Introduction to MS/ Cost Concepts Flashcards
are raw materials that can be physically and directly associated with the finished product during the manufacturing process.
Direct materials
is the work of factory employees that can be physically and directly associated with converting raw materials into finished goods.
Direct labor
consists of costs that are indirectly associated with the manufacture of the finished product.
Manufacturing overhead
✓ Do not physically become part of the finished product.
✓ Cannot be traced because their physical association with the finished product is too small in terms of cost.
✓ Companies account for indirect materials as part of manufacturing overhead.
Indirect materials
has no physical association with the finished product, or it is impractical to trace the costs to the goods produced. Companies classify indirect labor as manufacturing overhead.
Indirect labor
includes indirect materials, indirect labor, depreciation on factory buildings and machines, insurance, taxes and maintenance on factory facilities.
Manufacturing overhead
which shows the cost of completed goods on hand.
Finished Goods
which shows the cost applicable to units that have been started into production but are only partially completed
Work in Process
the monetary amount of the resources given up or sacrificed to attain some objective such as acquiring goods and services.
Cost
describes how a cost behaves or changes as the amount of cost driver changes.
Cost behavior
an account in which a variety of similar costs are accumulated prior to allocation to cost objects. It is a group of costs associated with an activity. Example: overhead control account.
Cost pool
the intermediate and final disposition of cost pools. Example: product, job, process.
Cost object
a factor that causes a change in the cost pool for a particular activity. It is used as a basis for cost allocation; any factor or activity that has a direct cause-effect relationship.
Cost driver
any event, action, transaction or work sequence that incurs costs when producing a product or providing a service
Activity
is the study of how specific costs respond to changes in the level of business activity.
Cost behavior analysis
identifies the activity that causes changes in the behavior of costs. With an appropriate activity index, companies can classify the behavior of costs into three categories: variable, fixed, or mixed.
activity index
are costs that vary in total directly and proportionately with changes in the activity level. A variable cost remains the same per unit at every level of activity.
Variable costs
are costs that remain the same in total regardless of changes in the activity level.
Fixed costs
are costs that contain both a variable and a fixed element.
Mixed costs
is the range of activity over which a company expects to operate during the year
relevant range
The kind of accounting concerned with providing information to management in making decisions about the operations of the business
a. Responsibility accounting
b. Cost accounting
c. Management accounting
d. None of the above
C. Managerial Accounting
Which of the following is not a characteristic of Management Services?
a. MS is broad in scope
b. MS involves problem-solving affecting the future operations of the client
c. Beneficiary of service is management
d. MS is repetitive as far as the same client is concerned
d. MS is repetitive as far as the same client is concerned
A person who is qualified by education, experience, technical ability, and temperament to advise or assist businessmen on a professional basis in identifying, defining, and solving specific management problems involving the organization, planning, direction, control, and operation of a firm is called a
a. Management Consultant
b. Certified Public Accountant
c. Accounting Technician
d. Management Accountant
a. Management Consultant
Management accounting is considered successful when it
a. Helps managers improve their decision
b. Is in accordance with GAAP
c. Is relevant
d. Is accurate
a. Helps managers improve their decision
- The major difference(s) between financial and management accounting is that
a. Financial accounting reports are prepared primarily for users external to the company
b. Management accounting is not under the jurisdiction of the Securities and Exchange Commission
c. Government regulations do not apply to management accounting
d. All of the above are differences between financial and management accounting
d. All of the above are differences between financial and management accounting
The following characteristics refer to Financial Accounting except
a. Provides information to external users
b. Emphasizes on objective data
c. Has no externally imposed standards
d. Generates general purpose financial statements
c. Has no externally imposed standards
Managerial accounting information is generally prepared for
a. Stockholders
b. Creditors
c. Managers
d. Regulatory agencies
c. Managers
Which of the following is not an internal user?
a. Creditor
b. Department manager
c. Controller
d. Treasurer
a. Creditor
The major reporting standard for presenting managerial accounting information is
a. Relevance
b. Generally accepted accounting principles
c. The cost principle
d. The current tax law
c. The cost principle
The term “prime costs” refers to
a. The sum of direct labor costs and all factory overhead costs
b. The sum of direct materials costs and direct labor costs
c. Manufacturing costs incurred to produce units of output
d. All costs associated with manufacturing other than direct labor and direct materials costs
b. The sum of direct materials costs and direct labor costs
The term “conversion costs” refers to
a. Costs that are associated with marketing, shipping, warehousing, and billing activities
b. The sum of direct labor costs and all factory overhead costs
c. The sum of direct materials costs and direct labor costs
d. Manufacturing costs incurred to produce units of output
b. The sum of direct labor costs and all factory overhead costs
The sum of the direct materials costs, direct labor costs, and manufacturing overhead incurred in the current year is the
a. Cost of goods manufactured
b. Cost of goods available for sale
c. Total cost of work in process
d. Total manufacturing cost
a. Cost of goods manufactured
Which one of the following does not appear on the balance sheet of a manufacturing company?
a. Finished goods inventory
b. Work in process inventory
c. Cost of goods manufactured
d. Raw materials inventory
a. Finished goods inventory
Cost of goods manufactured is calculated as follows
a. Beginning WIP + direct materials used + direct labor + manufacturing overhead + ending WIP
b. Direct materials used + direct labor + manufacturing overhead – beginning WIP + ending WIP
c. Beginning WIP + direct materials used + direct labor + manufacturing overhead – ending WIP
d. Direct materials used + direct labor + manufacturing overhead – ending WIP – beginning WIP
c. Beginning WIP + direct materials used + direct labor + manufacturing overhead – ending WIP
Which one of the following would not be classified as manufacturing overhead?
