Final Exam (Comprehensive) Flashcards

Question

What are allocations? What are they used for? (In what process are they used?) (CHP 3) (Exam 1)

Answer 1

Allocating manufacturing overhead to jobs simply means that we will be "Splitting up" or "Dividing" the total manufacturing overhead costs among the jobs we produced during the year. - EX - We would put a "Piece" of the price of MOH to each product to make up for the costs.

Answer 2

Predetermined MOH rate = Total estimated Manufacturing Overhead costs ------------------------------------------ Total Estimated amount of the allocation base (Cost Driver)

Answer 3

Step 1 - The company estimates its total manufacturing overhead costs for the coming year Step 2 - The company selects an allocation base and estimates the total amount that will be used during the year. Step 3 - The company calculates its predetermined manufacturing overhead (MOH) rate using the information estimated in steps 1 and 2. Step 4 - The company allocates some manufacturing overhead to each individual job as follow: MOH allocated to a job = Predetermined MOH rate X Actual amount of allocation based by the job.

Answer 4

Overallocated manufacturing overhead - The amount of manufacturing overhead allocated to jobs is more than the amount of manufacturing overhead costs actually incurred; results in jobs being overcosted - Occurs when jobs have been overcosted. The estimated is greater than the actual MOH incurred and distributed to products. Underallocating manufacturing overhead - The amount of manufacturing overhead allocated to jobs is less than the amount of manufacturing overhead costs actually incurred; this results in jobs being undercosted. - Occurs when jobs have been undercosted. The estimated is less than the actual MOH incurred and distributed to products. These Over and Under allocations are fixed when pricing the COGS. We would either increase COGS for underallocation or Decrease COGS for overallocation.

Answer 5

Robotic process automation (RPA) - A software system that observes a person or user performing a task, recognizes patterns in that user activity, and creates a "bot" tp replicate that person's task processes.

Answer 6

Pivot tables are tables made in Excel these tables have the ability to sort, filter, and graph data. To make a pivot table you would select any cell in the data set and go to the ribbon then go to "Insert" and click "Pivot Table" Then you would drags what you wants columns and rows you want as well as values.

Answer 7

Plantwide overhead rate - when overhead is allocated to every product using the same manufacturing overhead rate. You would use the predetermined MOH rate formula Total Estimated MOH / Cost driver

Answer 8

Direct Materials + Direct Labor + MOH = Total Job Cost

Answer 9

Separate manufacturing overhead rates are established for each department. You would pick this way of costing to get a more accurate cost for manufacturing.

Answer 10

(ABM) Using activity-based cost information to make decisions that increase profits while satisfying customers' needs.

Answer 11

Lean thinking is having A philosophy and business strategy of operating without waste

Answer 12

D - Defects O - Overprotection W - Waiting N - Not utilizing people to their full potential T - Transportation I - Inventory M - Movement E - Excess processing

Answer 13

Prevention costs - Costs incurred to avoid poor-quality goods or services. -EX- Training personnel, Evaluating potential suppliers, Using better materials Appraisal costs - Costs incurred to detect poor-quality goods or services -EX- Inspection of incoming materials, Inspection at various stages of production, Product testing, cost of inspection. Internal failure costs - Costs incurred when the company detects and corrects poor-quality goods or services before making delivery to customers. -EX- Cost of rework, Cost of making rejected units, disposal of rejected units, breakdown External failure costs - Costs incurred when the company does not detect poor-quality goods or services until after delivery is made to customers -EX- Lost profits from reputation for poor quality, Warranty costs, Sales returns and allowances due to defects, cost of recalls.

Answer 14

1 - Remove Irrelevant data 2 - Remove duplicate records 3 - Standardize data 4 - Deal with missing data 5 - Filter out data outliers

Answer 15

Notated as R, this statistical measure indicates the degree of correlation between two variables. It's value can range from -1 to 1. A negative value means the variables move in opposite directions, where as positive means that variables move in the same direction. The closer to 1 the most correlation it has. TO USE THE FORMULA In the ribbon go to formulas --> more functions -> Statistical --> CORREL then select the two variables of interest

Answer 16

Departmental overhead rate = Total estimated departmental overhead cost pool ------------------÷---------------------- Total estimated amount of the departmental allocation

Answer 17

Activity cost allocation rate = Total estimated activity cost pool ------------------÷---------------------- Total estimated activity allocation base

Answer 18

You would get the total estimated amount of the cost pool then divide it by the allocation base/cost driver Estimates total cost pool ------------------------------------- Total estimated allocation base

Answer 19

Variable cost - Costs incurred for every unit of activity. As a result, total variable costs change in direct proportion to changes in volume. Fixed costs - Costs that do not change in total despite wide changes in volume. Mixed costs - Costs that change but not in direct proportion to changes in volume. Mixed costs have both variable cost and fixed cost components.

