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Cost Accounting > Midterm I > Flashcards

Midterm I Flashcards

1
Q

How does management accounting differ from financial accounting?

A

Management accounting measures, analyzes, and reports financial and nonfinancial info that helps managers make decisions to fulfill the goals of an organization. It is not restricted by GAAP.

Financial accounting focuses on reporting to external parties such as investors, government agencies, and banks. It measures and records business transactions and is based on GAAP.

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2
Q

Cost object

A

Anything for which a separate measurement of costs is desired (product, service, project, customer, etc.)

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3
Q

Cost-volume-profit analysis

A

examines the behavior of total revenues, total costs, and operating income as changes occur in the units sold, selling price, variable cost per unit, or fixed costs of a product.

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4
Q

Cost pool

A

Grouping of individual indirect cost items

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5
Q

The assigning of direct costs to the chosen cost object

A

Cost tracing

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6
Q

Cost allocation

A

Assigning of indirect costs to the chosen cost object

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7
Q

A factor that links in a systematic way an indirect cost or group of indirect costs to cost objects

A

Cost-allocation base

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8
Q

Costs related to the particular cost object and can be traced to that cost object in an economically feasible way

A

Direct costs

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9
Q

Indirect costs

A

costs related to the particular cost object but cannot be traced to that cost object in an economically feasible way

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10
Q

Assumptions underlying the CVP analysis:

A
  1. Changes in level of revenues and costs arise only because of changes in the number of product units sold.
  2. Total costs can be separated into a fixed component that does not vary with the units sold and a variable component that changes with respect to the units sold.
  3. When represented graphically, the behaviors of total revenues and total costs are linear in relation to units sold within a relevant range and time period.
  4. The selling price, variable cost per unit, and fixed costs are known and constant.
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11
Q

The term direct costing is a ________ for variable costing because variable costing does not include all direct costs as _______ costs. Variable costing includes as inventoriable costs not only direct manufacturing costs but also some _______ costs.

A

misnomer; inventoriable; indirect

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12
Q

Why do managers consider direct costs to be more accurate than indirect costs?

A

Because when costs are allocated, managers are less certain whether the cost allocation base accurate measures the resources demanded by a cost object.

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13
Q

Difference between total revenues and total variable costs

A

Contribution margin

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14
Q

Difference between selling price and variable cost per unit

A

Contribution margin per unit

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15
Q

The contribution margin per unit divided by selling price

A

Contribution-margin percentage (ratio)

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16
Q

The business functions in the value chain are:

A 
Research & development
Design of products & processes
Production
Marketing
Distribution
Customer service
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17
Q

5-step decision-making process:

A
  1. Identify the problem & uncertainties
  2. Obtain information
  3. Make predictions about the future
  4. Make decisions by choosing among alternatives
  5. Implement the decision, evaluate performance, and learn
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18
Q

______ decisions focus on selecting organization goals and strategies, predicting results under various alternative ways of achieving those goals, deciding how to attain the desired goals, and communicating the goals and how to attain them to the entire organization.

A

Planning

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19
Q

______ decisions focus on taking actions that implement the planning decisions, deciding how to evaluate performance, and providing feedback and learning to help future decision making.

A

Control

20
Q

Institute of Management Accountants sets standards of ethical conduct in the four following areas:

A

Competence
Confidentiality
Integrity
Credibility

21
Q

Factors affecting the classification of a cost as direct or indirect include:

A
  • the materiality of the cost in question
  • available information-gathering technology
  • design of operations
22
Q

A _____ cost changes in total proportion to changes in the related level of total activity or volume.

A

variable

23
Q

A _____ cost remains unchanged in total for a given time period, despite wide changes in the related level of total activity or volume.

A

fixed

24
Q

A variable that causally affects total costs over a given time span.

A

cost driver

25
Q

Relevant range

A

The band of normal activity level or volume in which there is a specific relationship between the level of activity or volume and the cost in question

26
Q

Three types of inventory manufacturing companies have:

A

Direct materials inventory
Work-in-process inventory
Finished goods inventory

27
Q

Costs of a product that are considered as assets in the balance sheet when they are incurred and that become cost of goods sold when the product is sold

A

Inventoriable costs

28
Q

Costs in the income statement other than costs of goods sold

A

Period costs

29
Q

Acquisition costs of all materials that eventually become part of the cost object and can be traced to the cost object in an economically feasible way

A

Direct material costs

30
Q

Include the compensation of all manufacturing labor that can be traced to the cost object in an economically feasible way

A

Direct manufacturing labor costs

31
Q

Manufacturing costs that are related to the cost object that cannot be traced to that cost object in an economically feasible way

A

Manufacturing overhead costs

32
Q

All direct manufacturing costs

A

Prime costs

33
Q

All manufacturing costs other than direct material costs

A

Conversion costs

34
Q

Overtime premium

A

The wage rate paid to workers in excess of their straight-time wage rates

35
Q

Idle time

A

A subclassification of indirect labor that represents wages paid for unproductive time caused by lack of orders, machine breakdowns, material shortages, poor scheduling, and the like.

36
Q

The sum of the costs assigned to a product for a specific purpose

A

Product cost

37
Q

Three common features of cost accounting and cost management are:

A
  • calculating the costs of products, services, and other cost objects
  • obtaining information for planning and control and performance evaluation
  • analyzing the relevant information for making decisions
38
Q

Examines the behavior of total revenues, total costs, & operating income as changes occur in the units sold, selling price, variable cost per unit, or fixed costs of a product

A

Cost-volume-profit (CVP) analysis

39
Q

How does an increase in the income tax rate affect the breakeven point?

A

An increase in the income tax rate does not affect the breakeven point. Operating income at the breakeven point is zero, and no income taxes are paid at this point.

40
Q

What is operating leverage?

A

Operating leverage describes the effects that fixed costs have on changes in operating income as changes occur in units sold, and hence, in contribution margin

41
Q

How is knowing the degree of operating leverage helpful to managers?

A

Knowing the degree of operating leverage at a given level of sales helps managers calculate the effect of fluctuations in sales on operating incomes.

42
Q

7 Steps in Job Costing

A
  1. Identify the job that is the chosen cost object
  2. Identify the direct costs of the job
  3. Select the cost-allocation bases to use for allocating indirect costs to the job
  4. Identify the indirect costs associated with each cost-allocation base
  5. Compute the rate per unit of each cost-allocation base used to allocate indirect costs to the job
  6. Compute the indirect costs allocated to the job
  7. Compute the total cost of the job by adding all direct and indirect costs assigned to the job
43
Q

3 major documents used in job-costing systems:

A

job cost record
materials requisition record
labor-time sheet

44
Q

This form of costing uses actual rates for direct and indirect cost rates

A

Actual Costing

45
Q

This form of costing uses actual rates for direct-cost rates and budgeted rates for indirect-cost rates

A

Normal Costing

46
Q

What are the factors that affect the breakeven point under variable costing?

A
  1. Fixed (manufacturing and operating) costs

2. Contribution margin per unit

47
Q

What are the factors that affect the breakeven point under absorption costing?

A
  1. Fixed (manufacturing and operating) costs
  2. Contribution margin per unit
  3. Production level in units in excess of breakeven sales in units
  4. Denominator level chosen to set the fixed manufacturing cost rate

Cost Accounting (1 decks)

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