Module 46 Flashcards
(34 cards)
1
Q
COST ACCOUNTING OBJECTIVE
A
- To compute the cost per unit for financial statement presentation of COGS on the income statement and Ending Inventory
2
Q
MANUFACTURING COST COMPONENTS
A
- Direct Materials - Materials that become part of the product
- Direct Labor - Employees who work on the product
- Factory OH - All other manufacturing costs, including normal spoilage
- Variable
- Fixed
3
Q
PRIME COSTS
A
- DL - Direct Labor
- DM - Direct Materials
4
Q
CONVERSION COSTS
A
- DL - Direct Labor
- OH - Overhead (Variable and Fixed)
5
Q
COST OF GOODS PURCHASED
A
Where
Gross Purchases
-Purchase Discounts
-Purchase Returns
=Net Purchases
+Freight In
=Costs of Goods Purchased
6
Q
FLOW OF COSTS T-ACCOUNTS
A
- Supply Closet
- DM - Direct Materials
- DL - Direct Labor
- OH - Direct OH
- Factory Floor
- WIP - Work in Process
- Warehouse
- FGI - Finished Goods Inv.
- Loading Dock
- COGS - Cost of Goods Sold
7
Q
JOB-ORDER COSTING
A
- A system of allocating costs to groups of unique products
- Each job is a cost center
- Basically create smaller T-Accounts in the large T-Accounts in normal cost accounting
8
Q
ACCOUNTING FOR OVERHEAD
A
- Distinguising feature is that the costs cannot be directly traced to the final product
- Variable overhead uses ACTUAL activity levels
- Fixed overhead uses NORMAL capacity
9
Q
INCORRECTLY APPLIED OVERHEAD
A
OH
Underapplied - Overapplied
10
Q
DISPOSITION OF INCORRECTLY APPLIED OVERHEAD
A
- Fixed - COGS
- Variable
- Immaterial - COGS
- Material - pro rate to WIP,FGI,COGS
11
Q
SERVICE DEPARTMENT COST ALLOCATION
A
- Costs of departments such as (maintenance, receiving) must be allocated to production departments
- Methods Include:
- Direct Method
- Step Method
- Reciprocal Method
12
Q
DIRECT METHOD
A
- Simply allocates the costs of each service dept. to each of the production depts.
- Each service department ignores the costs for services they provide to eachother
13
Q
STEP METHOD
A
- Allocate a portion of the service costs to the service departments
- Choose the highest service department costs to allocate first
- Then allocate the new balance of the remaining service costs to the production departments
- Total amounts should always agree
14
Q
RECIPROCAL METHOD
A
- Uses a linear equation to allocate costs simulataneously between service depts.
15
Q
PROCESS COSTING
A
- Process costsing, in contrast to job-order costing, is applicable to a continuous process of production of the same or similiar goods, for example oil refiniery and chemical production
16
Q
PROCESS COSTING STEPS
A
- Calculate the number shipped (n whole units)
- Calculate the equivalent finished units (EFU’s)
- Calculate the cost per EFU
- Complete the WIP T-Account
17
Q
PROCESS COSTING STEP 1
A
- Calculate the number shipped (in whole units)
Beginning Inventory
+Units Started
=Units To Be Accounting For
-Ending Inventory
=Units Shipped
18
Q
PROCESS COSTING STEP 2 - FIFO
A
- Calculate the EFU’s under FIFO
- Do so for Direct Materials and Conversion Costs
Units Shipped
+ Ending Inventory
-Beginning Inventory
= FIFO EFU’s
19
Q
PROCESS COSTING STEP 2 - W/A
A
- Calculate the EFU’s under W/A
- Do so for Direct Materials and Conversion Costs
Units Shipped
+ Ending Inventory
= W/A EFU’s
20
Q
PROCESS COSTING STEP 2 - FIFO
A
- Calculate the cost per EFU’s under FIFO
- Do so for Direct Materials and Conversion Costs
Current Costs
FIFO EFU’s
21
Q
PROCESS COSTING STEP 2 - W/A
A
- Calculate the cost per EFU’s under W/A
- Do so for Direct Materials and Conversion Costs
Beginning Costs + Current Costs
W/A EFU’s
22
Q
PROCESS COSTING STEP 4
A
- Complete the WIP T-Account. Using the number of Ending Inventory EFUs from step 2 and Cost per EFU in step 3, calculate the $ value of ending inventory in WIP and plug COGM
23
Q
LOST UNITS
A
- Abnormal Spoilage is a PERIOD cost; do not include in WIP
- Normal Spoilage is a PRODUCT cost; the costs of all units are spread over the good units; usually part of OH
24
Q
ACTIVITY BASED COSTING
A
- ABC is a cost system that focuses on activities, determines their costs, and then uses appropriate cost drivers to trace costs to the products based on activity.
- Terminology Includes -
- Cost Driver
- Cost Pools
- Non-Value Added Costs
- Value Added Costs
- Value Chain
- Engineered Costs
25
**COST DRIVER**
- A cost driver is a factor that causes a cost to be incurred. Cost drivers may be volume related and transaction related.
- Volume related - repair costs may depend on volume of machine hours
- Transaction related - purchasing costs may depend on number of purchasing transactions)
26
**COST POOLS**
- Cost pools are groupings of related costs accumulated together to be allocated to a product or some other cost object
27
**NON-VALUE-ADDED COSTS**
- Non-value-added costs are the cost of activities that can be eliminated without the customer perceiving a decline in product quality or performance
28
**VALUE-ADDED COSTS**
- Value-added costs are the cost of activities that cannot be eliminated without the customer perceiving a decline in product quality or performance
29
**VALUE CHAIN**
- A value chain is the sequence of business functions in which value is added to a firms products or services.
- This sequence includes R&D, product design, manufacturing, marketing, distribution, and customer service
30
**ENGINEERED COSTS**
- Engineered costs are determined from industrial engineering studies that examine how activities are performed and if/how performance can be improved
31
**BACKFLUSH COSTING**
- Backflush costing is a costing system that omits recording some or all of the journal entries to track the purchase an production of goods
- Goods are costed after they have been completed
32
**JOINT PRODUCTS**
- Joint products are two or more products who share costs until the split off point. Allocation methods include Sales Value Method; NRV Method
1. Sales Value Method - costs are allocated based on sales value at split off
2. NRV - Costs are allocated based on NRV; final sales value less sperable costs
- NRV associated with by-products can be subtracted from joint costs before allocation
33
**COST ESTIMATION APPROACHES**
- Basic Cost Estimation Approaches Include:
1. Industrial Engineering - costs estimated based on inputs (man hours) and outputs
2. Conference Method - analysis of opinions from various depts.
3. Account Analysis Method - analysis of ledger accounts
4. Quantitative Method - analysis using math models
* Scattergraph
* High-Low
* Regression
* Correlation
34
**HIGH-LOW COST ESTIMATION**
- Computes the slope for the variable rate based on the highest and lowest observations - should use $$$
- Take the average of the high and low $ amounts vs the average of the units associated with those $ amounts; the unit cost is then your VC
- Back into you fixed cost using the highest total $ amount selected and the VC from above.
- Always works as long as $ amount is in range
