BEC 1 Cost measurement Flashcards Preview

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Flashcards in BEC 1 Cost measurement Deck (19):
1

Cost objects

- resources or activities that serve as the basis for management decision
- require separate cost measurement and may be products. product lines, departments etc

2

Product cost

Direct materials
Direct labor
Manufacturing overhead

3

Prime costs

Direct materials
Direct labor

4

Conversion costs

Direct labor
Manufacturing overhead

5

Product costs

inventoriable
become cost of goods sold when sold

6

Period costs

Expensed in the period incurred

7

Traditional overhead rate

Budgeted manufacturing overhead costs / Estimated cost driver

8

Relevant range

The relevant range is the range of volume for which the assumptions of the cost driver are valid and in which the actual value of the cost driver exists

9

Costs incurred before the split off point

Costs incurred before the split off point are sunk costs, not relevant to further processing decisions.
Joint costs are allocated using one of the following methods.
Use % of product to total based on a ratio of:
- relative sales value
- net realizable value
- physical units

10

Cost of goods manufactured

WIP beginning
Add:
Direct materials
Direct labor
Manufacturing overhead
Less:
WIP ending

11

Cost of goods sold

Finished goods (beginning)
Add: Cost of goods manufactured or Purchased
Less: Finished goods (ending)
Cost of goods sold

12

Job costing

with job costing, each unit is unique and easily identifiable costs are determined by each job

13

Process costing

with process costing, mass produced identical units are manufactured, and costs are determined by activity/process/department

14

Equivalent unit

used in process costing, equivalent units are fully completed and partially completed units during the period.
In applying costs, determine the units, then costs, then apply the cost flow assumption for cost per unit and allocation of costs

15

Equivalent units - FIFO

Equivalent units
Beginning WIP x % to be completed
Add: Units started and completed
Add: Ending WIP x % completed

Total costs = cost incurred during the current period

16

Equivalent units - weighted average

Equivalent units
Units completed
Add: Ending WIP x % completed

Total costs = costs in beginning WIP + costs incurred during the current period

17

Abnormal Spoilage

charge to income of the current period

18

Normal spoilage

increase the cost of the product produced

19

Activity based costing

ABC is a costing theory that assumes that resource consuming activities cause costs and that costs should be assigned to benefiting products based on the activities performed and the resources consumed.

ABC system often divide costs into multiple activity centers and identify the activities that drive the costs in each cost center. Costs are then assigned based on the volume of cost drivers at the determined rate per cost driver