EXAM 3 Flashcards
When managers make decisions, they need to 1) ___ the 2) ___ (and __) among the 3) al___ actions.
So managers need to 4) _____ the costs associated with that alternative
1) compare
2) cost (and benefits)
3) alternative
4) estimate
Cost estimates can be an important element in helping managers make 1) ____ that add 2) ___ to the company
What adds value to the firm (2 points)?
-improves 3) ____ and ____ etc.
1) decisions
2) value
3) profitability and better decisions
The most important characteristic of cost for decision making is how they 1) ___ (how they 1.0) ___ with activity)
Therefore, the basic idea in cost estimation is to 2) ____ the relation between 3) ___ and the 4) ____ affecting them, the cost 5) ____
1) behave
1.0) vary
2) estimate
3) costs
4) variables
5) drivers
What are the 2 key terms of cost behavior?
What’s the formula of the cost equation?
___ = ___ +___
variable costs and fixed costs
Formula = TC = F + VX
TC = total costs
F = fixed costs (don’t vary with activity levels)
V = variable costs (per unit of activity)
X = volume of activity
Variable costs 1) ___ proportionately with activity levels and fixed costs 2) ___
1) change
2) do not
What are 3 general methods to estimate the relation between cost behavior and activity levels?
1) E _____ ___
2) Ac____ ___
3) S_____ ____ (like regression analysis)
-Engineering estimates
-Account Analysis
-Statistical methods
For the general methods to estimate the relation between cost behavior and activity levels (Engineering estimates, Account Analysis, Statistical methods
It’s a good idea to use 1) ____ than 2) ___ method so that results can be 3) ___
1) use more
2) one
3) compared
Define Engineering Estimates
cost estimates are based on 1) m__ and then 2) p__the 3)___invovled in a task
activities involved is 4) la____, r___, and i____
1) measuring
2) pricing
3) work
4) labor, rent, insurance
Engineering Estimates also estimates the 1) __ and ___ for each activity
1) time and cost
What are the advantages of the Engineering Method
- it can 1) ____ each 2) ___ required to perform operation
- permits 3) ____ with other centers with 4) si___ operations
- doesn’t require 6) ___ from 7) ___ activities in the organization
-it can be used to estimate costs for totally 8) __ activities
1) detail
2) step
3) comparison
4) similar
6) data
7) prior
8) new
What are the disadvantages of Engineering Estimates ?
- can be 1) ____ to use
- based on 2) ___ conditions
1) expensive
2) optimal
A company that uses engineering estimates often can identify where 1) ___ exists in operation
slack
Define Account Analysis
1) r___ each 2) a_____making up the total 3) ___ being analyzed.
1) reviews
2) account
3) cost
Account analysis 1) __ each 2) ___ account used to record costs that are of 3) __, if it’s 4) __ or ___ (depending on the relationship with the cost activity)
1) reviews
2) cost
3) interest
4) fixed or variable
What’s a key step in account analysis ?
Identifying the relation between the 1) __ and the 2) __
1) activity
2) cost
Account analysis is a useful way to 1) est___ c__
it uses the 2) ___ and 3) __ of managers and accountants who are familiar with company 6) __. and the way cost 7) ___ to 8) __ in activity level
1) estimate costs
2) experience
3) judgment
6) operations
7) react
8) changes
Account analysis relies heavily on 1) ___, which can be a disadvantage/advantage depending on the 2) ___ of the person making the estimate.
The decisions based on the cost estimate can have a major 3) ____ co______ for the people making them
1) personal judgment
2) bias
3) economic consequence
What is an advantage of the Analysis Method?
1) __ and 2) ___ are familiar with company 3) ___ and the way 4) ___ react to 5) __ in activity levels
There’s a card for this before this is just saying it again (but study it!)
1) managers
2) accountants
3) operations
4) costs
5) changes
What are the disadvantages of the Analysis Method?
-managers and accountants may be 1) __
-decisions often have major 2) ___ ____ for managers and accounts
There’s a card for this before this is just saying it again (but study it!)
