Mid-term Flashcards
(100 cards)
1
Q
Cost of Goods Sold Equation
A
Beginning Finished Goods + Cost of Goods Manufactured + Ending Finished Goods
2
Q
Finished Goods Inventory Formula
A
Beginning Finished Goods Inventory + COG Manufactured - COGS = Finished Goods Inventory
3
Q
A ____ is incurred when a resource is used for some purpose.
A
Cost
4
Q
What are cost pools?
A
Meaningful groups into which costs are often collected.
5
Q
A ____ ______ is any factor that causes a change in total cost
A
Cost Driver
6
Q
A Cost Object is
A
Any product, service, customer, activity, or organizational unit to which costs are assigned for some management purpose.
7
Q
A ____ _____ is a group of related products
A
Value Stream
8
Q
______ ______ is the process of assigning costs pools or from cost pools to cost objects.
A
Cost Assignment
9
Q
A Direct Cost
A
Can by conveniently or economically traced to a cost pool or cost object.
10
Q
An Indirect Cost
A
Cannot be conveniently or economically traced to a cost pool or cost object.
11
Q
Direct Materials Cost
A
Includes the cost of the materials in the product and a reasonable allowance for scrap and defective units.
12
Q
Indirect Materials Cost
A
Refers to the cost of materials used in manufacturing that are not physically part of the finished product
13
Q
Direct Labor Cost
A
Includes the labor used to manufacture the product or to provide the service
14
Q
Indirect Labor Cost
A
Includes supervision, quality control, inspection, purchasing and receiving, and other manufacturing support costs.
15
Q
All indirect costs are commonly combined into a single cost pool called _____ or, in a manufacturing firm, _____ ______.
A
Overhead, Factory Overhead
16
Q
Prime Costs
A
Refer to direct materials and direct labor that are combined into a single amount.
Direct Material + Direct Labor
17
Q
Conversion Costs
A
Refers to direct labor and factory overhead combined into a single amount.
Direct Manufacturing Labor Costs
18
Q
Relevant Range is
A
The range of the cost driver in which the actual value of the cost driver is expected to fall and for which the relationship to total cost is assumed to be approximately linear.
19
Q
Cost Drivers provide two important roles for the management accountant:
A
- Enabling the assignment of costs to cost objects.
2. Explaining cost behavior: how total costs change as the cost driver changes.
20
Q
What are the four types of cost drivers?
A
- Activity-based
- Volume-based
- Structural
- Executional
21
Q
Activity-Based Cost Drivers are a
A
Detailed description of the specific activities performed in the firm’s operations.
This includes each step in manufacturing the product or in providing the service.
22
Q
Variable Cost is
A
A cost that changes in total in response to changes in one or more cost drivers.
(VCU) x Quantity of Units Sold (Q)
23
Q
Fixed Cost is
A
The portion of the total cost that does not change with a change in the quantity of a designated cost driver within the relevant range.
24
Q
Mixed Cost is
A
The term used to refer to total cost when total costs includes both variable and fixed cost components.
25
A ____ ____ is one that varies with the cost driver but in steps.
Step Cost
26
Unit Cost or Average Cost is
The total cost of manufacturing resources consumed (materials, labor, and overhead) divided by the number of units of output.
Total Cost of Manufacturing / Number of Units of Output
27
Capacity for operations (plant, building & equipment) are _____ costs.
Fixed.
28
Costs that are consumed during operations (direct materials and labor) are _____ costs.
Variable.
29
Structural Cost Drivers are
Strategic in nature and involve plans and decisions that have a long-term effect with regard to issues such as scale, experience, technology, and complexity.
30
Execution Cost Drivers are
Factors the firm can manage in the short term to reduce costs, such as workforce empowerment, design of the production process, and supplier relationships.
31
Cost of Goods Sold
Is the cost of the product transferred to the income statement when inventory is sold.
Merchandiser:
Beg. Merch. Inv. + COG Purch. - End. Merch. Inv.
Manufacturer:
Beg. F.G. Inv. + COG Manuf. - End. F.G. Inv.
32
Product Costs for a manufacturing firm include only
The costs necessary to complete the product, direct materials, direct labor and factory overhead.
33
Period Costs are
All non-product expenditures for managing the firm and selling the product.
General, selling, and administrative costs that are necessary. Advertising costs, data processing costs, executive and staff salaries are all period costs.
AKA: Operating Expenses, Selling and Administrative Expenses and Operating Expenses.
