COGS
4) asset
5) inventory
6) expensed
7) COGS
Define Period Cost
Costs recognized for financial reporting when 1) ____
2) ___ costs related to the firm
1) incurred
2) nonmanufacturing
Define Direct Costs
cost that for a 1) ___ cost can be 2) ____ to the product
1) reasonable
2) direct traced
Define Direct Materials
materials directly 1) ___ to the product at a 2) ____
also called 3) ___
1) traceable
2) low cost
3) raw materials
Define Direct Labor
workers who directly 1) t___e to 2) tra___ materials into the 3) fi___ product
1) traceable
2) transforming
3) finished
What are the 2 types of direct costs
Direct Materials and Labor
What words are related to period costs?
st___ or sa__
store or sales
What are the 2 types of product costs
-
-
Indirect and Direct costs
-direct material
-direct labor
-manufacturing overhead
Define Direct Manufacturing costs
product costs that can be 1) ____ with 2) ____ (or ____) at a relatively 3) __ ___
1) identified
2) units
3) low cost
Define Indirect Costs
costs that 1) ___ reasonably be 2) ____ to the product
so that’s 3) ____ _____
1) cannot
2) directly traced
3) manufacturing overhead
Define manufacturing overhead
All 1) p___ costs except 2) d___ ___ and d___ ___
1) production
2) direct labor and direct materials
What are examples of manufacturing overhead ?
indirect _____
-cost of workers who _____on the product but still required to make factory ____ (______, ______ ,____)
indirect ______
-______ for machinery, ______ supplies, _____ parts
and other manufacturing costs
-_____ on things
-expenses to _____ operating (____)
indirect labor
-cost of workers who dont work directly on the product but still required to make factory operate (supervisors, maintenance workers, inventory store keepers)
indirect materials
-lubricants for machinery, cleaning supplies, repair parts
and other manufacturing costs
-depreciation on things
-expenses to keep things operating (ex. electricity)
Define Prime Costs
the “1) ____” costs of the product
sum of ____ and ____
sum of direct labor and direct materials
1) primary
Define Conversion Costs
costs to 1) ___ 2) ____ into the 3) ___
-
1) convert
2) materials
3) final product
-direct labor
-manufacturing overhead
Companies with low manufacturing overhead focus on 1)____
Companies with high direct labor or manufacturing costs focus on 2) ____
1) prime costs
2) conversion costs
What are the 2 elements of nonmanufacturing costs (also called period costs)
marketing and administrative costs
Define Marketing costs
required to obtain customer 1) ____ and 2) _____ customer with 3) _____ products
EX.
-ad____
-_____ commissions
-______ costs
-anything having to with a ___
1) orders
2) provide
3) finished
costs necessary to sell the products
EX.
-advertising
-sales commissions
-shipping costs
-anything having to with a store
Define Administrative Costs
Costs required to 1)____ the 2) ____ and provide 3) ____
EX.
-executive ____
-____ processing
-____ costs
1) manage
2) organization
3) staff support
cost necessary to operate the business
EX.
-executive salaries
-data processing
-legal costs
Define Cost Allocation
Process of 1) ____ 2) ____ costs to ____, ser____, people, business units, etc.
1) assigning
2) indirect costs to products, services, people, business units, etc.
Define Cost Object
Any 1)____ to which a cost is 2) ____; examples include a product, a department, or a product line.
1) end
2) assigned
Define Cost Pool
costs we want to 1)____ to the cost 2) ___
it’s a 3) _____ of _____ to be assigned
1) assign
2) objects
3) collection of costs
Define Cost Allocation Rule
method used to assign the costs in the cost 1) ___ to the cost 2) ___
1) pool
2) object
What’s the 3 step process for Cost Allocation
- Define the ____
- Determine the ____ rule
- ____ the costs in the ____ to the ____
- Define the cost pool
- Determine the cost allocation rule
- Assign the costs in the cost pool to the cost object: any end to which a cost is assigned
A cost that can be unambiguously related to a cost object at a reasonable cost is ___
direct cost
Is it prime cost, conversion costs, or both?