1) bias
2) economic consequences
Define Statistical Cost Estimation
analyze costs within a 1) ___ ___, which is the 2) __ within a cost estimate may be 3) ___
1) relevant range
2) limits
3) valid
Statistical Cost Estimation
Relevant range for projection is usually between 1) ___ and __ limits (bounds) of 2) __ activity levels for which data is 3) ___
1) upper and lower
2) past
3) available
A graph that you can use for statistical cost estimation is
a scattergraph
Scattergraph
-the slope of the line represents the estimated 1) ____ costs per unit. The intercept with the vertical axis represents an estimate of the 2) ___ costs
1) variable
2) fixed
Scattergraph
-the slope is referred to as the variable per unit because it represents the 1) ___ in costs that occurs as a result of changes in 2) ____
-the intercept is referred to as the fixed costs because it represents the cost incurred at a 3) ____level
1) change
2) activity
3) zero
Define High-low cost estimation
method to estimate cost based on 1) __ cost observations, which are the 2) __ and __ 3) __ levels
1) two
2) highest and lowest
3) activity
SB 5-2
Define Regression
designed to generate a 1) __- that 2) ___t fits a set of data points
uses 3) a___ ____ points
1) line
2) best
3) all data
Regression techniques…
-it uses all data points, the resulting estimates have a 3) ___ base than those based on a few select points (like high and low activity levels)
-generates 4) __ that helps a manager determine how well the estimated 5) re____ equation describes the relations between 6) ___ and __
3) broader
4) info
5) regression
6) costs and activities
Obtaining Regression Estimates
-the most important step in obtaining regression estimates for cost estimation is to establish the 1) e___ of a logical 2) r____ between 2.0) ac___ and the cost to be 2.1) es____
these activities are referred as 3) ___, which are the 4) ___ terms/____ variable or the 5) __ (RHS) of a regression equation
the cost to be estimated is called the 6) ___ ___, the 7) ___ term or the 8) ___ (LHS) of the regression equation
1) existence
2) relation
2.0) activities
2.1) estimated
3) predictors
4) X terms/independent variable
5) right-hand side
6) dependent variable
7) Y term
8) the left-hand side
The independent variable in regression is the 1) ____ term or 2) ____r
-the activity that 3) p___ the 4) c___ in cost
The dependent variable in regression is the 5) ___ term
-cost to be 6) ___
1) X
2) predictor
3) predicts
4) change
5) Y
6) estimated
Define Correlation Coefficient
-1) m__ the 2) p__ of the data points to the 3) __ line
-which is referred as 4) ___
other definition
-the 5) m___ the 6) li____r rel____ between 7) va___s
1) measures
2) proximity
3) regression
4) R
5) measure
6) linear relationship
7) variables
Correlation Coefficient (R)
-the closer R is to 1.0, the 1) __ the data 2) __ are to the regression line (the more we 2.0) ___ it)
-the closer R is to zero, the 3) __ the 4) __ to the regression line (the more we 4.0) ___ like it)
1) closer
2) points
2.0) like
3) poorer
4) fit
4.0) don’t
Correlation Coefficient is also called
R, Multiple R
Define Coefficient of Determination
-interpreted as the proportion of the variation in the 1) ____ variable (__ terms) by the 2) ___ side (__ terms, the ___ variable) of the regression equation
-referred as the 3) ____ (___)
-it’s the 4) _____ of the correlation coefficient
1) dependent variable (Y terms)
2) right hand side (X terms, the independent variable)
3) R-squared (R^2)
4) square
When the correlation coefficient is squared and adjusted for the number of independent variables used to make the estimate, it is called ____
adjusted R^2
The most commonly used regression technique is called 1) ___ ___ of ____ regression (OLS)
-this technique, the regression line is computed so that the 2) ___ of the squares of the 3) __ distances from each point to the regression line is 4) __
-therefore, it’s important to beware of 5) ___data points that vary significantly from the usual
1) ordinary least of squares regression (OLS)
2) sum
3) vertical
4) minimized
5) including
Because the regression program seeks to minimize square differences, the inclusion of these extreme points or “outliers” can significantly affect the results
Define t-statistic
it’s used to 1) __ the 2) __ of the coefficient
-the general rule of thumb, a t-statistic greater than 4) __ is considered 5) __. If it is significant, the cost is 6) ___ totally 7) ___
1) test
2) significance
4) 2.0
5) significant
6) NOT
7) fixed
How is t-statistic calculated?
