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Cost Accounting

Instructions:

Answer 50 questions in 15 minutes.
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Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.

1. When to use special order?

2. Operating department
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
Is spoilage that is not inherent in a particular production process and would not arise under efficient (normal) operating condition. Abnormal spoilage is usually regarded as avoidable and controllable. Cost of abnormal spoilage is written off as a l

3. What is cost behavior?
The sensitivity of costs to changes in production or sales volume. Better collaboration - planning - and motivation are a result of different sets of budget decisions. It helps managers make strategic and operating decisions that have a positive envi
When a joint production process yields two or more products with high total sales values compared with the total sales values of other products - if any.
Cocoa butter and Cocoa powder
Assignment of indirect costs to a particular cost object.

4. Joint cost
A. to compute inventory cost and cost of goods sold b. to determine cost reimbursement under contracts c. for insurance settlement computations d. for rate regulation e. for litigation purposes
Variable manufacturing overhead costs
The products of a joint production process that have low total sales values compared with the total sales value of the main product or of joint products.
Is a cost of a production process that yields multiple products simultaneously.

5. Know the cost function
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
Variable manufacturing overhead costs
Is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost. Pg.341 It can be plotted on a graph by measuring the level of an activity - such as number of batches produces or number of machines u
The normal spoilage is the spoilage related to the good units produced - normal spoilage rates are computed by dividing units or normal spoilage by total good units completed - not total actual units started in production.

6. What is process costing?
Costing system in which the cost object is masses of identical or similar units of a product or service.
Derived amount of output units that (a) takes the quantity of each output (factor of production) in units completed and in incomplete units of work in process and (b) converts the quantity of input into the amount of completed output units that could
The sensitivity of costs to changes in production or sales volume. Better collaboration - planning - and motivation are a result of different sets of budget decisions. It helps managers make strategic and operating decisions that have a positive envi
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.

7. Reciprocal allocation method
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
Allocates support-department costs to operating departments by fully recognizing the mutual services provided among all support departments. It fully incorporates interdepartmental relationships into the support-department cost allocation.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.

8. Single-rate method
A. to compute inventory cost and cost of goods sold b. to determine cost reimbursement under contracts c. for insurance settlement computations d. for rate regulation e. for litigation purposes
We use reciprocal method to have accurate service department cost allocations.
The products of a joint production process that have low total sales values compared with the total sales value of the main product or of joint products.
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.

9. Physical-Measure Method (Physical Units)...
The budgeted total fixed costs are the same for static budget and flexible budget as long as long as the number of units falls within the relevant range. Therefore - the budget is the same amount of fixed costs.
The difference between actual results and expected performance. The expected performance is also called budgeted performance - which is a point of reference for making comparisons.
Allocates joint costs to joint products produced during the accounting period on the basis of a compatible physical measure - such as the relative weight - quantity - or value at the split off point.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.

10. Direct method allocation

11. End products (Separable products at the split off point)
Tanning cream and Instant cocoa mix
Cocoa beans
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
Special orders are used when a company receives a onetime only unexpected order that will not affect the company's current fixed manufacturing costs - nor will the special order affect the selling price or the quantity of items sold to regular custom

12. Reciprocal allocation
Cocoa beans
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
Is units of production whether fully or partially completed that do not meet the specifications required by customers for good units and that are discarded or sold at reduced prices.
Past manufacturing hourly wage rate and past manufacturing labor costs. Historical costs themselves are past costs that therefore are irrelevant to decision making. Managers divide the outcomes of decisions into two broad categories.

