Cost Accounting 1 Flashcards Preview

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Flashcards in Cost Accounting 1 Deck (18):
1

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

2

What is the difference between Cost Accounting and Managerial Accounting?

Cost Accounting - External Focus- GAAP

Managerial Accounting - Internal Focus- Not GAAP

3

What are Product Costs (aka Inventory Costs)?

Prime Costs

Conversion Costs

4

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

5

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).

6

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/Over-applied Fixed OH always goes to COGS

7

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)

8

Where is Under/Over-applied Variable OH recorded?

If Immaterial - Goes to COGS

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

9

Where is Under/Over-applied Fixed OH recorded?

It always goes to COGS

10

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

Under-applied overhead.

If it's Fixed OH- under-applied goes to COGS.

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

11

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

A credit balance indicates over-applied 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.

12

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)

13

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 (Conversion Cost)
: Ending Balance (Goes to BS)

14

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)

15

How does Freight In affect Cost Accounting calculations?

Inventory (Product) Cost

Part of DM Purchases

16

How does Freight Out affect Cost Accounting?

Selling (Period) Cost

Not part of inventory

17

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
- DM to WIP to FG to COGS
- You're likely going to be solving for the last job in the queue

18

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)