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Cost Accounting

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Answer 50 questions in 15 minutes.
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Match each statement with the correct term.
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1. Main product
Cocoa beans
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 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.

2. Operating department
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
Variable manufacturing overhead costs
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
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

3. How is Cost Volume Profit used?
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
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
Is a cost of a production process that yields multiple products simultaneously.
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.

4. Qualitative costs
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 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.
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
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.

5. Splitoff point
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.
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
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
The juncture in a point-production process when two or more products become separately identifiable

6. Normal Spoilage
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
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.
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

7. What is contribution margin?
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
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.
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.

8. Dual rate method
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.
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
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.
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.

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

10. When do we use reciprocal allocation?
We use reciprocal method to have accurate service department cost allocations.
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.
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.

11. Approach one of Joint Costs
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
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
Allocates joint costs using market base data such as revenues.
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.

12. Joint cost
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
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.
We use reciprocal method to have accurate service department cost allocations.

13. Why do we allocate costs?
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
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
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
Allocates joint costs using market base data such as revenues.

14. Single-rate method
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
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

15. Use of cost drivers in ABC system

16. What is variance?
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 difference between actual results and expected performance. The expected performance is also called budgeted performance - which is a point of reference for making comparisons.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
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.

17. 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.
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
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
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

18. How do we account for abnormal spoilage?
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
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
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.

19. End products (Separable products at the split off point)
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
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.
Tanning cream and Instant cocoa mix

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

21. Actual cost allocation
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.
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
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.

22. how do we account for normal spoilage?
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.
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
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

23. Joint product
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
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 costs because they are unavoidable and cannot be changed no matter What action is taken.
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.

24. Intermediate products (Separable products 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.
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
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
Cocoa butter and Cocoa powder

25. Reciprocal allocation
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
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
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.

26. When do we have a favorable price variance?
Costing system in which the cost object is masses of identical or similar units of a product or service.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.

27. 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.
Cocoa butter and Cocoa powder
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
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.

28. Supporting department (service department)
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.
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.

29. What is cost allocation?
Assignment of indirect costs to a particular cost object.
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
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.
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.

30. Separable costs
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
Cocoa beans
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
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.

31. Quantitative costs
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
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.
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
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.

32. 4 overhead variances.
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.
Cocoa beans
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.

33. Why would we use Just-in-time production system? Just-in-time (JIT) production (also called lean production)
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 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
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.

34. Direct method allocation

35. Fixed costs in relation to flexible budget?
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.
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff 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.
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.

36. Scrap
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
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.
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.

37. What are the steps in the decision-making model?
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.
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
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
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

38. When do we use absorption costing?
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
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.
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.
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

39. When to use special order?

40. Approach two of Joint Costs
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
We use reciprocal method to have accurate service department cost allocations.
Cost allocation method that allocates each support department's costs to operating departments only

41. Purpose of a budget?
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
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
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.

42. When do we use job order costing?
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
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation 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
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

43. Equivalent unit computation in process costing.
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
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.
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
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 the value of feedback in 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.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
The juncture in a point-production process when two or more products become separately identifiable
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.

45. Reciprocal method allocation
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.
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
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.

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

47. What is spoilage?
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 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
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

48. Reciprocal allocation method
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.
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
Allocates joint costs using market base data such as revenues.
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

49. Relevant costs for decision making?
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.
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
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.
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

50. What are historical 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.
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
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 units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.