13. Why do we allocate costs?
Accounting for spoilage aims to determine the magnitude of spoilage costs and to distinguish between costs of normal and abnormal spoilage. Also - to manage - control - and reduce spoilage costs - they can be highlighted - not simply folded into prod
Is units of production whether fully or partially completed that do not meet the specifications required by customers for good units and that are discarded or sold at reduced prices.
A. to compute inventory cost and cost of goods sold b. to determine cost reimbursement under contracts c. for insurance settlement computations d. for rate regulation e. for litigation purposes
Is spoilage inherent in a particular production process. The cost of normal spoilage are typically included as a component of the cost of goods units manufactured because good units cannot be made without making some units that are spoiled. pp646 is

14. Actual cost allocation
Cocoa butter and Cocoa powder
When actual rates are used for cost allocation - managers do not know the rates until the end of the budget period. If actual rates are used - the efficiency of the supplier department affects the cost allocated to the user department.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
Accounting for spoilage aims to determine the magnitude of spoilage costs and to distinguish between costs of normal and abnormal spoilage. Also - to manage - control - and reduce spoilage costs - they can be highlighted - not simply folded into prod

15. What is variance?
Allocates joint costs using market base data such as revenues.
Allocates joint costs to joint products produced during the accounting period on the basis of a compatible physical measure - such as the relative weight - quantity - or value at the split off point.
The difference between actual results and expected performance. The expected performance is also called budgeted performance - which is a point of reference for making comparisons.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.

16. Splitoff point
The normal spoilage is the spoilage related to the good units produced - normal spoilage rates are computed by dividing units or normal spoilage by total good units completed - not total actual units started in production.
The juncture in a point-production process when two or more products become separately identifiable
Is units of production whether fully or partially completed that do not meet the specifications required by customers for good units and that are discarded or sold at reduced prices.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.

17. What are historical costs?
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
Past manufacturing hourly wage rate and past manufacturing labor costs. Historical costs themselves are past costs that therefore are irrelevant to decision making. Managers divide the outcomes of decisions into two broad categories.
The normal spoilage is the spoilage related to the good units produced - normal spoilage rates are computed by dividing units or normal spoilage by total good units completed - not total actual units started in production.

18. Constant Gross-Marging Percentage NRV method...
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
Managers compare how revenue - costs - and contribution margin change across various alternatives then they choose the alternative that maximizes operating income. It also expands the use of information provided by breakeven analysis. Furthermore - i
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
Allocates joint cost to joint products produced during the accounting period in such a way that each individual product achieves an identical gross margin percentage. The method works backward int that the overall gross margin is computed first. Then

19. how do we account for normal spoilage?
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
Assignment of indirect costs to a particular cost object.
The normal spoilage is the spoilage related to the good units produced - normal spoilage rates are computed by dividing units or normal spoilage by total good units completed - not total actual units started in production.

20. Budgeted costs
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
A. to compute inventory cost and cost of goods sold b. to determine cost reimbursement under contracts c. for insurance settlement computations d. for rate regulation e. for litigation purposes
Allocates joint cost to joint products produced during the accounting period on the basis of their relative NRV final sales value minus separable costs. The NRV method is typically used in preference to the sales value at splitoff method - only when
The sensitivity of costs to changes in production or sales volume. Better collaboration - planning - and motivation are a result of different sets of budget decisions. It helps managers make strategic and operating decisions that have a positive envi

21. When do we use reciprocal allocation?
We use reciprocal method to have accurate service department cost allocations.
The difference between actual results and expected performance. The expected performance is also called budgeted performance - which is a point of reference for making comparisons.
Derived amount of output units that (a) takes the quantity of each output (factor of production) in units completed and in incomplete units of work in process and (b) converts the quantity of input into the amount of completed output units that could
Cocoa beans

22. Purpose of a budget?
Is spoilage inherent in a particular production process. The cost of normal spoilage are typically included as a component of the cost of goods units manufactured because good units cannot be made without making some units that are spoiled. pp646 is
When a joint production process yields two or more products with high total sales values compared with the total sales values of other products - if any.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
Used when implementing strategy. It is the quantitative expression of a proposed plan of action by management and is an aid to coordinating what needs to be done to execute that plan.