- Transportation In cost for steel
- Lease payments on the factory
- Steel used in the making the components
- Maintenance on the manufacturing machines
- Machine Operator wages
- Prime
- Conversion
- Prime
- Converison
- Both
SB 2-2
Product Costs are recorded in 1) ______ when costs are 2) ____
1) inventory
2) incurred
A manufacturing company has 3 inventory accounts, what are they?
-raw materials inventory
-work in process inventory
-finished goods
Define Raw Materials inventory
materials 1) ___ to make a 2) ____
1) purchases
2) product
Define Work in Process
Product in the production 1) ___ but 2) ___ yet ____
what are the 3 things that are accumulated here?
1) process
2) not yet complete
3 things accumulated
-direct materials, direct labor, manufacturing overhead
Define Finished Goods
product 1) ____ , but not yet 2) ___
1) fully complete
2) sold
SB 2-3
The way costs respond to changes in activity levels is called
cost behavior
Define Fixed Costs
Costs that are 1) ___ as volume 2) ___ within the relevant range of activity
-cost per unit varies 3) ____ to change in activity
-they’re a 4) ____ in total as activity changes
1) unchanged
2) changes
3) inversely
4) “fixed”
Define Variable Costs
Costs that change in 1) d__ pr___ within a change in 2) v___e within the 3) ___ ____ of activity
-costs 4) ____ in total as activity changes
-cost per unit stays 5) ____ when activity changes within the relevant range
1) direct proportion
2) volume
3) relevant range
4) “vary”
5) constant
Define Relevant Range
the range within the total 1) ___ costs and unit 2) _____ costs 1) ____
1) fixed
2) variable
3) don’t change
Define Step Costs
Cost that 1) in__ with volume in 2) s___; also called 3) s___cost
1) increases
2) steps
3) semifixed
What is the 4 basic cost behaviors ?
-V___
-F____
-Se__
-S____
-Variable
-Fixed
-Semivariable
-Step
Define Semi-variable costs
it’s also called
has both fixed and variable components
also called mixed costs
Is it fixed/variable and is it period/product?
- Administrative support for sales supervisors
-Fixed, Period
-sales = period (sales = administrative)
Is it fixed/variable and is it period/product?
- Assembly line workers’ wages
-Variable, Product
-wages = variable
Is it fixed/variable and is it period/product?
- Cafeteria costs for the factory
-Fixed, Product
-product = factory
Is it fixed/variable and is it period/product?
- Controller’s office rental
-Fixed, Period
-controller is an accountant so they have nothing to do with manufacturing, so it’s period
Is it fixed/variable and is it period/product?
- Depreciation on the building for administrative staff offices
Fixed, Period
-depreciation = fixed
Is it fixed/variable and is it period/product?
- Energy to run machines producing units of output in the factory
Variable, Product
-machines = product
Is it fixed/variable and is it period/product?
- Overtime pay for assembly workers
-Variable, Product
Is it fixed/variable and is it period/product?
- Salaries of top executives in the company.
Fixed, Period
-salaries = fixed
-executives = period
Is it fixed/variable and is it period/product?
- Sales commissions for sales personnel
Variable, Period
Is it fixed/variable and is it period/product?
- Transportation-in costs on materials purchased
Variable, Product
-materials purchased = product
What are the 3 components of product costs
full cost
full absorption ccost
variable cost
Define full cost
Sum of all costs of 2) ____ and 3) ___ a unit or product (includes both 4) ____ and ___costs).
2) manufacturing
3) selling
4) fixed and variable costs
Define full absorption costs
All 1) ____ and ____ _____ costs; used to compute a product’s 2) ____ value under GAAP
1) variable and fixed manufacturing
2) inventory
Define Variable cost
the sum of all 1) ____ of manufacturing and selling a unit of the product
1) variable costs
When the amount of labor required is not sensitive to the amount produced, then it is probably best to consider labor to be a(n) ______ cost.
Fixed
The full cost of a product equals all __
manufacturing and selling costs (fixed and variable costs)
Putting fixed cost on a per unit basis may be ____ for decision making
misleading
The difference between revenue and variable costs is ___
Contribution Margin