Answer 20

Relevant range - The band of volume where total fixed costs remain constant at a certain level and where the variable cost per unit remains constant at a certain level.

Answer 21

1 - Scatterplot Analysis 2 - High-Low Method 3 - Regression Analysis 4 - Cost-Volume-Profit

Answer 22

Variable Costing - The costing method that assigns only variable manufacturing costs to products. All fixed manufacturing costs (Fixed MOH) are expensed as period costs. Also known as direct costing. The difference between both ways of costing is in the way Fixed MOH is treated. Variable costing treats FMOH as a period cost unlike Absorption that treats it like part of the product through COGS by allocating the cost into products. FORMULA Product Cost = DM + DL + Variable manufacturing cost Sales (-) Variable cost ------------------------------ Contribution Margin (-) Fixed Costs --------------------------------- Net Operating Income

Answer 23

Absorption Costing - The costing method where products "absorb" both fixed and variable manufacturing costs Absorption costing allocates fixed MOH into the product and treats it as product costs through COGS. Sales (-) COGS ----------------------- Gross margin (-) Operating costs --------------------------- Net operating income

Answer 24

Linear Regression - Is commonly used to analyze relationships between one cost driver (Independent Variable) and total costs (Dependent variable) Multiple Regression - Is used when multiple cost drivers affect total costs or other outcomes, making it essential for more complex cost behavior analysis. In summary, linear regression is suitable for analyzing one cost driver, while multiple regression is ideal when several factors affect costs. These tools enhance managerial accounting by providing insights into cost behavior, budgeting, and strategic decision-making.

Answer 25

Select both variables (x)(y) then in the ribbon on excel click quick layout then scatterplot then add tredline, select display R-Square

Answer 26

High-Low Method Y(High) - Y(Low) --------------------------- X(High) - X(Low) Gives Slope or our (V) for the equation Y = V(X) + F Then we solve for F By using either the high or low numbers insert them into the formula then solve for F Then we get our equation

Answer 27

Product Cost DM + DL + V MOH + F MOH Operating Income Sales (-) COGS -------------------- Gross profit (-) op expenses ------------------- Operating income

Answer 28

Product Cost DM + DL + VMOH Operating Income Sales (-) Variable costs ------------------------------- Contribution Margin (-) Fixed costs ----------------------------- Operating income

Answer 29

Contribution Margin = Sales - Variable costs Its used for many things some being break-even point(Units), required sales (Units), etc.

Answer 30

Cost-Volume-Profit analysis - (CVP) Expresses the relationships among costs, volume, and profit or loss. - Managers use it to determine the sales volume that will be needed just to break even or to cover costs. They also use it to determine the sales volume that will be needed to earn a target profit.

Answer 31

Margin of safety - Excess of expected sales over breakeven sales; the drop in sales a company can absorb without incurring an operating loss. The margin of safety = Expected sales ($ or units) - BEP($ or units) The margin of safety (%) = The margin of safety (units or $) ----------------------------------------------- Expected (or actual) sales (Units or $) Gives us a number we would have to hit to incur a loss.

Answer 32

Operating Leverage - The relative amount of fixed and variable costs that make up a firm's total costs Operating Leverage Factor = Contribution Margin ------------------------------ Operating Income It means The operating leverage factor, at a given level of sales, indicates the percentage change in operating income that will occur from 1% change in sales volume. In other words, it tells us how responsive a company's operating income is to changes in sales volume.

Answer 33

Scenario Analysis - The process of experimenting with different scenarios to see wat would happen to company profits under those conditions, frequently using three scenarios: Base case, Best case, and Worst case.

Answer 34

Sales Revenue (-) Variable costs --------------------------- Contribution Margin

Answer 35

Contribution Margin ------------------------------- Sales revenue

Answer 36

Sales in Units = Fixed Exp + Operating income --------------------------------------------- Contribution Margin EX - Fixed exp 7,000, CM 14. Breakeven 7,000 + 0 ---------------- 14 = 500 posters to breakeven

Answer 37

BEP($)= Fixed expenses + Operating Income ---------------------------------------------------- Contribution Margin Ratio