23. Reciprocal method allocation
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
It is the marginal profit per unit sale. The difference between total revenues and total revenues cost. It indicates why operating income changes as the number of units sold changes. The difference between total revenues minus total variable costs.
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
Cocoa butter and Cocoa powder

24. Approach two of Joint Costs
Method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventorial costs. - Fixed and manufacturing overhead are the same. It is a method of inventory costing in which all variable/fixe
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
The products of a joint production process that have low total sales values compared with the total sales value of the main product or of joint products.
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.

25. Relevant costs for decision making?
Allocates joint costs using market base data such as revenues.
The normal spoilage is the spoilage related to the good units produced - normal spoilage rates are computed by dividing units or normal spoilage by total good units completed - not total actual units started in production.
The sensitivity of costs to changes in production or sales volume. Better collaboration - planning - and motivation are a result of different sets of budget decisions. It helps managers make strategic and operating decisions that have a positive envi
Are expected future costs that differ among alternative courses of action being considered. Relevant costs must occur in the future and differ among the alternative courses of action.

26. What are sunk costs?
Are expected future costs that differ among alternative courses of action being considered. Relevant costs must occur in the future and differ among the alternative courses of action.
When actual rates are used for cost allocation - managers do not know the rates until the end of the budget period. If actual rates are used - the efficiency of the supplier department affects the cost allocated to the user department.
Used to estimate the cost function of individual activities - the manager collects data on the activity's costs and the quantities of competing cost drivers over a reasonably long period. Managers must identify a cost driver for each activity in the
Past costs because they are unavoidable and cannot be changed no matter What action is taken.

27. Equivalent unit computation in process costing.
Special orders are used when a company receives a onetime only unexpected order that will not affect the company's current fixed manufacturing costs - nor will the special order affect the selling price or the quantity of items sold to regular custom
Past manufacturing hourly wage rate and past manufacturing labor costs. Historical costs themselves are past costs that therefore are irrelevant to decision making. Managers divide the outcomes of decisions into two broad categories.
The normal spoilage is the spoilage related to the good units produced - normal spoilage rates are computed by dividing units or normal spoilage by total good units completed - not total actual units started in production.
Derived amount of output units that (a) takes the quantity of each output (factor of production) in units completed and in incomplete units of work in process and (b) converts the quantity of input into the amount of completed output units that could

28. Fixed costs in relation to flexible budget?
Allocation method that classifies costs in each cost pool into two pools (a variable-cost pool and a fixed-cost pool) with each pool using a different cost-allocation base.
Is a cost of a production process that yields multiple products simultaneously.
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
The budgeted total fixed costs are the same for static budget and flexible budget as long as long as the number of units falls within the relevant range. Therefore - the budget is the same amount of fixed costs.

29. Approach one of Joint Costs
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
The sensitivity of costs to changes in production or sales volume. Better collaboration - planning - and motivation are a result of different sets of budget decisions. It helps managers make strategic and operating decisions that have a positive envi
Allocates joint costs using market base data such as revenues.
Cocoa beans

30. When do we use job order costing?
Assignment of indirect costs to a particular cost object.
When the cost object is a distinct product or service called a job. Job costing systems accumulate costs separately for each product or service. Work is broken into jobs; each job is tracked separately
The budgeted total fixed costs are the same for static budget and flexible budget as long as long as the number of units falls within the relevant range. Therefore - the budget is the same amount of fixed costs.
The products of a joint production process that have low total sales values compared with the total sales value of the main product or of joint products.

31. What is variable costing?
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
When actual rates are used for cost allocation - managers do not know the rates until the end of the budget period. If actual rates are used - the efficiency of the supplier department affects the cost allocated to the user department.

