Midterm Exam 1 Flashcards
What is a production/manufacturing/inventorial cost?
Where is it recorded?
Production costs are those incurred in the manufacturing process
= DM + DL + OH
Recorded on B/S in DM, WIP, and FS Inventory accounts until sold –> I/S in COGS
What is a period cost?
Where is it recorded?
Period costs are those unrelated (directly) to the production process.
They are recorded on the I/S under Operating costs
What is a Variable cost?
Variable costs are those that change in proportion to production volume
(ex: DM, DL)
What is a Fixed Cost?
What are the kinds of fixed costs?
Fixed costs are those that remain the same even w/changing production volumes.
Committed/Capacity costs are those that can only be changed long-term.
Discretionary costs are those that are set at a fixed amount for each period but can be changed short-term.
What is a Mixed/ Semi-Variable Cost?
Mixed costs are those with a fixed and variable component, usually in the form of a base charge (regardless of production form) + additional cost per usage
(ex: electricity bills, salesperson w/commission , etc)
What is a Direct Cost?
Direct costs are those that can be directly and efficiently traced to a finished product
What is an Indirect Cost?
How are they allocated?
How are they categorized?
Indirect costs are those that cannot be easily/efficiently traced to a finished product.
They are allocated using cost drivers.
An indirect cost is a Mfg OH cost when its related to assembly of product (ex: Indirect material, indirect labor, etc).
It is a General OH if unrelated to assembly.
What is a sunk cost?
Sunk costs are those made in the past that cannot be recovered.
What is a Differential / Incremental Cost
A Differential costs describes the cost difference between 2 courses of action
What is an Average Cost?
What is it used for?
Average costs are total costs / production volume.
They are used for product pricing.
How do you calculate total production costs?
DM used + DL + MOH
How do you calculate COGM
Beg WIP + Total production - End WIP
How do you calculate COGS
Beg FG + COGM - End FG
What are the purposes of Managerial Accounting?
- (Product) Decision making
- Formulate F/S
- Evaluate company performance
- Org (internal) control
What are the steps to job-order costing
- Procurement of raw materials
- Account for material cost in production (DM and IM)
- Account for DL cots
- Account for IL Costs
- Account for Miscellaneous OH
- Calc MOH rates
- Allocate OH costs to ea production job
- Calc total production cost for ea job
- Calc shipment of FG
10* Calc OH variance
11* Close out OH variance