– the value of the estimated 1) co___ (___), 2) ____by its estimated 3) s___ ___r (SEb)
1) coefficient (b)
2) divided
3) standard error (SEb)
-it’s a little b
Define Adjusted R-squared (R^2)
the correlation coefficient squared and adjusted for the number of 1) ___ used to make the estimate
this adjustment to R^2 recognizes that as the number of independent variables increases, R^2 (unadjusted) will 2) _____
don’t learn it
1) independent variable
2) increase
Adjusted R-squared (R^2)
Statisticians believe that R^2 is a 1) ___ measure of the association between 2) __ and ___ than the 3) un__ ____ value when more than one 4) ___ predictor is used
don’t learn it
1) better
2) X and Y
3) unadjusted R^2
4) X
Define Multiple Regression
when more than 1) o____ p____ (__) is in the model
X1: ___ hours
X2: ___ costs
What’s the equation ?
Total costs = ___(__) + ____(__) + ___ costs
1) one predictor (X)
Total Costs = Variable costs(X1) + Variable Costs(X2) + fixed costs
X1: laborhours
X2: materials costs
What are the more common problems with using regression estimates?
- attempting to 2) ___ a 3) ___ equation to a 4)___ data
- failing to 6) ___ 7) ___ observations (called 8) “___”)
-including 9) __ with apparent, but spurious relations to the 10) __ variable
-using data that 11) ___ fit the 12) as __ of regression analysis
2) fit
3) linear
4) nonlinear
6) exclude
7) unrepresentative
8) outliers
9) predictors
10) dependent
11) don’t
12) assumptions
What are the practical implementation problems
-1) __ relations
-2) o___
-3) ___ relations
-using data that 4) ___ the 5) __ of regression analysis
1) nonlinear
2) outliers
3) spurious
4) don’t fit
5) assumptions
Effect of Nonlinear Relations
the effect of attempting to fit a linear model to nonlinear data is likely to occur when the firm is operating near its 1) ___ li___
Close to maximum capacity cost 2) ___ more rapidly than activity overtime
1) capacity limits
2) increase
Effect of Outliers
because regression minimizes the sum of the squared deviations from the regression line, observations that lie a significant distance away from the line could have an 1) ___on the regression estimates
1) overwhelming effect
Effect of Spurious Relations
-It’s sometimes tempting to include 1) m__ ___ in the regression and let the program 2) “___” r__ among the variables
this can lead to spurious relations
The association will typically be quite 3) ___, but both are driven by 4) __t
1) many variables
2) find relations
3) high
4) output
Effects of Using Data that Don’t Fit the Assumptions of Regression Analysis
2 important assumptions that are NOT satisfied in estimating costs
-the process of which cost are being estimated remains 1) ___ o___
-the errors in estimating costs are 2) in__ of the cost 3) ____
1) constant overtime
2) independent
3) drivers
Effects of Using Data that Don’t Fit the Assumptions of Regression Analysis
regression analysis assumed the process stays the same, so it leaves the cost analyst with 2 choices
Choice 1: the analyst can restrict to a 1) __ period and assumed the process has remained the 2) __
-estimates will 3) __ be as 4) ___ because there are relatively 5) __ observations
Choice 2: the analyst can use 6) ___ period. As long as the process has 7) ___ ___d
-then the estimates will be 8) __ ___ (since it’s based on more 9) ___), but the analyst risks using estimates that might 10) __ be meaningful if the process has 11) ___
1) short
2) same
3) not
4) reliable
5) few
6) longer
7) not changed
8) more reliable
9) information
10 not
11) changes
Users of regression should
- fully understand the 1) __and its 2) __
- 3) __ the model, that’s the hypothesized relation between 4) __ and __ pre___
- know the 5) ___ of the data being 6) __
- examine a 7) __ of the data
And regression estimate is only a ___
1) method
2) limitations
3) specify
4) costs and cost predictors
5) characteristics
6) uses
7) plot
only an estimate
How is an Estimation Method is Chosen
What are the advantages?
-reliance on 1) ____data is relatively 2) i___e
-computational 3) t__ allow for more 4) ___ to be used than for 5) no___-s___ method
1) historical
2) inexpensive
3) tools
4) data
5) non-statistical
How is an Estimation Method is Chosen
What are the disadvantages?