32. Main product
When a joint production process yields one product with a high total sales value - compared with total sales values of other products of the process.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
The budgeted total fixed costs are the same for static budget and flexible budget as long as long as the number of units falls within the relevant range. Therefore - the budget is the same amount of fixed costs.
Cost allocation method that allocates each support department's costs to operating departments only

33. Intermediate products (Separable products at the split off point)
When a joint production process yields one product with a high total sales value - compared with total sales values of other products of the process.
Cocoa butter and Cocoa powder
Allocates support-department costs to operating departments by fully recognizing the mutual services provided among all support departments. It fully incorporates interdepartmental relationships into the support-department cost allocation.
Allocates joint costs to joint products produced during the accounting period on the basis of a compatible physical measure - such as the relative weight - quantity - or value at the split off point.

34. 4 overhead variances.
Allocates joint cost to joint products produced during the accounting period on the basis of their relative NRV final sales value minus separable costs. The NRV method is typically used in preference to the sales value at splitoff method - only when
Qualitative costs and benefits (those costs and benefits that are non-quantifiable and/or immeasurable within the scope of this analysis) were determined based on the literature review and information gathering process.
Variable manufacturing overhead costs
When a joint production process yields two or more products with high total sales values compared with the total sales values of other products - if any.

35. Byproduct
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
The products of a joint production process that have low total sales values compared with the total sales value of the main product or of joint products.
Cost allocation method that allocates each support department's costs to operating departments only
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.

36. Separable costs
Allocates joint costs to joint products produced during the accounting period on the basis of a compatible physical measure - such as the relative weight - quantity - or value at the split off point.
Variable manufacturing overhead costs
When a joint production process yields one product with a high total sales value - compared with total sales values of other products of the process.
All costs - manufacturing - marketing - distribution and so on incurred beyond the splitoff point that are assignable to each of the specific products identified at the splitoff point.

37. When do we have a favorable price variance?
Allocates joint cost to joint products produced during the accounting period on the basis of their relative NRV final sales value minus separable costs. The NRV method is typically used in preference to the sales value at splitoff method - only when
The products of a joint production process that have low total sales values compared with the total sales value of the main product or of joint products.
When actual rates are used for cost allocation - managers do not know the rates until the end of the budget period. If actual rates are used - the efficiency of the supplier department affects the cost allocated to the user department.
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.

38. Why would we use Just-in-time production system? Just-in-time (JIT) production (also called lean production)
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
Is a demand-pull manufacturing system in which each component in a production line is produced as soon as - and only when - needed by the next step in the production line. This system achieves close coordination among workstations. It smoothes the fl
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
Is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost. Pg.341 It can be plotted on a graph by measuring the level of an activity - such as number of batches produces or number of machines u

39. Joint product
Used to estimate the cost function of individual activities - the manager collects data on the activity's costs and the quantities of competing cost drivers over a reasonably long period. Managers must identify a cost driver for each activity in the
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
When a joint production process yields two or more products with high total sales values compared with the total sales values of other products - if any.
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.

40. Scrap
Qualitative costs and benefits (those costs and benefits that are non-quantifiable and/or immeasurable within the scope of this analysis) were determined based on the literature review and information gathering process.
Allocation method that classifies costs in each cost pool into two pools (a variable-cost pool and a fixed-cost pool) with each pool using a different cost-allocation base.
Is spoilage inherent in a particular production process. The cost of normal spoilage are typically included as a component of the cost of goods units manufactured because good units cannot be made without making some units that are spoiled. pp646 is
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.

41. What are relevant costs?
Is spoilage that is not inherent in a particular production process and would not arise under efficient (normal) operating condition. Abnormal spoilage is usually regarded as avoidable and controllable. Cost of abnormal spoilage is written off as a l
Cost allocation method that allocates each support department's costs to operating departments only
They are expected future costs and relevant revenues are expected future revenues that differ among the alternative courses of action being considered. In order to be relevant costs and relevant revenues - they must: Occur in the future - every decis
Allocates joint cost to joint products produced during the accounting period on the basis of their relative NRV final sales value minus separable costs. The NRV method is typically used in preference to the sales value at splitoff method - only when