34
Materials Inventory cost added and cost transferred out are:
Cost Added: Purchase of Materials
| Cost Transferred Out: Cost of Materials used in production
35
Work-in-process inventory cost added and cost transferred out are:
Cost Added: Cost of materials used, labor costs and overhead costs.
Cost Transferred Out: Cost of goods manufactured.
36
Finished Goods Inventory cost added and cost transferred out are:
Cost Added: Cost of goods manufactured.
| Cost Transferred Out: Cost of Goods Sold
37
Total Manufacturing Cost is
the sum of materials used, labor and overhead for the period.
38
Cost of Goods Manufactured is
The cost of goods finished and transferred out of WIP Inventory account this period.
Beg. WIP Inv. + Total Manuf. Costs = Total Cost of WIP
Total Cost of WIP - End WIP Inv. = COG Manuf.
39
Job Costing is
Tracing costs to a specific product or service
40
Process Costing is
Accumulating costs at the department level and then allocating these costs from the departments to the products or services.
41
Actual Costing System
Uses actual costs incurred for all product costs, including direct materials, direct labor, and factory overhead.
42
Normal Costing System
Uses actual costs for direct materials, and direct labor and normal costs for factory overhead.
43
Standard Costing System
Uses standard costs and quantities for all three types of manufacturing costs: direct materials, direct labor, and factory overhead.
44
Job Costing is a costing system that
Accumulates costs and assigns them to specific jobs, customers, projects, or contracts.
45
Overhead Applications
Is a process of allocating overhead costs to jobs. Allocation is necessary because overhead costs are not traceable to individual jobs.
The two approaches to allocating overhead costs are actual costing and normal costing.
46
Actual Costing System
Uses actual costs incurred for direct materials and direct labor and records actual factory overhead for the jobs.
47
Actual Factory Overhead Costs are
Incurred each month for indirect materials, indirect labor, and other indirect production costs.
48
The Predetermined Factory Overhead Rate is
An estimated rate used to apply factory overhead cost to a specific job.
Estimated Total Factory Overhead Amount for the Year/Estimated total amount of cost driver for the year = Predetermined Overhead Rate
49
Factory Overhead Applied is
The amount of overhead assigned to a job using a predetermined factory overhead rate.
Predetermined Rate x Cost Driver = Applied Overhead
50
Over-applied Overhead is
The amount of factory overhead applied that exceeds actual factory overhead cost.
51
Underpaid Overhead is
The amount by which actual factory overhead exceeds factory overhead applied.
52
Operation Costing
Is a hybrid costing system that uses job costing to assign direct materials costs to jobs and process costing to assign conversion costs to products or services.
53
Spoilage refers to
Unacceptable units that are discarded or sold for disposal value.
54
Rework is the
Additional work performed to make non-conforming goods into good units that can be sold in regular channels.
55
Scrap is the
Material left over from the manufacture of the product; it has little or no value.
It can be classified according to a specific job and common to all jobs.
56
Normal Spoilage
Occurs under normal operating conditions; it is uncontrollable in the short-term.
57
Abnormal Spoilage
Is an excess over the amount of normal spoilage expected under normal operating conditions; it is charged as a loss to operations in the period detected.
58
Cost Estimation
Is the development of a well defined relationship between a cost object and its cost drivers for the purpose of predicting the cost.
59
What are the six steps of Cost Estimation?
1. Define the cost object
2. Determine the cost drivers
3. Collect consistent and accurate data
4. Graph the data
5. Select and employ an appropriate estimation method
6. Evaluate the accuracy of the cost estimate
60
What is the Mean Absolute Percentage Error? (MAPE)
Is calculated by taking the absolute value of each error, and then averaging those errors and converting the result to a percentage of the actual values.
61
What is the High-Low Method
Uses algebra to determine a unique estimation line between representative high and low points in the data.
Y = a + (b x X)
62
Y=
a=
b=
X=
Y= the value of the estimated maintenance cost.
a= a fixed quantity that represents the value of Y when x is zero.
b= the slope of the line, it is the unit variable cost for maintenance cost per operating hour.
X= the cost driver, the number of operating hours of operation in the plant.
63
Regression Analysis is
A statistical method for obtaining the unique cost-estimating equation that vest fits a set of data points.
Y=a+bX+e
64
Least Squares Regression
Is a cost-estimation method that minimizes the same of the squares of the estimation errors.
65
Dependent Variable
is the cost to be estimated.
66
Independent Variable
Is the cost driver used to estimate the value of the dependent variable.
67
Simple Regression
Has a single, independent variable
68
Multiple Regression
Regression applications having two or more independent variable.