-reliance on historical data may be the 1) o___ re__ available, cost effective basis for estimating costs
-analysis must be 2) al__ to cost 3) ac__ c__
1) only readily
-basically relying only on historical data is not gonna be great
2) alert
3) activity changes
Define learning phenomenon
Systematic relationship between the amount of 1) ___ in performing a 2) __ and the __ required to perform it
1) experience
2) task and the time
The learning phenomenon means that variable costs tend to 1) __ per unit as the volume of activity 2) ___
-so the linear cost estimate will 3) ___ the variable cost per unit
1) decrease
2) increases
3) overstate
The learning phenomenon affects the most 1) ___ activities (2) ____ costs)
1) professional
2) overhead
What are Data problems
-1) __ data
-2) o__
-3) in__
-4) al__ and d___y costs
-5) mi ___ t___ periods
1) missing
2) outliers
3) inflation
4) allocated and discretionary
5) mismatched time
SB 6-1
Define cost management
provides information about the costs of 1) p__ , pr___, and s__ 2) u_ and p__ by an organization
1) process, products, and services
2) used and produced
A major role of cost management is to report the cost of 1) pr___ or pro___ the organizations 2) pro___/s____
1) producing or providing
2) product/services
What’s the purpose of calculating the individual product cost?
The accountant needs to provide the individual product cost to the various products managers so to make 1) ___ regarding 2) pri___, 3) pr____, 4) pro__, etc.
1) decisions
2) pricing
3) production
4) promotion
What are keys to good cost management system?
-oriented to the needs of the 1) d___ m____
-designed so that 2) __ 3) e___ c____ (called the ____ ___ test)
1) decision makers
2) benefits
3) exceed costs (cost benefit test)
The objective of the cost management system is to provide 1) i___ about costs 2) __t for 3) d___ m___
1) information
2) relevant
3) decision making
Costs that are common to 2 or more cost objects are likely to be 1) al___ to those cost objects on a somewhat 2) ar___ basis
1) allocated
2) arbitrary
Cost allocation can lead to
1)___ information and 2) __ decisions
1) misleading
2) poor
the cost management system 1) a__ and r__ costs about 2) p__, p__, and se___
1) accumulates and reports
2) processes, products, and services
The goal of well-designed cost management system is to balance the 1) po__ d___ in reported product cost with the cost of conducting a special study every time a manager needs to make decision
1) potential distortion
Our goal in designing the cost management system is to ensure that we make the 1) ___ ___-off between cost of 2) b__ ___ons and the cost 3) d___ the __
1) best trade-off
2) bad decisions
3) developing the info
Reasons to calculate product/service
Decision Making
-deciding what to ___
-setting ____
-knowing the ____ and c__ of in___
-deciding what to sell
-setting prices
-knowing the COGS and cost of inventory
How costs from the cost pool are assigned and allocated to the cost object is illustrated on a(n) ___ diagram
cost flow
3 points relate to designing a new cost system for managerial purposes
-cost system should have a 1) ___ f___
-different cost information is used for 2) __ pu___
-cost information for managerial purposes must meet the 3) ___ test
1) decision focus
2) different purposes
3) cost-benefit test
3 points relate to designing a new cost system for managerial purposes
1. Cost system should have a decision focus
cost systems must meet the needs of the 1) ___-m___ (c__/u__) of cost accounting. If the cost system is not designed to provide these data, it will not meet the 2) ___ needs
it’s important to design the cost system so that the cost data provided by the cost system facilitate the 3) ___-____ of the user
1) decision-makers (customers/users)
2) manager’s
3) decisions making
3 points relate to designing a new cost system for managerial purposes
2. Different cost information is used for different purposes
What works for one purpose will not necessarily work for another purpose. Cost information must provide the 1) ap__ __ for its 2) in____ p___
1) appropriate data
2) intended purpose
3 points relate to designing a new cost system for managerial purposes
3. Cost information for managerial purposes must meet the cost-benefit test
Cost information can always be improved. However, the 1) be___of improvements (ex better decisions) must 2) ou___ the cost of making the improvements.
So ask the basic question, “will the benefits outweigh the costs”
1) benefit
2) outweigh
What’s the equation for the basic inventory equation (cost flow model)?
