Introduction to Cost Accounting

Question 1

It is the process of providing financial information about a business to various types of user.

Answer 1

Cost Accounting

Question 2

These include managers who plan, control, and make decisions.

Answer 2

Internal users

Question 3

These include the government, those providing funds, and those with various interests in the business.

Answer 3

External Users

Question 4

It is the process of using accounting information to report to outside parties, such as investors and creditors.

Answer 4

Financial Accounting

Question 5

What is the primary focus of financial accounting?

Answer 5

It’s the financial statements for use by those who provide funds to the entity and other people who may have financial interest in the firm.

Question 6

What kind of reports prepared under financial accounting are its focus?

Answer 6

They are focused on the enterprise.

Question 7

The information used in financial accounting is based on what?

Answer 7

Historical transaction data

Question 8

The historical transaction data may be what?

Answer 8

Historical
Quantifiable
Monetary
Verifiable

Question 9

This can be used internally to support financial analysis by management, and is necessary for many organized corporations due to the requirements of SEC.

Answer 9

Financial Accounting; or
Historical Transaction Data

Question 10

It addresses the needs of stakeholders within the organization rather than outside stakeholders.

Answer 10

Management Accounting

Question 11

It typically addresses individual or departmental needs rather than the needs of the entire enterprise.

Answer 11

Management Accounting

Question 12

Most of the data in management accounting are what?

Answer 12

Futuristic

Question 13

What kind of data is used in the management accounting system?

Answer 13

Financial Accounting Data

Question 14

What happens if you make management decisions today?

Answer 14

It will have an impact on future financial statements.

Question 15

It is the intersection between financial and managerial accounting

Answer 15

Cost Accounting

Question 16

It is needed and used by both financial and managerial accounting

Answer 16

Cost Accounting

Question 17

Why do cost accounting provide product cost information to external parties?

Answer 17

For credit and investment decisions

Question 18

Why do cost accounting provide product cost information to internal parties?

Answer 18

For planning and controlling

Question 19

This kind of company normally buys a product ready for resale upon receiving it.

Answer 19

Merchandising

Question 20

How to compute the COGS for merchandising company?

Answer 20

Beg. Merchandise Inventory
Add: Purchases
= Cost of Goods Available for Sale
Less: End. Merchandise Inventory
= Cost of Goods Sold

Question 21

What information is especially important in manufacturing?

Answer 21

Information on costs

Question 22

Why is explaining the difference in accounting for merchandising and manufacturing important?

Answer 22

Because most of our accounting education is centered around merchandising

Question 23

This kind of company transforms raw materials into something else the end consumer desired.

Answer 23

Manufacturing

Question 24

It is defined as the mechanical, physical, or chemical transformation of materials, substances, or components into new products.

Answer 24

Manufacturing

Question 25

What does the information produced by cost accounting system provide?

Answer 25

Provides a basis for determining product cost and aids management in planning and controlling operations

Question 26

They help the management in gathering the data needed to determine product costs and generate meaningful FS and other reports

Answer 26

Cost accounting producers

Question 27

Unit cost information is useful in making a variety of what kind of decision?

Answer 27

Marketing decisions

Question 28

What are the lists of important marketing decisions?

Answer 28

1. Bidding on contracts.
2. Analyzing profitability.
3. Determining the selling price of a product.
4. Metting competition.