Operations Management

Question 1

Cost Objects

Answer 1

resources activities that serve as the basis for management decisions

Question 2

Prime cost

Answer 2

direct material + direct labor

Question 3

Conversion Cost

Answer 3

Direct Labor+ Mftrg Overhead applied

Question 4

Cycle of Inventory- All on the B/S. Part of Inventory

Answer 4

RM–WIP–FG

Question 5

Product costs

Answer 5

Inventoriable costs. sit on the b/s they are not expensed until the product is sold

Question 6

Product vs. Period

Answer 6

Period costs do not go on the b/s they are expensed and do not go on the b/s. Admin expenses etc

Question 7

Nonmanufacturing Costs

Answer 7

costs that do not relate to the manufacturing of a product. These costs are expensed in the period incurred. This is treated as a period cost

Question 8

Cost accounting measures PIE

Answer 8

• Product costing
• Income
• Efficiency

Question 9

Tracing costs to cost object

Answer 9

• Product
• Department
• Geographic Area

Question 10

Product cost

Answer 10

has to be in the factory

Question 11

Cost drivers can be

Answer 11

dollars

hours

Question 12

When traditional accounting used, application of overhead is accomplished in 2 steps

Answer 12

Step 1: Calculate Overhead rate : Budgeted overhead costs/ Estimated cost driver
Step 2: Applied overhead= Actual cost driver X Overhead rate

Question 13

Variable Cost

Answer 13

Constant per unit. Total costs varies with the number

Question 14

Fixed Cost

Answer 14

• Total fixed costs does not change

- FC vary per unit

Question 15

Fixed Cost & Variable- Long-Run Characteristic

Answer 15

Any cost can be considered variable

Question 16

Semi-Variable Cost

Answer 16

a little bit mixed with fixed and variable

Question 17

Cost of Goods Manufactured Formula

Answer 17

Beg WIP
\+ DM
\+DL
\+Manufacturing Overhead
-WIP Ending
= COG Manufactured

Question 18

Materials used

Answer 18

Beg. RM
\+Purchases (Including freight in)
= RM Available
-End. RM
= Raw Materials used

Question 19

Cost of Goods Sold

Answer 19

Beg. FG
\+Cog Manufactured
= Cost of Goods available for sale
-FG Inventory Ending 
=Cost of Goods sold

Question 20

Product cost is the sum of

Answer 20

DM
+DL
+Mftg Overhead

Question 21

Job Order costing

Answer 21

used when there are relatively few units produced and when each unit is unique or easily identifiable

Question 22

Overhead Applied

Answer 22

Rate X Actual $

Question 23

Process Costing

Answer 23

We average the cost bc we are mass producing homogeneous units. Every unit is exactly the same

Question 24

Goal of production report

Answer 24

to keep track of the physical units and the costs associated with all the units

Question 25

Equivalent Units

Answer 25

Calculation is made by taking into account the partially completed units and by making use of equivalent units

Question 26

FIFO

Answer 26

3 elements
1) WIP Beg. (how much work did we do this time, the amount of work that has to be done this period)
2) Units started and completed this period
( Units completed and transferred out)
3) WIP ending

Question 27

Calculation using Weighted Average

Answer 27

1) Units completed and transferred out (always 100%)

2) Work in process ending

Question 28

Cost per Unit under Weighted Avg. Method

Answer 28

Beginning Costs+ Current Costs

/ Equivalent Units

Question 29

Cost per Unit under FIFO Method

Answer 29

Current Cost Only

/ Equivalent Units

Question 30

Normal Spoilage vs. Abnormal Spoilage

Answer 30

NS- Included in the inventory cost B/S

AS- Should not occur, Should not be included in the standard

Question 31

Abnormal Spoilage is what type of expense

Answer 31

period expense, goes separately on the income statement as a period expense

Question 32

Activity based Costing

Answer 32

Traditional system single cost driver, direct labor hours. Single rate to apply

Question 33

Activity Based

Answer 33

Uses multiple over head rates by department. Improves the cost allocation

Question 34

Cost Drivers

Answer 34

Traditional One “Volume”

ABC- Multiple

Question 35

Activity Centers

Answer 35

Cost pools

Question 36

Value Chain

Answer 36

series of activities in which customer usefulness is added to the product. Support activites directly support value-added activities

Question 37

Non-Value added Chains

Answer 37

These don’t increase product value or service. For example surplus inventory

Question 38

Advantages of ABC costing

Answer 38

If the product uses a particular demand then it gets a lot of overhead. this will remove must of the cost distortion caused by traditional volume based overhead systems

Question 39

Joint product Costing

Answer 39

two or more products that are generated from a common cost “Main Products”

Question 40

By-Product

Answer 40

minor or relatively small value

Question 41

Split-off point

Answer 41

point in the production process where the joint products can be recognized as individual products

Question 42

Net Realizable Value

Answer 42

Must back out separable costs

Question 43

Price elasticity of demand

Answer 43

(Q2-Q1/Q1) / (P2-P1/P1)
2= New Price or New Quatity
1= Old Price & Old Quantity