___ + __ - __ = ___
Beginning Balance + Transfers In - Transfers Out = Ending Balance
BB + TI - TO = EB
BB + TI - TO = EB
Beginning Balance + Transfers In - Transfers Out = Ending Balance
For this equation, which accounts are true for it (3)?
-raw materials
-work in process
-finished goods
Lenox manufactures a special fluid at its Hazard plant. Operating data follows
Materials 2,499,000
Labor 214,200
Manufacturing OH 856,800
The Hazard plant produced 1,050,000 liters in November. The plan has never any beginning/ending inventories.
Compute the cost per liter of liquid produced in November.
Add up all costs
2,499,000 + 214,200 + 856,800 = 3,570,000
3,570,000/1,050,000 = 3.40 cost per liter
Skilled workers that can easily track their time to products being produced are classified as direct __ ___
direct labor costs
Costs that cannot be directly traced to products at a reasonable cost are classified as ___ ___ costs
manufacturing overhead costs
Allocation base
-needs to be measured for each 1) __ ob__ before it can be used to allocate 2) ___ ____
-a common allocation base is 3) __ l____
-it should have a 4) ___ 5) __ and ___ with the costs incurred
1) cost object
2) manufacturing overhead
3) direct labor
4) direct
5) cause and effect
Define predetermined overhead rate
1) __ per __ of the 2) ___ b__ used to charge 3) ___ to products
always used 4)____ annual OH cost
1) cost per unit
2) allocation base
3) overhead
4) estimated
What’s the equation for predetermined OH rate?
predetermined OH = ____ / ___
estimated OH/estimated allocation base
Major inventory components that go into the production of products and can be easily assigned to the cost of the products are classified as direct ___ ___
direct material costs
If most overhead costs are employee-related and affected by wage rate, the best choice for overhead allocation is probably direct ___
direct labor cost
If costs are largely determined by the labor activity regardless of the seniority/skills, direct ___ would be a better choice
direct labor hours
Predetermined OH Rates
Why use estimates?
-products need to have costs 1) ap____/_____d d___ the period
-the 2) ___ amount of 3) in___t costs is 4) ____ known until the 5) ___ of the period
1) applied/allocated during
2) exact
3) indirect costs
4) not
5) end
What’s a characteristic of a discrete production process?
It includes a distinct 1) ___of s____ that all units 2) ___ or __ go through
1) set of steps
2) may or may not
Define job costing
records 1) __ and __ for each 2) i___ __
an accounting system that traces costs to individual units or to 3) s___ ___, __, or ___ of goods
1) cost and revenues
2) individual job
3) specific jobs, contracts, or batches of goods
Define process costing
1) d___ se__ and r___ costs for each unit
An accounting system used when 2) i___ units are produced through a series of uniform 3) __steps
1) doesn’t separate and record
2) identical
3) production
What are production flows for job costing
- c___tion
- co___
- h____
- m___s
- ___ accounting
- se__
- ____ homes
construction
consulting
hospitals
movies
public accounting
services
custom homes
(all are job shops)
what type of product is job costing ?
ex. hospitals, consulting, construction
its a c _____ product
customized product
What are production flows for process costing?
petroleum, paint, tissues
(all continuous flow processing)
What type of product are process costing?
h___ product
homogenous product
Define continuous flow processing
System that generally 1) __-produces a __, __ output in a 2)___ process.
1) mass-produces a single, homogeneous
2) continuing
SB 7-1
Define job
1) p__/s___ that can be 2) e___ (or at a 3) __cost) 4) __ from other products/services
for which the firm desires that a 5) __ cost be recorded for the product/service
6) ____ba___of items
1) product/service
2) easily
3) reasonable
4) distinguished
5) specific
6) small batches.
Define job shops
firms that ___ j__s
1) produce jobs
Define job cost sheet
1) ___ of the 2) __ of the job kept in the accounting system.
