Module3 Flashcards
what are product costs
DL, DM, Manufacturing overhead applied. Inventorable.
what are period costs
SG&A (includes sales commission), Interest Expense, Abnormal spoilage. Expensed when incuired.
what is calculation of application of overhead
overhead rate x actual cost driver
calculate overheard rate
budgeted overhead costs divided by estimated cost driver
examples of fixed costs
straight line depreciation, electricity, officers’ salary, fringe benefits, advertising expenses
examples of variable costs
fringe benefits, indirect labor, maintenance and repairs of a building
How do fixed costs act in the relevant range.
fixed costs are constant in total, but decrease per unit as production level increase
What are cost drivers?
activities that cause costs to increase as the activity increases. Often non-financial
How do variable costs act in the relevant range
variable in total but fixed per unit
what is cost allocation essential for?
for measuring income and assets for external reporting
Compute equivalent units per production using weighted average method?
Units completed + Ending WIP x % completed
Compute equivalent units per production using FIFO
Beg WIP x % to be completed + United completed-beg WIP + Ending WIP x % completed
what is cost per equivalent unit using weighted average?
Beginning cost + Current costs / Equivalent Units
what is cost per equivalent unit using FIFO?
Current cost only / Equivalent units
Activity Based Costing
can be used for either process or job costing. uses a cause and effect relationship to capitalize costs to inventory so ok for internal reporting but not external reporting.
Ways that joint costs are allocated
relative unit volume, relative sales value at split off, and net realizable value.
Service cost allocation: Direct method
most widely used and less complicated. service costs are allocated to production departments
Service cost allocation: Step down method
Service department costs are allocated to other service depts as well as production depts
Partial productivity ratio
quantity of output produced/individual quantity of input used
total factory productivity ratio
quantity of output produced/costs of ALL inputs used
Control charts
plot comparison of actual results to acceptable range. graphic depiction. shows trend to improved quality conformance or declining quality conformance.
Pareto Diagram
determine quality control issues that are most frequent and demand greatest attention. Shows frequency of defects from highest to lowest.
Fishbone Diagram
after defects identifiend by Pareto diagram, Fishbone used to analyze the defect. Identify sources of problems in the production process and take corrective action.
Controllable margin
Contribution margin less controllable fixed costs
