Module 1 Flashcards
What are the four ethical standards of managerial accounting?
- Competence
- Confidentiality
- Integrity
- Credibility
Which of the following statements regarding Work-in-Process is not correct?
A. Work-in-Process is partially completed inventory
B. Work-in-Process consists of direct labor, direct material, and manufacturing overhead
C. Work-in-Process inventory is debited to record direct material used and direct labor incurred.
D. Work-in-Process inventory appears on the year-end balance sheet
E. Work-in-Process inventory is credited to account for actual overhead costs
E
Why do companies use normal costing? (Choose all that apply)
A. To measure variable and fixed costs separately
B. To smooth out seasonal variations in overhead costs
C. To support pricing and decision making before actual costs are incurred
B and C
What is the most accurate method for accounting for under- or over-applied manufacturing overhead at year-end?
A. Charging it to Work-in-Process inventory
B. Charging it to Cost of Goods Sold
C. Charging it to a special loss account
D. Prorating it among Raw Materials inventory, Finished-Goods inventory, and Cost of Goods Sold
E. Carrying the over or under applied balance forward to the next year by applying it to the accrued overhead account.
D
In which order should the following tasks be performed in creating an activity-based costing system?
1 - Calculation of cost application rates
2 - Identification of cost drivers
3 - Assignment of cost to products
4 - Identification of cost pools
4, 2, 1, 3
The percent of total activity cost that activity-based costing charges to a product is the:
Consumption Ratio
How is ABC similar to a job-cost system with a single plant-wide rate?
A. Both approaches assume that unit-level costs are variable and non-unit-level costs are fixed
B. Both approaches first accumulate overhead costs and then assign costs to cost objects.
C. Both approaches recognize the distinction between batch-, product-, and facility-, level costs
D. Both approaches develop rates using actual overhead costs and the actual number of cost drivers.
B
Compared to job costing, ABC tends to
A. Reduce cross-subsidization
B. Simplify the accounting system
C. Reduce costing accuracy
D. Provide information that is less relevant for cost management
E. Use more unit-level cost drivers and less non-unit level drivers
A
For mixed costs (that have fixed and variable costs), what happens to average cost per unit and total cost when production level decline within the relevant range?
- Average cost per unit increases
- Total cost decreases
A company observed a decrease in the cost per unit. All other things being equal, which of the following is probably true?
A. The company is studying a variable cost, and total volume has increased
B. The company is studying a variable cost, and total volume has decreased
C. The company is studying a fixed cost, and total volume has increased
D. The company is studying a fixed cost, and total volume has decreased
E. The company is studying a fixed cost and total volume has remained constant
C
Which of the following statements is true?
A. Compared to the income statement you learned about in MGMT 200, the contribution margin income statement simplifies costs by categorizing them as either fixed or variable
B. Both the income statement used in MGMT 200 and the contribution margin income statement separately report product versus period costs
C. Cost of Goods Sold reported on the income statement used in MGMT 200 is limited to only variable costs
D. Creating a contribution margin income statement is not necessary to do break-even analysis
E. The MGMT 200 income statement is used primarily for internal reporting purposes, while the contribution margin income statement is used primarily for external reporting purposes.
A
Which costs are classified as prime costs?
Direct Material and Direct Labor
Which costs are classified as Manufactured Overhead costs? (8 possible)
- Service Dept. costs
- Indirect Labor
- Indirect Material
- Production supervisor salary/fringe benefits
- Overtime premiums
- Idle time
- Depreciation
- Taxes, insurance, utilities
Which costs are classified as conversion costs?
Manufacturing Overhead and Direct Labor
Which costs are classified as product costs?
- Direct Material
- Direct Labor
- Manufacturing Overhead