1) record
2) cost
The job cost sheet is a 1) _____ account that provides the 2) ___ for the 3) ____ account which is the 4) __ account
the 5) ____ on the balance sheet is a 6) ___ account which is supported by a subsidiary ledger for each customer
1) subsidiary ledger
2) detail
3) work in process
4) control
5) accounts receivable
6) control
Define Subsidiary Ledger Account
account that 1) ___ 2) __ transactions for a 3) sp___ 4) ___, ___, or j__
1) records
2) financial
3) specific
4) customer, vender or job
Define Control Account
account in the 1) ___ ledger that 2) s___ a set of 3) ___ ledger accounts
1) general
2) summarizes
3) subsidiary
What are the 3 components of product costs
direct materials (can be traced)
direct labor (can be traced)
manufacturing costs (allocate it/assign/apply)
All direct materials, that includes 1) ___ ____, and other materials are 2) ___ as 3) ___
how would the journal entry look like?
1) storage, supplies
2) debited
3) material inventory
Materials Inventory
Accounts Payable
The journal entry to record the direct materials transferred to a job includes a debit to _____
Work in Process Inventory
The journal entry to record the direct materials transferred to a job includes a credit to ______.
materials inventory
The entry to record the direct labor incurred and assigned to a job includes a credit to ____
wages payable
The entry to record the direct labor incurred and assigned to a job includes a debit to ______.
work in process inventory
The journal entry to record the purchase of direct materials on account includes a debit to ____
materials inventory
The journal entry to record the purchase of direct materials on account includes a credit to ______
accounts payable
The journal entry to record the applied manufacturing overhead cost includes a debit to ______.
Work in process inventory
The journal entry to record the transfer of inventory to finished goods includes a credit to ______
Work in Proces Inventory
The journal entry to record the transfer of inventory to finished goods includes a debit to ______.
finished goods
The journal entry to record the purchase of direct materials on account?
Materials Inventory
Accounts Payable
The journal entry to record the direct materials transferred to a job ?
Work In Process Inventory
Materials Inventory
The entry to record the direct labor incurred and assigned to a job ?
Work in Process Inventory
Wages Payable
what’s the entry for sale of finished goods?
COGS
Finished Goods Inventory
Accounts Rec
Revenue
Look at other entries on your piece of paper
When a company sells finished goods on account for $75,000 that cost $50,000 to produce, the accounts debited include ____ and____
COGS and Accts Rec
Direct labor is different from direct materials. There is no 1) ___, so the cost is recorded in the 2) ___ account
and the accounting document that records this cost is the 3) ___, which includes fields for the 4)__ and 5) ___/___
-the time card can be physical or virtual to fill out
1) “store”
2) work in process
3) time card
4) job number
5) start/end times
Manufacturing overhead is more complicated than direct labor and direct materials.
It’s pooled 1) ___ into 2) __ account and then allocated to 3) i___ jobs based on an arbitrary allocation base
1) together
2) one
3) individual
When manufacturing OH control is more than applied manufacturing OH, it’s _____ overhead
EX.
actual overhead is $50,000 and applied overhead is $48,000, then overhead is underapplied
underapplied OH
If actual overhead is $45,000 and applied overhead is $48,000, then overhead is ____
overapplied
if you switch the numbers then its underapplied
Summary of Steps in Job Costing System
- Select an 1) ___ for computing the 2) ___ rate
- Estimate 3) __ for each overhead 5) __
- Calculate the 6) ___ rate by dividing the estimated 7)
- Record 8) ___ costs for each 9) __ they are incurred
- Apply 10) ___ using the 11) ___ rates as jobs are 12) ___ or when the 13) ____ ___ are prepared
- If there is over or underapplied overhead, either 14) ___ it ___ directly to ___ or allocate it to and 15) ___ inventories
1) allocation base
2) predetermined
3) overhead
5) cost
6) predetermined
7) allocation
8) direct
9) job
10) overhead
11) predetermined
12) completed
13) financial statements are prepared
14) write it off directly to COGS
15) COGS and ending inventories
When applied overhead is more than actual overhead, the journal entry made at the end of the period ______ Cost of Goods Sold
reduces
too much was applied, the entry will credit COGS
When a company uses both an Applied Manufacturing Overhead account and a Manufacturing Overhead Control account, the journal entry to write off overapplied or underapplied overhead will always debit____
applied manufacturing overhead
When overhead is applied to products, the ___ account is credited
applied manufacturing overhead
Define normal costing
cost of determined by 1) ____ ____, 2) ___ ___, and 3) ___ ___ using the 4) ___ and the 5) ____ allocation base
1) actual DM
2) actual DL
3) applied OH
4) POHR
5) actual
Define actual costing
cost of job determined by 1) ___ ___, 2) ___ ___, and 3) ___ ___ using 4) ___ ____ ___ and the 5) ____ allocation base
1) actual DM
2) actual DL
3) applied OH
4) actual OH rate
5) actual
Define standard costing
cost of job determined by 1) ____ ____ DM, 2)____ , and applied OH using the 3) ___ ___ and a 4) _____ allocation base
1) standard (budgeted) DM
2) standard DL
3) POHR
4) standard (budgeted)
When it comes to using Using Normal , Actual, and Standard Costing. Which ones do we use?
