EXAM 1 Flashcards

1
Q

What’s the goal of cost accounting?

  • to assist 1) ___ in achieving the 2) m___ ____ for their 3) or___
A

1) managers
2) maximum value
3) organizations

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2
Q

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

A

1) activities
2) raw resources
3) goods and services
4) households
5) purchase and consume
6) treatment/disposal
7) waste

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3
Q

1) M___the effects of 2) d__ on the 3) ___ of the organization is one of the fundamental services of cost accounting

A

1) measuring
2) decisions
3) value

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4
Q

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

A

1) single
2) efficient

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5
Q

Define value-added activities

Those activities that 1) cu___ perceive as adding 2) u___ to the 3) ___ or ____ they purchase

A

1) customers
2) utility
3) goods/services

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6
Q

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 ___

A

1) research and development
2) customer
3) service, quality, and cost

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7
Q

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___

A

1) Research and Development
2) Design
3) Purchasing
4) Production
5) Marketing and Sales
6) Distribution
7) Customer Service

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8
Q

Define the Supply Chain

Set of 1) f__ and i___ that 2) ___ goods and services to the firm

A

1) firms and individuals
2) sells

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9
Q

Firms buy resources from supplies (other companies, employees, etc)

Is this supply chain or distribution chain?

A

Supply chain

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10
Q

Define Distribution Chain

Set of firms and individuals that 1) b__ and 2) di___ goods and services from the firm.

A

1) buys
2) distributes

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11
Q

Firms that sell their products to distributors and customers

Supply Chain or Distribution Chain?

A

Distribution Chain

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12
Q

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

A

1) decision makers
2) aren’t
3) involved
4) external

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13
Q

Financial Acct is info primarily used by

-cr___
-inv__
-go___ a__

A
  • creditors
  • investors
  • government agencies
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14
Q

Does cost acct use any standards or follow GAAP or IFRS

A

no

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15
Q

What does standards does Financial acct info use?

A

Generally Accepted Accounting Principles (GAAP) in the US and International Financial Reporting Standards (IFRS)

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16
Q

An important characteristic of financial accounting data is that it be ____ across firms

A
  • comparable
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17
Q

Cost accounting information is designed for ___

A

managers

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18
Q

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
A

1) own
2) no
3) comparable

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19
Q

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

A

1) relevant

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20
Q

Cost accounting information is commonly used in developing 1) ____ ac_____ in__, but we are focused to use it for managers to make decisions

A

1) financial accounting information

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21
Q

The primary purpose of financial accounting is to provides 1) ___ (ex. 2) ___) or creditors (ex. banks) information regarding company/management 3) ___

A

1) investors
2) shareholders
3) performance

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22
Q

Financial Accounting: Users of the information (decison makers)

________

A

External (investors, creditors, etc.)

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23
Q

Cost Accounting: Users of the information (decison makers)

_____

A

Internal (managers)

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24
Q

Financial Accounting: Important Criteria

it has c_____, ____ relevance (for investors)

