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Flashcards in Cost Accounting Deck (36)
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31

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

32

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

33

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

Cost Pools and Allocations increase compared to a traditional costing system

34

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

35

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

36

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)