we use normal and standard. Not actual costing
Debits to the Manufacturing Overhead Control are to record all of the following except _
direct materials
indirect materials
plant depreciation
direct materials
2 common events that lead to manufacturing OH being applied and recorded-
-preparing ____ statement
-com____ a job
-preparing financial statements
-completing a job
Job costing is similar for both manufacturing and service organizations.
What are the 3 primary differences ?
- Service organizations generally use 1) fe ___ ___ __than 2) ___ and s__ companies
- Service companies’ overhead accounts have slightly different names (3) ___ control, ___ overhead, etc)
- Service companies finished goods (or services) are charged to the cost of 4)___ rather than to 5) ___
1) fewer direct materials
2) manufacturing and service companies
(3) Service overhead control, applied service overhead,
4) services billed rather than to 5) ___
Improprieties in job costing are caused by one or more actions
- Misstating the 1) ___ of __ion
- 2) ___ costs to the 3) ___ jobs or categories
- 4) m__ the cost
1) stage of completion
2) Charging costs
3) wrong jobs or categories
4) Misrepresenting
Misstating the Stage of Completion
1) __ needs to know the stage of completion of the project to evaluate 2) __ and 3) ___ costs.
ex. If a job is 60% completed but 80% of the total budget has been spent, job supervisors may be tempted to 4) ______ the percentage of completion
1) management
2) performance
3) control
4) overstate
Charging Costs to the Wrong jobs
to avoid the appearance of cost 1) __ on jobs, job supervisors sometimes instruct employees to charge costs the to wrong jobs
At a minimum, this misleads managers who rely on 2) ___ cost information for 3) __, ___, and other decisions.
At worst, it cheats people who are paying for a job on a 4) ___ plus f__ that doesn’t really cost as much as claimed
-this is 5) __ and __
1) overruns
2) accurate
3) pricing, cost control
4) cost plus fee
5) unethical and illegal
Misrepresenting the Cost of Jobs
Managers might know the correct cost of the job but intentionally deceive a customer to obtain a larger payment.
They might perceive to obtain a larger loan for the job or other reasons. Government auditors generally work on site…
Costs can be misrepresented by choosing to allocate OH cost using the method that provides the most favorable result rather than attempting to find an allocation base that truly represents how OH resources are used.
When a project has a cost overrun it ______ schedule
maybe on, ahead, or behind
When compared to jobs, projects are more ______ to evaluate.
difficult
The journal entry to record the applied manufacturing overhead cost includes a debit to ______.
Work in process inventory
Define Manufacturing OH Control
used to track all 1) ____ ____ expenses (2) t____ account, wont exist on financial statements)
-indirect labor (debit 3) \_\_\_\_\_ , credit 4) \_\_\_\_ \_\_\_\_) and material costs (debit side of manufacturing OH control) -property tax (debit 5) \_\_\_\_\_\_ , credit 6) \_\_\_
1) actual OH
2) temporary
3) Manu OH control
4) wages payable
5) Manu OH control
6) Accts Payable
Applied Manufacturing OH – used to 1) ____ OH to jobs based on the 2) ____ ____ _
-entry is always the same
(this is for 2 accounts)
Debit 3) ___
Credit 4)_____
-sometimes it can be combined 5) \_\_\_\_\_\_\_\_\_ 6) \_\_\_\_\_
1) allocated
2) predetermined OH rate (POHR)
3) WIP
4) Applied Manu OH
5) Actual MAnu OH
6) Applied Manu OH