69
```
Y=
a=
b=
X=
e=
```
Y= the amount of the dependent variable, the cost to be estimated.
a= a fixed quantity, intercept or constant term, which represents the amount of Y when X equals zero.
b= the unit variable cost, also called the coefficient of the independent variable, that is, the increase in Y (cost) for each unit increase in X (cost driver).
X= the value for the independent variable, the cost driver for the cost to be estimated, there may be more cost drivers.
e= the estimation error, which is the amount by which the regression prediction (y=a+bX) differs from the data point.
70
Outliers
Are unusual data points that strongly influence a regression analysis.
71
Dummy Variable
Is used to represent the presence or absence of a condition.
72
R-Squared
Is a number between zero and 1 and often is described as a measure of the explanatory power of the regression; that is, the degree to which changes in the dependent variable can be explained by changes in the independent variable(s).
73
T-value
Is the measure of the reliability of each independent variable.
74
Multicollinearity
Means that two or more independent variables are highly correlated with each other.
75
Correlation
Is present when a given variable rends to change predictably in the same (or opposite) direction for a given change in the other, correlated variable.
76
Standard Error of the Estimate (SE)
Is a measure of the dispersion of the actual observation around the regression line, and as such it provides a measure of the accuracy of the regression's estimates.
77
Confidence Intermal
Is a range around the regression line within which the management accountant can be confident the actual value of the predicted cost will fall.
78
P-Value
Measures the risk that a particular independent variable has only a chance relationship to the dependent variable.
79
The Cost-Volume-Profit Model is
Operating profit = Sales - Total Costs
Rearranged Equation:
Sales = Variable expenses + Fixed expenses + Profit
80
Operating Profit is simply
Before-tax income.
81
Operating Profit =
Sales - Variable Costs - Fixed Costs
Rearranged Equation:
Sales = Variable expenses + Fixed expenses + Profit
82
Contribution Margin Equation
p-v = cm
83
Total Contribution Margin Equation
(p-v) * Q
84
P =
V =
Q =
```
P = Price per unit
V = Variable Cost per unit
Q = Number of Units sold
```
85
Contribution Margin Ratio
(p-v)/p
86
Contribution Income Statement Equation that separates fixed costs and variable costs.
Sales - VC = CM
CM - FC = Operating Profit
87
Break even point in UNITS Equation (online)
Fixed expenses / Unit contribution margin
88
Break even point in total sales DOLLARS Equation
Fixed expenses / CM ratio
OR
[Fixed Cost / 1 – (Variable Cost / Sales)]
89
Break even point in UNITS SHORT CUT Method
Q=FC/CM per Unit
| = F/(p-v)
90
CVP Revenue Planning Formula πB - to know the sales volume necessary to achieve a PRETAX (operating) profit
πB = (p * Q) - (v * Q) - F
= Q * (p-v) - F
Q * (p-v) = F + πB
Q = (F + πB) / (p-v)
EXAMPLE (page 306 [9-3]):
Q = $60,000 + $48,000 / ($75-$35) per unit = 2,700 units per year
Solution in sales dollars:
Y = p * Q = $75/unit * 2,700 units/year = $202,500 per year.
91
What does πB mean?
Income BEFORE tax profit
92
What does πA mean?
Income AFTER tax profit
93
CVP Revenue Planning Formula πA- To find the desired level of AFTER TAX Profit
F + πA / (1-t) / Q= (p-v)
EXAMPLE (page 310 [9-3]):
Q = $60,000 + [48,000 / (1 - 0.2) / $75 - $35 = 3,000 units per year.
94
What-if-analysis is the calculation of an
Amount given different levels of a factor that influences that amount.
95
What is the Margin of Safety?
The amount of planned (or actual) sales above the break-even point.
MOS = Planned or actual sales - Breakeven sales
96
What is the MOS in Units?
MOS = Planned or actual sales - Breakeven sales
97
What is the MOS in Sales Dollars?
MOS = Planned or actual sales - Breakeven sales
EXAMPLE (page 315 [9-5]):
=1,500 units * $75 price per unit = $112,500
98
What is the Margin of Safety Ratio?
A useful measure for comparing the risk of two or more alternative products or decision alternatives.
MOS Ratio = MOS / Planned Sales
EXAMPLE (page 315 [9-5]):
= 1,500 units / 3,000 units per year = 0.50
99
What is the Operating Leverage?
Refers to the extent of fixed costs in an organization's cost structure.
The higher the relative amount of fixed costs the higher the operative leverage.
100
What is the Degree of Operating Leverage (DOL) formula?
Contribution Margin / Operating Profit
