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Flashcards in BEC- Cost Accounting Deck (36)
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2
BEC

What is Cost Accounting?

Cost Accounting is a component of GAAP that records Ending Inventory on the Balance Sheet for
o Direct Materials
o Direct Labor
o Work in Process
o Finished Goods

Cost Accounting also records for the Income Statement

3
BEC

What is the difference between Cost Accounting and Managerial Accounting?

Cost Acct - External Focus, GAAP

Managerial Acct - Internal Focus, Not GAAP

4
BEC

What are Product Costs (aka Inventory Costs)?

Prime Costs

Conversion Costs

5
BEC

What are included in Prime Costs?

Direct Material USED - Have become part of the product or had a direct impact on the product

Direct Labor Used - Employees who worked on product and had direct impact

6
BEC

What is Factory Overhead?

All factory costs except for DM and DL used in production, including Spoilage (except for abnormal spoilage, which is a period cost and not included in OH).

7
BEC

What is included in Fixed Factory Overhead?

FFO = Estimated Costs / Normal Capacity

Uses Normal Activity

Examples of Fixed Factory OH: Depreciation (SL), Utilities, Taxes

Under/Overapplied Fixed OH always goes to COGS

8
BEC

What is included in Variable Overhead?

VO = Estimated Activity / Actual Activity

Uses Actual Activity

Examples of Variable Factory OH: Deprecation (Units of Prod), Indirect materials (supplies & insignificant items), Indirect labor (factory foreman, janitors, machine maintenance)

9
BEC

Where is Under/Overappllied Variable OH recorded?

If Immaterial – Goes to COGS

If Material – Goes to WIP, Finished Goods, or COGS, based on their Ending Balance

10
BEC

Where is Under/Overapplied Fixed OH recorded?

It always goes to COGS

11
BEC

What is indicated by a Debit balance in Actual Factory Overhead? How is it corrected?

Underapplied overhead.

If it's Fixed OH, underapplied goes to COGS.

If it's Variable OH, underapplied goes to COGS if immaterial, but is allocated to WIP, FG or COGS based on ending balances.

12
BEC

What is indicated by a Credit balance in Applied Factory Overhead? How is it corrected?

A credit balance indicates overapplied overhead.

If Fixed overhead, it is corrected from COGS.

If Variable overhead, it is corrected through COGS if immaterial, but if material overage is allocated to WIP, FG or COGS based on ending balances.

13
BEC

Which variables are used to calculate Direct Material balances?

Beginning Balance
DR Net purchases (plus freight-in)
CR Direct Materials Used
= Ending balance (goes to BS)

14
BEC

What variables are used to calculated Work in Process (WIP)?

Beginning Balance (End Bal of Previous WIP)
DR Direct Materials Used
DR Direct Labor Used (Conversion Cost)
CR COGM
DR Factory Overhead Applied (Converstion Cost)
= Ending Balance (Goes to BS)

15
BEC

What variables are included in Finished Goods calculations?

Beginning Balance
DR COGM
= COGAS (Cost of Goods Avail for Sale)
CR COGS
= Ending Balance (Goes to BS)

16
BEC

How does Freight In affect Cost Acct calculations?

Inventory (Product) Cost

Part of DM Purchases

17
BEC

How does Freight Out affect Cost Accounting?

Selling (Period) Cost

Not part of inventory

18
BEC

When is Job-Order Costing used?

Used when costs are easily connected to a specific product or product line

Can also be applied to services

Calculation is the same as normal cost accounting – just use your T Accounts
o DM to WIP to FG to COGS
o You’re likely going to be solving for the last job in the queue

19
BEC

What is the Direct Method for allocating service department costs?

No services allocated between service departments, even if they serve each other. Only allocate to product(s)

20
BEC

What is the Step Method for allocating service department costs?

Services can be allocated to both other service departments and the product(s)

21
BEC

Under process costing, how are the units shipped calculated?

Beginning Inventory
+ Units Started
- Ending Inventory
= No. Units Shipped

22
BEC

Which two inventory methods are used under Process Costing?

FIFO

Weighted Average

23
BEC

What is another name for Process Costing?

Equivalent Units of Production

24
BEC

How will Equivalent Finished Units under FIFO compare to EFU under the Weighted Average method?

EFU FIFO will always be LESS than EFU Weighted Avg (unless Beginning Inventory is Zero)

25
BEC

How are Direct Materials calculated under the Weighted Average Method?

Beginning Inventory + Current Costs / EFU WA

26
BEC

How are Conversion Costs calculated under Weighted Average Method?

Beginning Inventory + Current Costs / EFU WA

27
BEC

How are Equivalent Finished Units calculated for Direct Materials?

Units Shipped
+ EI x % Complete DM
= EFU (Weighted Average Method)

- Beginning Inventory x % Complete
= EFU (FIFO)

28
BEC

How are Equivalent Finished Units calculated for Conversion Costs?

Units Shipped
+ EI x % Complete CC
= EFU (Weighted Average)

- Beginning Inv x % Complete
= EFU (FIFO)

29
BEC

How are Direct Materials calculated under the FIFO method?

Current Costs / EFU FIFO

Note: FIFO method uses Current Period costs only and ignores Beginning Inventory

30
BEC

How are Conversion Costs calculated under the FIFO method?

Current Costs / EFU FIFO

FIFO method uses Current Period costs only and ignores Beginning Inventory

31
BEC

How is WIP calculated?

Beginning balance (DM, DL, OH)
+ Current Costs (DM, DL, OH)
- COGM (Goes to Finished Goods)
+ DM EFU x Cost per DM EFU
+ CC EFU x Cost per CC EFU
= Ending WIP