Cost Accounting

Question 1

Departments responsible for DM issues…

Answer 1

Pay too much = Purchasing

Use too much = Production

Question 2

Departments responsible for DL issues…

Answer 2

Pay too much = Personnel

Use too many hours = Production

Question 3

Variance that results from actual costs (standard) being lower than standard costs (actual)

Answer 3

Favorable (Unfavorable)

Question 4

Variance analysis

Answer 4

[SAD]

Standard minus Actual = Difference

Question 5

Actual costs are compared with…

Answer 5

Standard costs allowed based on actual production (use DL $ per hour from standard costs and times by actual production, eg. $10/per hour, takes 5 hours to make one unit but actually made 2 units, so apply OH to the 10 hrs of actual production)

Question 6

DM price Variance

Answer 6

AQ (SP - AP)

• In factory can I control the quantity used? YES, then use Actual quantity [+ is good, - is bad]
• • Purchasing dept

Question 7

DM quantity (usage) Variance

Answer 7

SP (SQ - AQ)

• In factory can I control price? NO, then use Standard Price
• • Production [SQ =Stnd allowed for actual production]

Question 8

DL Rate Variance

Answer 8

AH (SR - AR)

• In factory can I control hours worked? YES, then use Actual
• • Personnel

Question 9

DL Efficiency Variance

Answer 9

SR (SH - AH)

• In factory can I control pay rate?NO, then use Standard
• • Production [SH= Stnd allowed for actual production]
• • Stnd hrs allowed= Production quantity x stnd hrs of labor per unit

Question 10

Distinction between fixed and variable costs in relation to one another..

Answer 10

Fixed are fixed in total but variable per Unit (as cost driver inc, fixed costs stay same but fixed per unit decrease)
Variable are fixed in Unit but vary in total (as cost driver inc, variable per unit stay the same but total variable increases)

Question 11

Explain Job Oder costing..

Answer 11

Allocate costs to groups of unique products. Each job becomes a cost center.
- Expensive, heterogeneous, cost per Job

Question 12

OH application rate =

Answer 12

Est factory OH / Est activity base

Question 13

The factory OH control account is….

Answer 13

Debited as actual factory OH costs are incurred. The factory OH applied account is credited as FO is applied to inventory at the POHR

Question 14

What is the flexible budget equation for OH variance analysis

Answer 14

= Fixed + Variable (x)
where x = actual production x actual Hrs
or.. actual production x Standard hrs allowed for actual production

Question 15

What are the FBE for OH variance analysis (think SEV)

Answer 15

Actual > FBE@Actual > FBE@Stnd > Applied

Question 16

Diff between costs included for WA and FIFO methods..

Answer 16

WA calculation includes prior period and current costs

FIFO separates beg inventory costs from current costs

Question 17

OH efficiency variance

Answer 17

OEV= Pre Variable OH rate x (SDLH - ADLH)

• For SDLH take units actually produced times the standard DL hours to complete or budgeted
• • Similar to DL efficiency variance- measures whether units manufactured required more or less than the number of hours expected

Question 18

Under the 2 variance method for analyzing OH, which consists of both variable and fixed OH elements?

Answer 18

Controllable (budget) variance

Question 19

Variable OH spending variance

Answer 19

(Standard Var OH rate - Actual Var OH rate) x Actual hours
* Diff in actual and budget variable costs that result from price changes in indirect materials and labor, poor budget est., etc

Question 20

Describe the OH volume variance and the calculation

Answer 20

When activity level doesn’t match with pre-determined activity used to apply (Budgeted FOH minus FOH applied)
OVV=(SDLH x PFOHR) - Budget FOH

Question 21

Variable OH efficiency variance

Answer 21

(Standard hrs allowed - Actual hrs worked) x Standard Var OH rate
* Whether units manufactured required more or less than the number of hours expected

Question 22

Explain ABC costing..

Answer 22

Assigns costs to activities performed and then assigns those costs to the products according to each products use of the activities

Question 23

4 way OH variance analysis

Answer 23

1. Fixed OH budget (spending) variance
2. Variable OH spending
3. Variable OH efficiency
4. Fixed OH volume variance

Question 24

3 way OH variance analysis

Answer 24

1. Spending (Var OH+Fixed OH budget)
2. Efficiency (Var OH efficiency)
3. Volume (Fixed OH volume)

Question 25

2 way OH variance analysis

Answer 25

1. Budget, Controllable (Var OH efficiency+Var OH spending+Fixed OH budget)
2. Volume (Fixed OH)

Question 26

Fixed OH spending variance

Answer 26

Actual FOH - Budgeted FOH (or FOH standard rate times budgeted production, DL, machine hrs, etc)

Question 27

Diff between Job Order and Process costing?

Answer 27

Job Order costing is the accumulation of costs by specific jobs, Process costing aggregates production costs by departments or production phases

Question 28

Basic equations for 4 variances:
DM price
DM usage
DL rate
DL efficiency

Answer 28

DM price= (Price)Q actual
DM usage= (Quantity)P, standard
DL rate= (Rate)H, actual
DL efficiency= (Hours)R, standard

Question 29

Calc equivalent units for WA method

Answer 29

Completed units x % complete
End WIP x % complete
= EU’s

Question 30

Calc equivalent units for FIFO method

Answer 30

Beg units first x (1-% complete)
+ Completed units
+ End WIP x % completed

Question 31

Calc CGM costs for FIFO method

Answer 31

Beg and completed EU’s x per unit

+ Beg costs

Question 32

Calc End WIP costs for FIFO method

Answer 32

End EU’s x per unit

Question 33

Selling Price variance

Answer 33

(Budgeted selling price - Actual selling price)

x Actual units sold

Question 34

Sales volume variance for operating income

Answer 34

(Actual units sold - Budgeted unit sales)

x Budgeted CM (or budget profit per unit if absorption costing)

Question 35

Calc to figure out Fixed OH expensed under absorption costing

Answer 35

(Units sold/Units produced) x Fixed OH

Question 36

What are the 2 ways to allocate by-products

Answer 36

1. The net revenue (sales-cost) reduces the main products CGS and inc overal GP
2. NRV of by-products deducted from cost of main product produced (not sold) ie- either minus from joint costs or allocate with the rest, whatever problem says

Question 37

3 methods of allocating service department costs

Answer 37

1. Direct- allocate service costs directly to producing departments
2. Step- allocate service to both service and production (most used service first, then next, etc)
3. Reciprocal- costs allocated among service departments simultaneously