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ACC-427: Cost Accounting > Final Exam > Flashcards

Final Exam Flashcards

1
Q

What is the Value Chain?

A

set of activities that transform raw resources into the goods and services end-user purchase and consume

includes the treatment or disposal of any waste generated by the end users

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2
Q

Which users use Financial Accounting? Cost Accounting?

A

EXTERNAL/COMPARATIVE users use financial accounting

INTERNAL/MANAGEMENT Decision Making users use cost accounting

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3
Q

What are Budgets?

A

the financial plan of the revenues and resources needed to carry out activities and meet financial goals

-help manager decide whether goals can be achieved; may need modifications

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4
Q

What timeframe is a budget usually prepared?

A

for the upcoming period (usually 1 year)

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5
Q

TRUE/FALSE: budgets are very important to the financial success of individuals and organizations

A

TRUE

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6
Q

What is an Opportunity Cost?

A

the foregone benefit from alternative courses of action

-NOT recognized in an accounting system

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7
Q

What is an Outlay Cost?

A

past, present, or future cash outflow; “sacrifice”

-recognized as an asset or expense in an accounting system

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8
Q

When is an expense charged?

A

charged to P&L in period it’s incurred

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9
Q

What is a Product Cost?

A

Cost into the product
-Manufacturing/Inventory
-expensed as COGS
-DM, DL, MOH

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10
Q

What is a Period Cost?

A

Non-Manufacturing
-expense when incurred
-SG&A, abnormal spillage

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11
Q

What is the formula for a Prime Cost?

*KNOW THIS FOR COMPUTATIONAL

A

Direct Material + Direct Labor

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12
Q

What is the formula for Conversion Cost?

*KNOW THIS FOR COMPUTATIONAL

A

Direct Labor + MOH
-Variable Costs = Fixed per unit/variable in total

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13
Q

What is the Full Cost?

A

ALL manufacturing and sellings costs

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14
Q

What consists of the Full Absorption Cost?

A

ALL fixed and variable MANUFACTURING costs

“GROSS MARGIN”

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15
Q

What consists of the Variable Cost?

A

ALL variable manufacturing and selling costs

“CONTRIBUTION MARGIN”

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16
Q

What is the purpose of calculating individual product (and service) costs?

A
  1. computing the inventory values and the COGS for financial statements
  2. Helping various product managers make decisions regarding pricing, production, promotion, adding or dropping a product, whether to outsource selected products or services.
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17
Q

What is the Basic Cost Flow Model?

*KNOW THIS FOR COMPUTATIONAL

A

BB + TI - TO = EB

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18
Q

Raw Materials TI = ____________

A

Purchases

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19
Q

Raw Materials TO = ____________

A

requisitioned into production

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20
Q

WIP TI = ____________

A

raw materials requisitioned into production

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21
Q

WIP TO = ____________

A

cost of jobs completed during the period (COGM)

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22
Q

F/Gs TI = ____________

A

Cost of Goods Manufactured

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23
Q

F/Gs TO = ____________

A

COGS

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24
Q

What is the difference between Direct and Indirect Costs, and examples?

A

Direct = ASSIGNED to a product
-DM, DL

Indirect = allocated based on some measure of activity
-MOH, indirect mat., indirect labor, depreciation, utilities

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25
Q

What are the 3 common estimated allocation bases?

A
  1. Machine Hours
  2. DL $
  3. DL Hours
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26
Q

What is Job Costing?

A

“Job Shop”
-customized
-traces costs to individual units or specific jobs

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27
Q

What is Process Costing?

A

“Continuous Flow Process”
-homogenous/identical items
-no need to trace costs to the individual unit level

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28
Q

What is Operations Costing?

A

“Batch Production”
-hybrid of job and process costing

29
Q

What are the THREE Inventory accounts?

A
  1. Raw Materials
  2. WIP
  3. Finished Goods
30
Q

A debit to MOH reflects __________

A

ACTUAL indirect materials, indirect labor, or other

31
Q

A credit to MOH reflects ____________

A

APPLIED overhead based on the predetermined overhead rate

32
Q

What does Underapplied Overhead mean?

A

actual OH costs are in excess of the applied OH costs

Dr. COGS
Cr. MOH

33
Q

What does Overapplied Overhead mean?

A

applied OH costs are in excess of the actual OH costs incurred

Dr. MOH
Cr. COGS

34
Q

What are the Equivalent Units?

A

number of COMPLETE physical units to which units in inventories are equal in terms of work done to date

35
Q

What is the 4 Step Process in assigning costs to production?

