Cost Accounting 2 Flashcards Preview

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Flashcards in Cost Accounting 2 Deck (18):
1

What is the Step Method for allocating service department costs?

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

2

Under process costing- how are the units shipped calculated?

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

3

Which two inventory methods are used under Process Costing?

FIFO

Weighted Average

4

What is another name for Process Costing?

Equivalent Units of Production

5

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)

6

How are Direct Materials calculated under the Weighted Average Method?

Beginning Inventory + Current Costs / EFU WA

7

How are Conversion Costs calculated under Weighted Average Method?

Beginning Inventory + Current Costs / EFU WA

8

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)

9

How are Equivalent Finished Units calculated for Conversion Costs?

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

- Beginning Inventory x % Complete
: EFU (FIFO)

10

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

11

How are Conversion Costs calculated under the FIFO method?

Current Costs / EFU FIFO

FIFO method uses Current Period costs only and ignores Beginning Inventory

12

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

13

How do period costs and product costs relate to net sales- gross margin and operating income?

Net Sales
- Product Costs
: Gross Margin
- Period Costs
: Operating Income

14

What is the focus of Activity Based Costing (ABC)?

Focuses on eliminating non-value-added activities for poor quality and inventory and things customers don't want or don't care about

Inventory is expensive to store and storing something is not a value-added expenditure

Uses Cost Pools - Different departments can have different OH rates

Uses Several OH rates based on Activity - Cost Pool / Cost Driver

15

How do Cost Pools and Allocations compare under ABC versus traditional costing system?

Cost Pools and Allocations increase compared to a traditional costing system

16

What is Backflush Costing?

Connected to Just-in-Time Production- which is part of Activity-Based Costing and Total Quality Management (TQM)

- Works backward to flush out COGS
- Mostly GAAP

17

What are the characteristics of By-Products?

Usually immaterial and common costs aren't allocated to them
Low Market Value
Can be valued at NRV
Can be treated as a contra expense and netted against COGS - Can be treated as a contra sale and netted against Sales
Recognition rules are very flexible with valuing and classifying by-products

18

What are Cost Functions?

Measure how costs change relative to activity levels

High-Low Method

Change in Cost (High-Low pts) / Change in Activity (High-Low pts)