BEC 3 Flashcards
period costs vs product costs
product cost is assigned to goods that were either purchased or manufactured. they are capitalized while period costs are costs that are expense during a period. they are not charged to a product.
prime costs vs conversion costs
prime costs = direct labor + direct material conversion costs ( factory overhead) = direct labor + overhead applied
relevant range
it is the range within which the relationship between a cost and its cost driver remain valid. within this range the fixed cost will remain fixed and the variable cost per unit will not change
conversion cost pricing
could be used when the customer furnishes the material used in manufacturing a procut
traditional costing
one way to allocate indirect costs: 1) overhead rate = budgeted o/h costs / estimated cost driver 2) applied o/h = actual cost driver x o/h rate
purpose of cost allocation
it is essential for measuring income and assets for external reporting
calculating prime costs
beginning inventory balance of DM + purchased during the period - purchase return and allowance + transportation costs = total DM available
total DM available - ending inventory balance of DM = DM used during the period
DM used during the period + DL = total prime costs
total cost saving over the product’s life
= total cost to purchase - total variable cost savings
total VC saving = total units to be sold * (change in DL per unit + change in DM per unit)
formula of costs of goods manufactured (COGM)
beginning WIP + DM used + DL (actual) + OH applied - ending WIP
formula of costs of goods sold
beginning finished goods + COGM - ending FG
production report
begin in process + transfer in = total units charged
= transfer out + end in process
weighted average equivalent units of production
two components: units completed + ending WIP * % completed
FIFO equivalent units of production
3 components: begin WIP *(1- %competed) + (units completed - begin WIP) + (ending WIP *% completed)
focuses of activity based costing
cost/benefit of activities which involve identification of value added and non value added activities
three methods of joint cost allocation
1) unit volume 2) sales prices quote available at split off 3) sales price not available at split off - ( sales value at point of sale “net realizable value” = final sales price - identifiable costs incurred after split off before final price)
