Managment And Cost Accounting Flashcards
What are the three functions management accounting is used for?
- Planning
- Controlling
- Decision making
What are the three types of organisations?
- Service
- Retailers
- Manufacturers
Define the cost recognition criteria,
- Sacrifice made for goods or services
- Expected to bring current or future benefit to the origination
What is a cost object?
Item for which costs are measured.
Management Accounting falls under the following:
- Internal focus
- Limited rules
- Future oriented
- Internal evaluation
- Detailed information about segments
- Broad, multi-disciplinary
True or False?
True
What are the three components involved in “classification by traceability”?
- Direct costs
- Cost driver
- Indirect costs
What is a direct cost?
Cost traceable to a single cost object.
What is a cost driver?
Factor that affects cost.
What are indirect costs?
Costs that cannot be directly traced to a cost.
What are the two cost classification techniques?
- Classification by traceability
- Classification by function
What are the two “costs” under the classification by function technique?
Production costs
Non-production costs
“All costs incurred in making the product”
Is what type of cost under classification by function?
Production Costs
What are the three types of production costs when classifying by function?
Direct materials
Direct labour
Overhead
What is the “prime cost”?
Sum of direct material cost + direct labour cost
What is the “conversion cost”?
Sum of direct labour cost + overhead costs
What are the two non-production costs? Give a definition for each.
Selling costs
- cost necessary to market and distribute a product or service.
Administrative costs
- any cost outside of factory and not selling cost, e.g general manager salary.
What is a problem with just using unit costs as the selling price?
Doesn’t take into account non-production cost, thus must set selling price to cover production cost and non-production costs while still maintaining a profit.
What is job costing?
Calculating the price for each individual job.
How do you calculate unit cost? - Job Costing
total job costs divided by units produced.
How do you calculate unit cost? - Process Costing
Process costs for period / units produced in period
When is process costing appropriate?
Amount of units produced not known until late in process (e.g manufacturing bricks).
How are costs accumulated in a process costing environment?
By process or department, not individual job.
What is a materials requisition form and why is it used?
Identifies materials used on a job. Allows for calculation of direct material cost for each job.
What is a job cost record and why is is used?
Record of direct labour for each job. Allows tracking and therefore calculation of total direct labour cost per job.
What is the formula for pre-determined overhead rate?
Estimated overhead costs / estimated activity driver
What is a ‘job order cost record’ and what does it record?
Record of total cost of job.
Records:
- Material cost
- Labour cost
- Overhead cost
Steps for calculating raw materials inventory
Opening balance
+ purchases
— transferred to work in process
= Closing balance
Steps for calculating work in process inventory
Opening balance
+ raw materials
+ direct labour
+ overhead
— transferred to finished goods
= Closing balance
Steps for calculating finished goods inventory
Opening balance
+ transferred in from work in process
— transferred to COGS
= Closing balance
Problems using actual overhead?
- Non-uniform incurrence :
some payments incur all at once (e.g insurance payment), thus driving actual overhead cost per job for that period dramatically more than any other period. Can result in customer dissatisfaction. - Non-uniform production:
cost driver hours used to determine overhead may vary throughout the year. Thus, using actual overhead cost will result in different selling prices. Can result in customer dissatisfaction. - Cannot wait till end of year to allocate overhead.
- Activities included in overhead benefit all jobs (e.g insurance paid all in one period, but gives benefit to all jobs over all periods of year).
Problems using estimated overhead rates?
- Not always accurate, can result in overpricing or underpricing jobs.
- No perfect common cost driver.
- Must control overhead costs.
- Requires forecasting of overhead costs, takes time and money.
