ACCTG 404 Exam 1

Question 1

Activity base

Answer 1

measure of whatever causes a variable cost to be incurred

total cost of surgical gloves in a hospital will increase as the number of surgeries increase, number of surgeries is the activity base

direct labor hours or machine hours

Question 2

Administrative Costs

Answer 2

all executive, organizational, clerical cost associated with general operation

office supplies, utilities

Question 3

Committed Fixed Costs

Answer 3

Investments in facilities, equipment, basic organizational structure that are long term

investments that you are committed to long term

Question 4

Common Cost

Answer 4

cost incurred to support a number of cost objects that cannot be traced individually

rent for a building that contains multiple departments

Question 5

Contribution Approach

Answer 5

costs are separated into variable and fixed categories, used to assess profitability of different business segments

Question 6

Contribution Margin

Answer 6

amount remaining from sales revenue after all variable expenses have been deducted

selling price - variable costs

Question 7

conversion cost

Answer 7

direct labor plus manufacturing overhead cost

costs incurred to convert raw materials into finished products

Question 8

cost behavior

Answer 8

way in which a cost reacts to changes in the level of activity (variable costs)

Question 9

cost object

Answer 9

anything for which cost data is desired

usually entails DM, DL, MOH

Question 10

cost structure

Answer 10

relative proportion of fixed, variable, and mixed costs incurred

Question 11

differential cost

Answer 11

a future cost that differs between any two alternatives

company deciding between two methods

same as incremental cost

Question 12

direct cost

Answer 12

a cost easily traced to a specified cost object

Question 13

direct labor

Answer 13

factory labor costs easily traced to a specific product

wages for factory line workers

Question 14

direct materials

Answer 14

materials that become an integral part of a finished product and costs are easily traced

Question 15

discretionary fixed costs

Answer 15

fixed cost that arise from annual decisions by management to spend on certain fixed cost items

Question 16

financial accounting

Answer 16

reports historical financial information to external parties

Question 17

finished goods

Answer 17

units of product that have been completed but not yet sold

Question 18

fixed cost

Answer 18

cost remains constant

Question 19

indirect cost

Answer 19

cost cannot easily be traced to a cost object

Question 20

indirect labor

Answer 20

labor costs of workers that cannot easily be traced to particular products

Question 21

indirect materials

Answer 21

small items of material such as glue and nails that may be integral part of a finished product, not easily traced

Question 22

inventoriable (product) costs

Answer 22

costs associated with getting a product ready for sale

DM, DL, MOH, expensed as COGS

Question 23

managerial accounting

Answer 23

provides information to managers for use within the organization

Question 24

manufacturing overhead

Answer 24

all manufacturing costs except direct materials and direct labor

includes indirect costs

Question 25

mixed cost

Answer 25

cost with variable and fixed cost elements

Question 26

opportunity cost

Answer 26

potential benefit given up when one alternative is selected over another

Question 27

period costs

Answer 27

costs taken directly to the income statement as expenses in period incurred selling and administrative expenses

Question 28

prime costs

Answer 28

direct materials plus direct labor

Question 29

raw materials

Answer 29

any materials going into the final product

Question 30

relevant benefit

Answer 30

benefit that will be directly affected by a specific decision, important in decision making process

Question 31

relevant range

Answer 31

range of activity within which assumptions about variable and fixed cost behavior

Question 32

selling costs

Answer 32

all costs incurred to secure customer orders sales commission, advertising expense

Question 33

sunk costs

Answer 33

cost already incurred that cannot be changed by any decision made now or in future

Question 34

variable cost

Answer 34

cost that varies in direct proportion to changes in activity level

Question 35

work in process

Answer 35

partially complete units of product requiring further work before they are ready for sale to the customer

Question 36

absorption costing

Answer 36

costing method that includes all manufacturing costs (direct materials, direct labor, manufacturing overhead) in unit product costs

Question 37

allocation base

Answer 37

measure of activity used to assign costs to cost objecct

Question 38

bill of materials

Answer 38

document showing quantity of each type of direct material required to make a product estimate of what it takes to build 1 unit of an object

Question 39

cost driver

Answer 39

a factor that causes overhead costs

Question 40

cost-plus pricing

Answer 40

a predetermined markup is applied to a cost base to determine target selling price 100 * 1.5 = selling price of 150

Question 41

job cost sheet

Answer 41

form that records direct materials, direct labor, moh charged to a job

Question 42

job order costing

Answer 42

assigns costs to specific jobs that have unique items used when each project is unique, like construction specific DL, DM, MOH

Question 43

materials requisition form

Answer 43

document specifying the type and quantity of materials to be drawn from the storeroom and the job charged for the cost of those materials

Question 44

multiple predetermined overhead rates

Answer 44

costing system with multiple overhead cost pools and a different predetermined overhead rate for each cost pool

Question 45

normal cost system

Answer 45

costing system that applies overhead costs to jobs by multiplying a predetermined overhead rate by the actual amount of allocation base incurred by the job

Question 46

overhead application

Answer 46

process of assigning overhead cost to specific jobs

Question 47

plantwide overhead rate

Answer 47

single predetermined overhead rate used throughout a plant

Question 48

predetermined overhead rate

Answer 48

rate used to charge manufacturing overhead cost to jobs that is established in advance of each period

Question 49

cost of goods manufactured

Answer 49

manufacturing costs associated with units off product completed during period

Question 50

finished goods

Answer 50

unit of product completed but not yet sold to customers

Question 51

overapplied overhead

Answer 51

credit balance in MOH that occurs when overhead cost in WIP is greater than overhead cost actually incurred

Question 52

overhead application

Answer 52

process of assigning overhead cost to specific jobs

Question 53

schedule of goods manufactured

Answer 53

schedule that contains direct materials, direct labor, and MOH

Question 54

schedule of cost of goods sold

Answer 54

schedule containing product costs

Question 55

underapplied overhead

Answer 55

debit balance in MOH occuring when overhead cost in WIP is less than overhead actually incurred

Question 56

conversion costs

Answer 56

direct labor cost plus MOH cost

Question 57

equivalent units

Answer 57

product of the number of partially completed units and their percentage of completion with respect to a particular cost

Question 58

Equivalent Units of Production (Weighted Average Method)

Answer 58

units transferred to next department (or to finished goods) during period plus equivalent units in departments ending WIP inventory averages cost of beginning inventory and new production in a period

Question 59

Operation Costing

Answer 59

hybrid costing system used when products have common characteristics and some individual characteristics hybrid of job order costing and process costing

Question 60

Process Costing

Answer 60

used when identical products are produced on a continual basis

Question 61

Processing Department

Answer 61

work is performed on a product and where materials, labor, and MOH cost are added to product

Question 62

Weighted Average Method

Answer 62

calculates unit cost by combining costs and outputs from current and prior periods

Question 63

Key Performance Indicator

Answer 63

percentage of production capacity used (EFFICIENCY) more units in system = more money

Question 64

roll forward analysis

Answer 64

tracks changes in an account from one period to the next by rolling forward balance