Midterm Flash Cards
From all Quizes + Random Questions added
Managerial Accounting involves gathering accounting data primarily for external users
False, Why and How?
Managerial Accounting aids management in planning, controlling and making sound business decisions regarding company operations.
True, Why and How?
Managerial Accounting can add substantial value to essentially all business majors - regardless of his or her major
True, Why and How?
Managerial Accounting is applicable solely to large corporations.
False, Why and How?
Financial Accounting provides financial information primarily to external users, but can be useful for internal users as well.
True, Why and How?
Managerial Accounting emphasizes relevance, timeliness,precision, and verifiability.
False, Why and How?
Financial Accounting focuses primarily on segment operations.
False, Why and How?
Management and Leadership essentially mean the same thing.
False, Why and How?
Business Ethics is a subordinate concept that can be lightly understood and should be used in both the US and Worldwide economy only when desired (i.e. Competence, Integrity, Credibility).
False, Why and How?
Corporate Social Responsibility focuses only on the needs of customers, employees and, shareholders.
False, Why and How?
Business Ethics and Integrity have been very highly regarded in US business operations over the past decade.
False, Why and How?
The three primary functions of management are - Planning, Controlling, and Decision Making.
True, Why and How?
What are the 3 basic classes of manufacturing costs:
Direct Materials, Direct Labor and Manufacturing Overhead
A Manufacturing Company President’s salary is part of direct labor.
False, Why and How?
The salary of a janitor working in the manufacturing plant is considered a manufacturing overhead cost
True, Why and How?
The cost of glue, nuts, and bolts for a manufacturing company are classified as DM.
False, Why and How?
Direct materials are product costs
True, Why and How?
The salary of a company sales associate is a product cost.
False, Why and How?
Non-manufacturing costs are period costs.
True, Why and How?
Manufacturing overhead costs are period costs.
False, Why and How?
Periods costs are reflected on the balance sheet.
False, Why and How?
Product costs are reflected on both the balance sheet and income statement.
True, Why and How?
Prime Costs are Product Costs.
True, Why and How?
Conversion Costs are Period Costs.
False, Why and How?
MO are Prime costs.
False, Why and How?
DL are Prime Costs / Are Conversion Costs / Period Costs. (Provide 3 T/F answers).
True, True, False
What are the Classes of Costs based on Cost Behavior?
Variable, Mixed, Fixed
Variable Costs per unit increases or decreases as activity increases or decreases.
False, Why and How?
Fixed cost per unit remains the same as volume increases or decreases.
False, Why and How?
In the Mixed Cost formula Y=a+bx, Y=Total Manufacturing Costs, a = Total Fixed Manufacturing Costs, b= Variable Costs per unit, x = volume
True, Why and How?
Indirect Costs as MO costs are period costs.
False, Why and How?
Direct Costs includes DM, DL and MO.
False, Why and How?
The contribution format income statement is primarily used for internal management decision making.
True, Why and How?
The fair market valueof an assetis a sunk cost.
False, Why and How?
Costs that impact decision making the same way are differential costs.
False, Why and How?
Opportunity costs address the benefit given up as a result of incurring a given cost.
True, Why and How?
What are Prime Costs?
Direct Labor & Direct Materials
What are Product Costs?
Direct Materials, Direct Labor and Manufacturing Overhead
What are non manufacturing costs?
Administrative + Selling Expenses
What are manufacturing costs?
Direct Materials, Direct Labor and Manufacturing Overhead
What are conversion costs?
Direct Labor & Manufacturing Overhead
What are period costs?
Administrative + Selling Expenses
Job Order Costing is used in companies that manufacture products to customer specifications.
True, Why and How?
Job Order Costing is only used in manufacturing companies
False, Why and How?
Job Order Costing captures all costs in bulk for assignment to jobs.
False, Why and How?
Direct Materials and Direct Labor are allocated to jobs.
False, Why and How?
All pending jobs are reflected in the Work In Process account.
True, Why and How?
The omission of manufacturing overhead cost seriously impairs the determination of total product cost
True, Why and How?
The job cost sheet is used to capture DM, DL, MO, and total cost per unit for each job.
True, Why and How?
Manufacturing Overhead costs are recorded on the job cost sheet based on actual costs.
False, Why and How?
Predetermined Overhead Rate is based on actual manufacturing overhead costs and actual allocation base.
False, Why and How?
The Allocation Base is the same as the Cost Driver.
True, Why and How?
Plantwide POHR provides a more accurate allocation of MO than departmental POHRs.
False, Why and How?
The 4-step process to compute the predetermined overhead rate involves the formula: Y = a + bx.
True, Why and How?
