Test your basic knowledge |

Cost Accounting

Instructions:

Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can study here.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

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. Budgeted 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.
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.
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.

2. Byproduct
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.
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
We use reciprocal method to have accurate service department cost allocations.
The juncture in a point-production process when two or more products become separately identifiable

3. What is variance?
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
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.
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 the relative total sales value at the splitoff point.

4. Joint product
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
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.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
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

5. Who are users of management accounting information?
We use reciprocal method to have accurate service department cost allocations.
Managers
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
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

6. Main product
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.
Allocates joint costs using market base data such as revenues.
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.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.

7. What are sunk costs?
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.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
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.
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.

8. How do we account for abnormal spoilage?
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.
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
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

9. Main product
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.
Assignment of indirect costs to a particular cost object.
Cocoa beans

10. Reciprocal method allocation
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
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.

11. What is spoilage?
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
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
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.
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

12. Intermediate products (Separable products at the split off point)
The juncture in a point-production process when two or more products become separately identifiable
Cocoa butter and Cocoa powder
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.
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

13. 4 overhead variances.
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.
Is a cost of a production process that yields multiple products simultaneously.
Variable manufacturing overhead costs
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.

14. Step down method allocation
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
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
The juncture in a point-production process when two or more products become separately identifiable

15. When do we have a favorable price variance?
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
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.
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.

16. What are historical 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.
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.
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.

17. Supporting department (service department)
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
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
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
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.

18. Net realizable value (NRV) method...
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 residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
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
Cost allocation method that allocates each support department's costs to operating departments only

19. how do we account for normal spoilage?
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
Is a cost of a production process that yields multiple products simultaneously.
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. What is the value of feedback in decision-making?
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
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.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.

21. Operating department
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 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.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
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.

22. Splitoff point
The juncture in a point-production process when two or more products become separately identifiable
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.
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
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.

23. What is contribution margin?
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.
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.
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.

24. How is Cost Volume Profit used?
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
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.
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 the relative total sales value at the splitoff point.

25. Abnormal Spoilage
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
Costing system in which the cost object is masses of identical or similar units of a product or service.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
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

26. What is process costing?
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.
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
Costing system in which the cost object is masses of identical or similar units of a product or service.
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

27. End products (Separable products at the split off point)
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
The juncture in a point-production process when two or more products become separately identifiable
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
Tanning cream and Instant cocoa mix

28. Rework
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.
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
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

29. Sales Value at splitoff method...
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
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.
Managers
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

30. What is cost behavior?
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
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 allocates each support department's costs to operating departments only
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.

31. Equivalent unit computation in process costing.
Cocoa butter and Cocoa powder
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
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
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.

32. What is a decision model?
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
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
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.

33. Why would we use Just-in-time production system? Just-in-time (JIT) production (also called lean production)
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
Cocoa butter and Cocoa powder
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single 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

34. Reciprocal allocation
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
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 a cost of a production process that yields multiple products simultaneously.

35. Actual cost allocation
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
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.
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
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.

36. Dual rate method
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
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.

37. Why do we allocate costs?
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
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
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
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

38. What is variable costing?
Cocoa beans
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
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.
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.

39. Direct method allocation

Warning: Invalid argument supplied for foreach() in /var/www/html/basicversity.com/show_quiz.php on line 183

40. Relevant costs for decision making?
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.
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 the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
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.

41. When to use special order?

Warning: Invalid argument supplied for foreach() in /var/www/html/basicversity.com/show_quiz.php on line 183

42. Scrap
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.
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.
Variable manufacturing overhead costs
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.

43. Approach one of Joint Costs
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.
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.
Allocates joint costs using market base data such as revenues.
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.

44. Quantitative costs
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
Costing system in which the cost object is masses of identical or similar units of a product or service.
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
Are outcomes that are measured in numerical terms. Some quantitative factors are financial; examples include the cost of direct materials - direct manufacturing labor - and marketing. Other quantitative factors are nonfinancial; they can be measured

45. Approach two of Joint 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.
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
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 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.

46. Physical-Measure Method (Physical Units)...
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.
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.
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.
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.

47. When do we use absorption costing?
Cocoa butter and Cocoa powder
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
Is a cost of a production process that yields multiple products simultaneously.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.

48. Know the cost function
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
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 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
We use reciprocal method to have accurate service department cost allocations.

49. Reciprocal allocation method
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.
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 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.
Managers

50. Qualitative costs
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
Variable manufacturing overhead costs
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
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.