42. How is Cost Volume Profit used?
When a joint production process yields two or more products with high total sales values compared with the total sales values of other products - if any.
Are expected future costs that differ among alternative courses of action being considered. Relevant costs must occur in the future and differ among the alternative courses of action.
Step 1 - Identify the problem and uncertainties Step 2 - Obtain information Step 3 - Make predictions about the future Step 4 - Make decisions by choosing among alternatives Step 5 - Implement the decision - Evaluate Performance - and learn
Managers compare how revenue - costs - and contribution margin change across various alternatives then they choose the alternative that maximizes operating income. It also expands the use of information provided by breakeven analysis. Furthermore - i

43. What is the value of feedback in decision-making?
We use reciprocal method to have accurate service department cost allocations.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
Allocates joint cost to joint products produced during the accounting period on the basis of their relative NRV final sales value minus separable costs. The NRV method is typically used in preference to the sales value at splitoff method - only when
Past manufacturing hourly wage rate and past manufacturing labor costs. Historical costs themselves are past costs that therefore are irrelevant to decision making. Managers divide the outcomes of decisions into two broad categories.

44. What is spoilage?
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
Is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost. Pg.341 It can be plotted on a graph by measuring the level of an activity - such as number of batches produces or number of machines u
Cost allocation method that allocates each support department's costs to operating departments only
Is units of production whether fully or partially completed that do not meet the specifications required by customers for good units and that are discarded or sold at reduced prices.

45. Dual rate method
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
Allocates joint costs to joint products produced during the accounting period on the basis of a compatible physical measure - such as the relative weight - quantity - or value at the split off point.
Allocation method that classifies costs in each cost pool into two pools (a variable-cost pool and a fixed-cost pool) with each pool using a different cost-allocation base.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.

46. What is cost allocation?
Used to estimate the cost function of individual activities - the manager collects data on the activity's costs and the quantities of competing cost drivers over a reasonably long period. Managers must identify a cost driver for each activity in the
Is spoilage that is not inherent in a particular production process and would not arise under efficient (normal) operating condition. Abnormal spoilage is usually regarded as avoidable and controllable. Cost of abnormal spoilage is written off as a l
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
Assignment of indirect costs to a particular cost object.

47. Rework
Cost allocation method that allocates each support department's costs to operating departments only
Cocoa beans
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
Allocates joint cost to joint products produced during the accounting period on the basis of their relative NRV final sales value minus separable costs. The NRV method is typically used in preference to the sales value at splitoff method - only when

48. Step down method allocation
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
Assignment of indirect costs to a particular cost object.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
When the cost object is a distinct product or service called a job. Job costing systems accumulate costs separately for each product or service. Work is broken into jobs; each job is tracked separately

49. Abnormal Spoilage
Are expected future costs that differ among alternative courses of action being considered. Relevant costs must occur in the future and differ among the alternative courses of action.
Is spoilage that is not inherent in a particular production process and would not arise under efficient (normal) operating condition. Abnormal spoilage is usually regarded as avoidable and controllable. Cost of abnormal spoilage is written off as a l
When actual rates are used for cost allocation - managers do not know the rates until the end of the budget period. If actual rates are used - the efficiency of the supplier department affects the cost allocated to the user department.
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.

50. When do we use absorption costing?
Is units of production whether fully or partially completed that do not meet the specifications required by customers for good units and that are discarded or sold at reduced prices.
The budgeted total fixed costs are the same for static budget and flexible budget as long as long as the number of units falls within the relevant range. Therefore - the budget is the same amount of fixed costs.
Past manufacturing hourly wage rate and past manufacturing labor costs. Historical costs themselves are past costs that therefore are irrelevant to decision making. Managers divide the outcomes of decisions into two broad categories.
Method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventorial costs. - Fixed and manufacturing overhead are the same. It is a method of inventory costing in which all variable/fixe

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Cost Accounting

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