A
  1. Determine “physical flow” (BB + TI - TO = EB)
  2. Calculate Equivalent Units of Production (EUPs) - Materials and Conversion Costs
  3. Indetify product costs to account for
  4. Compute costs per EUP (then allocate to WIP and F/G inventories)
36
Q

How do you find the EUPS?

A

of physical units x % of completion

37
Q

What does Weighted-Average Process Costing do?

A

combines the work and costs for the two periods (previous and current) and computes a single cost

-makes it impossible to know how much it cost to make a product this period

38
Q

What does FIFO Process Costing do?

A

keeps previous and current periods separate

-inventory numbers are more likely to reflect reality than under Weight-Avg because the units in ending WIP are likely to have been produced in the current period

39
Q

Which Process Costing Method gives managers better information about the work done in the current period?

A

FIFO Process Costing

40
Q

The Traditional/Plantwide allocation method uses __________

A

ONE cost pool for the entire plant as in a single-stage approach
-uses ONE OH allocation rate

41
Q

What is ABC?

A

two-stage product costing method that first assigns costs to activities and then allocates them to products based on each product’s consumption of activities

-based on the concept that products consume activities and activities consume resources

42
Q

Which costing, ABC or Traditional/Plantwide, provides more detailed measures of costs?

A

ABC

43
Q

What is the cost/benefit tradeoff for ABC?

A

Provides more information about product costs but requires more record-keeping

44
Q

What is a budget?

A

a financial plan of the resources needed to carry out activities and meet financial goals

45
Q

What is the Master Budget comprised of?

A

(1) Operating Budgets
-sales budgets
-production “”
-COGS “”
-M&A “”
Income Statement “”

(2) Financial Budgets
-Cash budget
-Balance sheet

46
Q

TRUE/FALSE: assembling a master budget is a complex process requiring careful coordination of many different organization segments

A

TRUE

47
Q

What is a variance, and the difference between a favorable and unfavorable variance?

A

Variance = difference between planned result and actual outcome

Favorable = when taken alone, increases operating profit
Unfavorable - when taken alone, decreases operating profit

48
Q

Does a Master Budget change after being developed?

A

NO

49
Q

How many levels of sales volume is a Master Budget developed for

A

ONE level

50
Q

A Flexible Budget is developed for __________ level(s) if sales volume

A

several

51
Q

What is Sales Activity Variance?

A

difference between operating profit in MASTER BUDGET and operating profit in FLEXIBLE BUDGET that arises because the actual number of units sold is different from the budgeted number

52
Q

What does the Cost-Volume Profit Analysis (CVP) show?

A

studies the relations among revenues, costs, and volumes and their effect on profit to help managers make decisions

53
Q

What is the Profit Equation?

A

Total Revenues - Total Costs

54
Q

Profit =

A

(P-V)X - F

55
Q

Unit Contribution Margin =

A

P - V

56
Q

TRUE/FALSE: the contribution margin should be large enough to cover the fixed costs

A

TRUE

57
Q

How is the Break-Even Point found, in units?

*KNOW FOR COMPUTATIONAL

A

Fixed Costs / Cont. Margin per unit

58
Q

How is the Break-Even Point found, in sales dollars?

*KNOW FOR COMPUTATIONAL

A

Fixed Costs / Cont. Margin ratio

((P-V)/P)

59
Q

How is the Target Point found, in units?

*KNOW FOR COMPUTATIONAL

A

Fixed Costs + Target Profit / Cont. Margin per unit

60
Q

How is the Target Point found, in sales dollars?

*KNOW FOR COMPUTATIONAL

A

Fixed Costs + Target Profit / Cont. Margin ratio

((P-V)/P)

61
Q

What is Differential Analysis?

A

process of eliminating revenues and costs of alternative actions available to decision-makers and of comparing these estimates to the status quo

62
Q

What are Differential Costs?

A

costs that differ among two or more alternatives
-CHANGE IN RESPONSE TO ALTERNATIVE COURSES OF ACTION

63
Q

Can Differential costs be both variable and fixed costs?

A

YES!

64
Q

What are Sunk Costs?

A

costs incurred in the past that cannot be changed by present or future decisions

65
Q

What is a Special Order?

A

order that will not affect other sales and is usually a short-run occurrence

66
Q

What costs do decision-makers focus on when deciding to accept a special order?

A

Differential Costs

67
Q

When is a special order usually accpeted?

A

when idle capacity is adequate for the job

68
Q

Do financial statements prepared in accordance with GAAP routinely provide differential cost information?

A

NO

ACC-427: Cost Accounting (6 decks)

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