a. Indirect labor
b. Direct materials
c. Insurance on factory building
d. Indirect materials
b. Direct materials
The wages of a timekeeper in the factory would be classified as
a. A prime cost
b. Direct labor
c. Indirect labor
d. Compliance costs
c. Indirect labor
The product cost that is most difficult to associate with a product is
a. Direct materials
b. Direct labor
c. Manufacturing overhead
d. Advertising
c. Manufacturing overhead
Product costs consist of
a. Conversion costs and unexpired expense
b. Prime costs and manufacturing overhead
c. Selling and administrative expenses
d. Period costs
b. Prime costs and manufacturing overhead
Costs that are expensed when incurred are called
a. Product costs
b. Direct costs
c. Inventoriable costs
d. Period costs
d. Period costs
Which of the following are period costs?
a. Raw materials
b. Prime costs
c. Conversion costs
d. Selling expenses
d. Selling expenses
Costs that can be easily traced to a specific department are called
a. Direct costs
b. Indirect costs
c. . Product costs
d. Manufacturing costs
a. Direct costs
Indirect costs
a. Can be traced to a cost object
b. Cannot be traced to a particular cost object
c. Are not important
d. Are always variable costs
b. Cannot be traced to a particular cost object
Variable costs are those costs that
a. Vary inversely with changes in activity
b. Vary directly with changes in activity
c. Decrease on a per-unit basis as activity increases
d. Increase on a per-unit basis as activity increases
b. Vary directly with changes in activity
As activity decreases, unit variable cost
a. Increases proportionately with activity
b. Decreases proportionately with activity
c. Remains constant
d. Increases by a fixed amount
c. Remains constant
Fixed costs are those costs that
a. Vary directly with changes in activity
b. Vary inversely with changes in activity
c. Increase on a per-unit basis as activity increases
d. Remain constant as activity changes
d. Remain constant as activity changes
The fixed cost per unit
a. Will increase as activity increases c. Will decrease as activity increases
b. Will increase as activity decreases d. Will exhibit the behavior described in choices “b”
and “c”
d. Will exhibit the behavior described in choices “b”
and “c”
Which of the following statements is false?
a. At zero production level, fixed costs are also zero
b. At zero production level, fixed costs are usually positive
c. At zero production level, variable costs are usually zero
d. At zero production level, total costs equal total fixed costs
a. At zero production level, fixed costs are also zero
The term “relevant range” as used in cost accounting means the range over which
a. Cost relationships are valid
b. Production may vary
c. Relevant costs are incurred
d. Costs may fluctuate
a. Cost relationships are valid
The salaries you could be earning by working rather than attending college are an example of
a. Misplaced Cost
b. Opportunity Cost
c. Sunk Cost
d. Outlay Cost
b. Opportunity Cost
Sunk costs
a. Are relevant to long-term decisions but not to short-term decisions
b. Are relevant to decision making
c. Are subtitles for opportunity costs
d. In themselves are not relevant to decision making
b. Are relevant to decision making
If the total cost of alternative A is P50,000 and the total cost of alternative B is P34,000, then P16,000 is termed the:
a. Opportunity cost
b. Sunk cost
c. Out-of-pocket cost
d. Differential cost
d. Differential cost
The term incremental cost refers to
a. The profit foregone by selecting one choice instead of another
b. The additional cost of producing or selling another product or service
c. A cost that continues to be incurred in the absence of activity
d. A cost common to all choices in question and not clearly or feasibly allocable to any of them
b. The additional cost of producing or selling another product or service
These are among the methods of segregating fixed cost and variable costs except
a. Simple regression analysis
b. Scattergraph
c. Breakeven method
d. High-low method
c. Breakeven method
The principal advantage of the scatter-diagram method over the high-low method of cost estimation is that the scatter-diagram method
a. Includes costs outside the relevant range.
b. Considers more than two points.
c. Can be used with more types of costs than the high-low method.
d. Gives a precise mathematical fit of the points to the line.
b. Considers more than two points.
Which of the following statements is true when referring to the high-low method of cost analysis?
a. The high-low method has no major weaknesses
b. The high-low method is very hard to apply
c. In essence, the high-low method draws a straight line through two data points
d. None of the above is true
c. In essence, the high-low method draws a straight line through two data points
The quantitative method that will separate a semi-variable cost into its fixed and variable components with the highest degree of precision is
a. Simplex method
b. Least squares method/Regression Analysis
c. Scattergraph method
d. High-low method
b. Least squares
Simple regression analysis involves the use of
Dependent variables Independent variables
a. One None
b. One One
c. One Two
d. None Two
A measure of the extent to which two variables are related linearly is referred to as
a. Sensitivity analysis
b. Input-output analysis
c. Coefficient of correlation
d. Cause-effect ratio
c. Coefficient of correlation
In regression analysis, which of the following correlation coefficients represents the strongest relationship between the independent and dependent variable?
a. 1.03
b. - .02
c. - .89
d. .75
c. - .89
In regression analysis, coefficient of determination is a measure of
a. The amount of variation in the dependent variable explained by the independent variables
b. The amount of variation in the dependent variable unexplained by the independent variables
c. The slope of the regression line
d. The predicted value of the independent variable
a. The amount of variation in the dependent variable explained by the independent variables