Total estimated manufacturing costs and total fixed estimated manufacturing costs are the same.
False, Why and How?
Assigning manufacturing costs to products reasonably ensures profits.
False, Why and How?
Actual and Estimated MO usually equals, and rarely require account adjustments at year end.
False, Why and How?
Under-applied MO occurs when actual MO is greater than applied MO.
True, Why and How?
Over-applied MO results in an overstatement of COGS and an understatement of Net Profit.
True, Why and How?
The correction of an under-applied MO results in an increase in COGS and a decrease in Net Profit.
True, Why and How?
What is Overapplied overhead?
Overapplied means that we assumed our expenses were higher, than the actual. Which means we understated net income
What is Underapplied overhead?
Underapplied means we assumed our expenses were lower, than the actual. Which means we overstated net income
How does one fix a overapplied or under applied adjustment?
You can either do a fix by crediting crediting COGS, and Debiting MO , or you can split it by WIP, Finished Goods and Cogs , MO
What is a sunk cost?
Cost that has already been incurred and cannot be changed
What is a opportunity cost?
Loss of benefit from another alternative if one alternative is chosen
Work in process consists of units of production that are partially complete and will require further work before they are ready for sale to customers.
True, Why and How?
Finished goods consist of completed units of product that have been sold to customers.
False, Why and How?
Raw materials immediately after purchase goes straight to Work in Process inventory
False, Why and How?
Selling and Administrative expenses first go through the manufacturing overhead account and then to work in process.
False, Why and How?
Selling and Administrative expenses are reflected on the income statement only.
True, Why and How?
While direct materials go to WIP as needed for a particular job, indirect materials for the same job go to manufacturing overhead as incurred.
True, Why and How?
When raw materials are purchased on credit, the company’s raw materials account is debited and their accounts payable account is credited.
True, Why and How?
As direct labor is incurred , the work in process account is debited and wages payable account is credited.
True, Why and How?
As indirect labor is incurred, the work in process account is also debited and wages payable account is credited.
False, Why and How?
As other manufacturing overhead costs are incurred (i.e. insurance premiums, rents), the manufacturing overhead account is debited and the work in process account is credited
False, Why and How?
When MO is applied, the MO account is credited and WIP is debited.
True, Why and How?
When good are completed, WIP is credited and the Finished Goods Account is debited.
True, Why and How?
When goods are sold, two journal entries are required - one for recording the sale, and the other for recording the cost of goods sold.
True, Why and How?
When recording the cost of goods sold, the company will debit the Finished Goods account and credit the Cost of Goods Sold account.
False, Why and How?
Estimated MO will almost never equal Actual MO.
True, Why and How?
When actual MO is greater than estimated MO, the company has overapplied MO.
False, Why and How?
An underapplied MO situation results in an overstatement of net income.
True, Why and How?
The correction of an overapplied MO situation results a decrease to cost of goods sold and a decrease to net income.
False, Why and How?
Overapplied or Underapplied overhead can be closed out directly to cost of goods sold or proportionately to Work In Process, Finished Goods and Cost of Goods Sold.
True, Why and How?
What is POHR?
Predetermined OverHead Rate
Process Costing is used by companies that make customized products.
False, Why and How?
Process Costing has some similarities with Job Order Costing.
True, Why and How?
Both Process and Job Order Costing seek to determine the proper product unit cost.
True, Why and How?
Process Costing accumulates costs based on jobs completed.
False, Why and How?
MO is an important cost element of Process Costing.
True, Why and How?
What is EUP?
Equivalent Units of Production
EU is a vitally important concept in determining units produced and unit costs in Process Costing.
True, Why and How?
EUP computed under the Weghted-Average Method requires the use of beginning inventory and units added to production for the period.
False, Why and How?
EU computed under the Weighted-Average Method focuses on units completed and transferred, and beginning inventory.
False, Why and How?
Total EUs require the determination of units completed and transferred + the percentage of DM and Conversion in ending inventory.
True, Why and How?
What is a Mixed Cost?
A cost behavior. Can have both variable and fixed elements. to determine mixed cost you would use the Y = a + bX formula
What is a variable Cost?
Total variable costs varies when there are changes to activity , however if its by unit, its constant. They are cost behaviors
What is a Fixed Cost?
Another cost behavior. In total, it remains the same, and per unit, it changes based off of level of activity
What is GAAP
Generally Accepted Accounting Principles
What is IFRS
International Financial Reporting Standards
What are differential costs
future costs between two alternative choices
What is the meaning of each of these letters in the formula Y = A + BX
Y = Total mixed Cost, A = Total fixed cost, B = Variable cost per UNIT of activity, and X = level of activity