A

comparability, decision relevance

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25
Cost Accounting: Important Criteria de___ ____ (for managers), ti____
decision relevance, timeliness
26
Financial Accounting: Who establishes or defines the system? _______ standard _____ group (____ in the US)
External standard setting group (FASB in the US)
27
Cost Accounting: Who establishes or defines the system?
managers
28
Financial Accounting: How to determine accounting treatment sta____ (____)
standard (rules)
29
Cost Accounting: How to determine accounting treatment re_____ for ______ making
relevance for decison making
30
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)
31
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
32
Managers seek to identify and eliminate _____ activities
non-value added
33
Define Non-Value Added Activities Activities that 1) ______ to the good or service
1) do not add value
34
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
35
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
36
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
37
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
38
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
39
Managers perform ____ analysis to assess whether proposed changes in an organization are worthwhile
cost benefit
40
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
41
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
42
Define Differential Revenues Revenues that 1)____ in response to a 2) ____ of action
1) change 2) particular course
43
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
44
SB 2-1
45
Define cost 1) ___ of 2) r___
1) sacrifice 2) resources (ex cash)
46
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
47
What are the 2 major categories on cost?
outlay and opportunity costs
48
Define outlay cost 1) __, ____ or f___ cash outflow
1) Past, present, or future
49
What's an example of outlay cost?
A college student -they sacrifice cash outflows for tuition, books, and fees -sacrifice time for their education
50
Define opportunity cost the 1) for__ b__ from the best (forgone) 2) a___e course of action
1) forgone benefit 2) alternative
51
Example of opportunity cost
College student -sacrifice time for their education
52
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
53
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
54
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
55
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
56
What are the 2 types of manufacturing costs
Product and Period Costs
57
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
58
Define Period Cost Costs recognized for financial reporting when 1) ____ 2) ___ costs related to the firm
1) incurred 2) nonmanufacturing
59
Define Direct Costs cost that for a 1) ___ cost can be 2) ____ to the product
1) reasonable 2) direct traced
60
Define Direct Materials materials directly 1) ___ to the product at a 2) ____ also called 3) ___
1) traceable 2) low cost 3) raw materials
61
Define Direct Labor workers who directly 1) t___e to 2) tra___ materials into the 3) fi___ product
1) traceable 2) transforming 3) finished
62
What are the 2 types of direct costs
Direct Materials and Labor
63
What words are related to period costs? st___ or sa__
store or sales
64
What are the 2 types of product costs What are the 3 major categories of product cost? - - -
Indirect and Direct costs -direct material -direct labor -manufacturing overhead
65
Define Direct Manufacturing costs product costs that can be 1) ____ with 2) ____ (or ____) at a relatively 3) __ ___
1) identified 2) units 3) low cost
66
Define Indirect Costs costs that 1) ___ reasonably be 2) ____ to the product so that's 3) ____ _____
1) cannot 2) directly traced 3) manufacturing overhead
67
Define manufacturing overhead All 1) p___ costs except 2) d___ ___ and d___ ___
1) production 2) direct labor and direct materials
68
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)
69
Define Prime Costs the "1) ____" costs of the product sum of ____ and ____
sum of direct labor and direct materials 1) primary
70
Define Conversion Costs costs to 1) ___ 2) ____ into the 3) ___ what are those costs? - -
1) convert 2) materials 3) final product -direct labor -manufacturing overhead
71
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
72
What are the 2 elements of nonmanufacturing costs (also called period costs)
marketing and administrative costs
73
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
74
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
75
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.
76
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
77
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
78
Define Cost Allocation Rule method used to assign the costs in the cost 1) ___ to the cost 2) ___
1) pool 2) object
79
What's the 3 step process for Cost Allocation 1. Define the ____ 2. Determine the ____ rule 3. ____ the costs in the ____ to the ____
1. Define the cost pool 2. Determine the cost allocation rule 3. Assign the costs in the cost pool to the cost object: any end to which a cost is assigned
80
A cost that can be unambiguously related to a cost object at a reasonable cost is ___
direct cost
81
Is it prime cost, conversion costs, or both? 1. Transportation In cost for steel 2. Lease payments on the factory 3. Steel used in the making the components 4. Maintenance on the manufacturing machines 5. Machine Operator wages
1. Prime 2. Conversion 3. Prime 4. Converison 5. Both
82
SB 2-2
83
Product Costs are recorded in 1) ______ when costs are 2) ____
1) inventory 2) incurred
84
A manufacturing company has 3 inventory accounts, what are they?
-raw materials inventory -work in process inventory -finished goods
85
Define Raw Materials inventory materials 1) ___ to make a 2) ____
1) purchases 2) product
86
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
87
Define Finished Goods product 1) ____ , but not yet 2) ___
1) fully complete 2) sold
88
SB 2-3
89
The way costs respond to changes in activity levels is called
cost behavior
90
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"
91
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
92
Define Relevant Range the range within the total 1) ___ costs and unit 2) _____ costs 1) ____
1) fixed 2) variable 3) don't change
93
Define Step Costs Cost that 1) in__ with volume in 2) s___; also called 3) s___cost
1) increases 2) steps 3) semifixed
94
What is the 4 basic cost behaviors ? -V___ -F____ -Se__ -S____
-Variable -Fixed -Semivariable -Step
95
Define Semi-variable costs it's also called
has both fixed and variable components also called mixed costs
96
Is it fixed/variable and is it period/product? 1. Administrative support for sales supervisors
-Fixed, Period -sales = period (sales = administrative)
97
Is it fixed/variable and is it period/product? 2. Assembly line workers’ wages
-Variable, Product -wages = variable
98
Is it fixed/variable and is it period/product? 3. Cafeteria costs for the factory
-Fixed, Product -product = factory
99
Is it fixed/variable and is it period/product? 4. Controller’s office rental
-Fixed, Period -controller is an accountant so they have nothing to do with manufacturing, so it’s period
100
Is it fixed/variable and is it period/product? 5. Depreciation on the building for administrative staff offices
Fixed, Period -depreciation = fixed
101
Is it fixed/variable and is it period/product? 6. Energy to run machines producing units of output in the factory
Variable, Product -machines = product
102
Is it fixed/variable and is it period/product? 7. Overtime pay for assembly workers
-Variable, Product
103
Is it fixed/variable and is it period/product? 8. Salaries of top executives in the company.
Fixed, Period -salaries = fixed -executives = period
104
Is it fixed/variable and is it period/product? 9. Sales commissions for sales personnel
Variable, Period
105
Is it fixed/variable and is it period/product? 10. Transportation-in costs on materials purchased
Variable, Product -materials purchased = product
106
What are the 3 components of product costs
full cost full absorption ccost variable cost
107
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
108
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
109
Define Variable cost the sum of all 1) ____ of manufacturing and selling a unit of the product
1) variable costs
110
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
111
The full cost of a product equals all __
manufacturing and selling costs (fixed and variable costs)
112
Putting fixed cost on a per unit basis may be ____ for decision making
misleading
113
The difference between revenue and variable costs is ___
Contribution Margin