Test 1 Flashcards
Direct costs
direct materials and direct labor
Indirect costs
Indirect materials (glue) and indirect labor (janitor)
Product Costs
Direct materials
Direct labor
Manufactoring overhead
Prime Costs
Raw materials
Direct Labor
Conversion Costs
Direct Labor + MOH (indirect labor)
Period Costs
Everything that isn’t a product cost
(selling expenses, admin expenses, accounting department)
Gross Profit
Revenue - COGS
Describe the flow of Inventory
RM -> WIP (DL and MOH added) -> FG ->COGS
What kind of cost is insurance on the plant?
MOH
What kind of cost is depreciation?
MOH
What is lost inventory called?
Shrinkage
What kind of cost is a delivery expense?
Period Cost (selling expense)
What are the two cost accumulation systems?
Job order costing
Process costing
What are the four quality management costs?
Prevention
Appraisal
Internal failure
External failure
Prevention costs
Avoiding poor quality stuff:
- employee training
- evaluation of supplies
- preventative maintanence on equipment
Appraisal costs
Detect poor quality stuff:
- inspection during production
- inspection of final product
- product testing
Internal failure costs
Correcting poor quality stuff:
- production issues (or halts)
- rework of substandard products
- rejected products
External failure costs
After delivery of poor quality stuff:
- lost profit from unhappy customer
- warranty costs
- service center costs
- sales return costs
MOH
Indirect costs (things required to build product, but do not touch product)
- rent
- depreciation
- janitor
- supervisor salaries
How to calculate the predetermined MOH rate?
Estimated OH costs / Estimated quantity of the allocation base (MHrs)
How to calculate allocated costs?
Predetermined rate * Actual quantity of allocation base
