FiNaL Stretch Flashcards
Fill in the Blank.
Activity-Based Costing (ABC) can be used with either ___A__ or __B___.
A. process
B. job costing
i.e. Activity-based costing may be used by manufacturing, service, or retailing entities and in job-order or process costing systems
WHAT should the base of a cost pool be for a homogeneous cost pool?
A cause-and-effect relationship with the cost items in the cost pool
i.e. A cost allocation base is the common denominator for systematically correlating indirect costs and a cost object
What type of variance would a purchasing manager most likely influence?
Direct Materials Price
WHY? - Because the Purchasing Manager is in charge of purchasing the materials used in production
WHEN is Job-order costing used?
WHEN each product is unique
i.e. preparing a costing method for a gravel pit operation
WHEN is process costing used?
TO assign costs to inventoriable goods or services
i.e. It applies to relatively homogeneous products that are mass produced on a continuous basis (e.g., petroleum products, thread, computer monitors, and a gravel pit operation)
WHAT would be considered a basic assumption of Activity-Based Costing (ABC)?
Products or services require the performance of activities, and activities consume resources
i.e. ABC helps to manage costs by providing more detailed analyses of costs than traditional methods
WHAT is a benefit to a company using activity-based costing (ABC)?
THE gained/ added insight into causes of cost
i.e. ABC Costing allows for the discovery of cost relationships that are unnoticed using traditional accounting methods
WHAT is a nonvalue-added activity in Activity-Based Costing (ABC)?
An activity that does NOT contribute to customer satisfaction or meet a need of an entity
e.g. Raw materials storage - though it may greatly reduced or eliminate a just-in-time (JIT) production system; it still does NOT affect customer value
WHAT factors are considered WHEN using the weighted-average method of process costing in calculating the manufacturing cost per equivalent unit?
Current costs plus cost of beginning work-in-process inventory
i.e. weighted-average method of process costing combines the costs of work done in the previous period and the current period
HOW do you calculate the Sales Mix Variance?
THE change in income due to differences between budgeted sales mix and actual sales mix
i.e. the formula is: [actual unit sales × (actual sales mix % – budgeted sales mix %) × budgeted contribution margin per unit]
HOW do you calculate the Total Direct Labor Price Variance (DLPV)?
Actual # of hours worked x (Standard Hourly Rate - Actual Hourly Rate)
HOW do you calculate the Material Efficiency Variance?
= Standard Costs x (SQ - AQ)
WHAT is the difference between the actual factory overhead and factory overhead applied to production, under the three-variance method?
THIS is the Net factory overhead variance
i.e. The net manufacturing overhead variance is the difference between actual overhead and the amount applied to production
HOW do you define “Labor usage?”
THE difference between standard hours at standard wage rates and actual hours at standard wage rates
i.e. the Formula is [(SQ – AQ) × SP or (SQ × SP) – (AQ × SP)].
HOW do you calculate the Labor Rate Variance?
AQ × (SP – AP)
i.e. Actual Quantity x (Standard Price - Actual Price)