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ACC-427: Cost Accounting > Quiz 1 > Flashcards

Quiz 1 Flashcards

1
Q

What are the 7 components of the Value Chain?

A
  1. R&D
  2. Design
  3. Purchasing
  4. Production
  5. Marketing
  6. Distribution
  7. Customer Service
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2
Q

Who are the primary users in Financial Accounting? Cost Accounting?

A

Financial Accounting = external users (mostly)
-creditors, investors

Cost Accounting = internal users
-management decision making

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3
Q

What does Financial Accounting do?

A

Show the Financial Position of a company

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4
Q

What does Cost Accounting do?

A

Show information on costs/customers for a company

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5
Q

Financial Accounting is geared towards what?

A

Accuracy and Compliance

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6
Q

Cost Accounting is geared towards what?

A

Efficiency and Effectiveness; Usefulness and Timely

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7
Q

What are Cost Drivers?

A

factor that causes or “DRIVES” costs

(e.g., increase # if cookies made, must increase labor)

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8
Q

What are Differential Revenues?

A

revenues that CHANGE in response to a particular course of action

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9
Q

What are Differential Costs?

A

costs that CHANGE in response to a particular course of action (i.e., alternatives)

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10
Q

What is a Responsibility Center?

A

specific unit of an organization assigned to a manager who is accountable for its operations and resources

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11
Q

What is a Budget?

A

financial plan of the revenues and resources (expenses) needed to CARRY OUT ACTIVITIES and MEET FINANCIAL GOALS

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12
Q

Who are the KEY financial players?

A

CFO
Treasurer
Controller
Internal Auditor
Cost Accountant

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13
Q

What must both the CEO and CFO do because of Sarbanes-Oxley?

A

sign off on financials - “do not omit material information”

sign off on evaluation of internal controls - are they operating effectively?

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14
Q

What is a Cost?

A

“sacrifice” of resources

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15
Q

What are the three types of costs?

A

Expense = cost that is charged AGAINST revenue in an accounting period (hits I/S)

Outlay = past, present, or future cash flows

Opportunity = FORGONE BENEFIT from the best alternative course of action

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16
Q

What is an Expense charged to and in what period?

A

Charged to P&L
in period it’s incurred

17
Q

What is a Product Cost?

A

costs included in Manufacturing/Inventory

Expense as COGS when product is sold

18
Q

What are included in Product Costs?

A
  1. Direct Materials (includes freight-in)
  2. Direct Labor
  3. Factory Overhead
    -indirect material
    -indirect labor
    -other indirect costs (factory depreciation, lights, heat, etc..)
19
Q

What is a Period Cost?

A

costs that are NON-MANUFACTURING

Expense when incurred, regardless of product sales

20
Q

What are included in Period Costs?

A
  1. SGA Expense (includes freight-out)
  2. Abnormal Spoilage
21
Q

What is the PRIME COST?

A

Direct Material + Direct Labor

22
Q

What is the CONVERSION COST?

A

Direct Labor + Manufacturing Overhead

(“costs to convert raw materials”)

23
Q

What are the 3 Inventory Accounts that Product Costs are allocated?

(depending on where in the production cycle)

A
  1. Raw Materials Inventory (ready to go into the production cycle)
  2. Work-in-Process (WIP) Inventory (in the production cycle)
  3. Finished Goods Inventory (out of the production and available for sale
24
Q

What are FIXED COSTS?

A

fixed IN TOTAL/variable PER UNIT

e.g., rent, salaries

25
Q

What are VARIABLE COSTS?

A

fixed PER UNIT/ variable IN TOTAL

e.g., wages

26
Q

What is the Full Cost?

A

ALL manufacturing and selling costs

27
Q

What is the Full Absorption Cost?

A

ALL FIXED and VARIABLE manufacturing costs (GAAP)
(Sales Price - COGS)

Direct Materials + Direct Labor + Var. Man OH + Fix. Man OH

“Gross Margin”

28
Q

What is the Variable Cost?

A

ALL VARIABLE manufacturing and selling costs
(Sales - Var. Costs)

“Contribution Margin

29
Q

What does the income statement look like for a GROSS MARGIN I/S?

A

Sales Revenue
-COGS (Var. & Fix. Man. Costs…also called Full Absorption Cost)
=Gross Margin
-M&A Costs (both var. and fix.)
=Operating Profit/Loss

30
Q

What does the income statement look like for a CONTRIBUTION MARGIN I/S?

A

Sales Revenue
-Var. Costs (both Man. and M&A)
=Contribution Margin
-Fix. Costs (both Man. and M&A)
=Operating Profit/Loss

ACC-427: Cost Accounting (6 decks)

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