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ACC-427: Cost Accounting > Test 1 > Flashcards

Test 1 Flashcards

1
Q

What are the 3 KEY POINTS related to designing a new cost accounting system for managerial services?

A
  1. Cost systems should have a DECISION FOCUS
  2. Different cost information is used for DIFFERENT PURPOSES
  3. Cost information for managerial purposes MUST MEET the COST-BENEFIT TEST
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2
Q

What is the purpose of calculating individual product (and service) costs?

A

-Computing the inventory values and COGS for financial statements
-Helping product manager decision making regarding pricing, production, promotion, add/drop product, outsource product/service, etc.

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3
Q

What is the Basic Cost Flow Model?

A

Beg. Bal. + Transfers In - Transfers Out = End. Bal.

BB + TI - TO = EB

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4
Q

What are the 3 Types of Inventory Accounts?

A
  1. Raw Materials
  2. WIP
  3. F/Gs
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5
Q

What is it when there are TRANSFERS IN for Raw Materials?

A

Purchased

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6
Q

What is it when there are TRANSFERS OUT for Raw Materials?

A

Requisitioned into production

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7
Q

What is it when there are TRANSFERS IN for WIP?

A

Raw materials requisitioned into production

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8
Q

What is it when there are TRANSFERS OUT for WIP?

A

Cost of Goods manufactured (jobs completed during the period)

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9
Q

What is it when there are TRANSFERS IN for F/Gs?

A

Cost of Goods manufactured

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10
Q

What is it when there are TRANSFERS OUT for F/Gs?

A

Cost of Goods Sold

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11
Q

What are Direct Costs?

A

DIRECT materials and labor ASSIGNED to a product

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12
Q

What are Indirect Costs?

A

Manufacturing Overhead (indirect) costs
-indirect materials
-indirect labor
-other (utilities, prepaids, depreciation, etc.)

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13
Q

MOH costs are ALLOCATED based on some measure of activity.

What are the 3 common estimated Allocation Bases?

A
  1. Direct Labor Hours
  2. Direct Labor Costs
  3. Machine Hours
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14
Q

What is a Predetermined Overhead Rate (for MOH)?

A

Estimated Overhead $ / Estimated Allocation Base

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15
Q

What are Equivalent Units?

A

Number of physical units x % of completion

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16
Q

What is a Predetermined Overhead Rate (for ending WIP)?

A

Estimated Overhead $ / (Equivalent units + Completed units)

17
Q

TRUE/FALSE: When ending Work-in-Process Inventory is present, you MUST calculate equivalent units

A

TRUE

of physical units x % of completion

18
Q

What are the 3 Basic Types of Product Costing Systems?

A
  1. Job Costing
  2. Process Costing
  3. Operations Costing
19
Q

What is Job Costing, and an example?

A

“Job Shop”
-customized
-traces costs to individual units or specific jobs
-contracts or batches of goods

e.g., car shop, law firms, hospital, construction

20
Q

What is Process Costing, and an example?

A

“Continuous Flow Process”
-identical items
-no need to trace costs to the individual unit level

e.g., ice cream, paint, cereal, petroleum

21
Q

What is Operations Costing, and an example?

A

“Batch Production”
-different batches of products
-homogenous within the batch
-hybrid costing system

e.g., automobile manufacturing, clothing, furniture

22
Q

When computing the cost of a job, which are ASSIGNED and which are ALLOCATED?

A

ASSIGNED:
-Direct Materials
-Direct Labor

ALLOCATED:
-MOH (indirect costs)

23
Q

What do DEBITS to the MOH account reflect?

A

ACTUAL indirect materials, indirect labor, or other

24
Q

What do CREDITS to the MOH account reflect?

A

APPLIED overhead based on the predetermined overhead rate

25
Q

When the actual overhead costs incurred (debits) are in excess of the applied overhead costs (credits), what has happened?

A

UNDERAPPLIED overhead

26
Q

When the applied overhead costs (credits) are in excess of the actual overhead costs incurred (debits), what has happened?

A

OVERAPPLIED overhead

27
Q

You have UNDERAPPLIED overhead.

What is the journal entry when writing-off to COGS?

A

Dr. COGS
Cr. MOH

28
Q

You have UNDERAPPLIED overhead.

What is the journal entry when writing-off to WIP, F/Gs, and COGS?

A

Dr. WIP Inventory
Dr. F/G Inventory
Dr. COGS
Cr. MOH

29
Q

You have OVERAPPLIED overhead.

What is the journal entry when writing-off to COGS?

A

Dr. MOH
Cr. COGS

NOTE: opposite of underapplied overhead

30
Q

You have OVERAPPLIED overhead.

What is the journal entry when writing-off to WIP, F/Gs, and COGS?

A

Dr. MOH
Cr. WIP
Cr. F/Gs Inventory
Cr. COGS

NOTE: opposite of underapplied overhead

31
Q

What is a Normal Cost?

A

cost of a job is determined by ACTUAL direct material and labor costs plus overhead applied using a PREDETERMINED rate and an ACTUAL allocation base

32
Q

What is an Actual Cost?

A

cost of a job is determined by ACTUAL direct material and labor costs plus overhead applied using an ACTUAL overhead rate and an ACTUAL allocation base

33
Q

What is a Standard Cost?

A

cost of a job is determined by STANDARD (budgeted) direct material and labor costs plus overhead applied using a PREDETERMINED overhead rate and a STANDARD (budgeted) allocation base

ACC-427: Cost Accounting (6 decks)

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