OPERATION MANAGEMENT

Question 1

MANAGEMENT ACCOUNTING

Answer 1

Is the process of measuring and using information for the following purposes:

• Management planning, decision making and control
• Reporting assets and COGS for FS and income taxes
• Reporting of costs under cost-based contracts

Question 2

ASSIGNMENT OF COSTS TO COST OBJECTS

Answer 2

Cost assignment is the process of tracing direct costs and allocating indirect/common costs to cost objects.

Question 3

COST OBJECT

Answer 3

is an item or activity for which a separate and discrete measurement of costs is desired, such as a product, function, dept, division, contract or service

Question 4

COST FOR EXTERNAL REPORTING

Answer 4

is the financial accounting purpose of reporting the value of inventory so that the COGS and income can be determined. Costs are classified based on their attachability to inventory

Question 5

PRODUCT COSTS

Answer 5

Direct costs can be attached to inventory based on associating cause and effect. Indirect costs are attached by systematic and rational allocation

-Are DM, DL and mfg OH

Question 6

PERIOD COSTS

Answer 6

These costs are not attached to inventory, but are recognized immediately

• No associated with mfg process
• Are selling, general or admin expenses

Question 7

DIRECT MATERIALS

Answer 7

Raw material costs that can be reasonably traces to a product on a per-unit basis

Question 8

DIRECT LABOR

Answer 8

Wages relating to employees who work directly on the product (ie hands on) that can be reasonably traced to a product on a per-unit basis

Question 9

INDIRECT MATERIALS

Answer 9

These are costs incurred in the mfg process, but either they do not become part of the product (ie machine oil) or they are not reasonably traceable to the product (eg paint, varnish, glue). Such costs become of factory overhead and are attached to the product through an allocation process

Question 10

INDIRECT LABOR

Answer 10

This incorporates factory labor costs for personnel who do not work directly on the product and whose costs cannot be reasonably traced on a per-unit basis. These costs become part of factory OH and are attached to the product through an allocation process

Question 11

FACTORY OH

Answer 11

Aka: mfg OH, factory burden, or simply OH. It includes all costs except direct labor and direct materials that are part of making the product, but which are not directly traced to a specific product. Costs are accumulated in factory OH accounts. They may either vary with production (variable costs) or not (fixed Costs). The costs are traditionally allocated to each unit produced on some basis such as $ per direct labor hour, per direct labor costs, or per machine hour

Question 12

PRIME COSTS

Answer 12

Direct materials and direct labor together

Question 13

CONVERSION COSTS

Answer 13

All factory costs other than direct materials are called conversion costs; they are required to convert materials into a finished product. Include DL and F/OH

Question 14

RELEVANT COSTS

Answer 14

Are those expected to differ among alt future courses of action. AKA: incremental costs or differential costs

Question 15

OPPORTUNITY COSTS

Answer 15

Are those revs that will be lost if one action is chosen over another

Question 16

RAW MATERIALS

Answer 16

This inventory includes anything tangible that becomes part of the product or its packaging. Raw mat are held in inventory until requisitioned by the production department. In the just-in-time (JIT) production system, raw materials are not stored in inventory, because they are not delivered to the factory until they are needed in production.

Question 17

What is the general inventory reconciliation formula?

Answer 17

Beg Inventory +Purchase - uses = End Inventory

Question 18

Companies in what type of industry may use a standard cost system for cost control?

Answer 18

Both mass production and service industries
-Historically, Std cost systems have been mainly used by companies involved in mass production of products. There is no inherent reason by Std cost system would not work equally well for service-oriented companies

Question 19

JOB COSTING OR JOB ORDER COSTING

Answer 19

Is a tracking system used for customized products or services

Question 20

JOB COST RECORDS

Answer 20

Costs are accumulated by the job, or job lot, and are recorded on job cost records as work progresses. Entries are made into the WIP ledger account for mfg inputs from the job cost records. The job cost records make up a subsidiary ledger that supports the control account WIP

Question 21

VALUE-ADDING COSTS

Answer 21

Are those costs that are necessary to production and add value to the product.

Question 22

PROCESS COSTING

Answer 22

is used for products whose individual units are indistinguishable from other units (eg sugar, corn flakes, textiles, paint).

• Costs are accumulated by process, then applied to the units processed using an avg cost for input units. There is a separate WIP account for each dpt or process which the units flow
• End of each period, costs are allocated b/n the units completed and transferred to the next dept and the unfinished units remaining in the EI based on equivalent finished units