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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. Purpose of a budget?
Managers
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
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.

2. End 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.
Tanning cream and Instant cocoa mix
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
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.

3. Single-rate method
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.
Cost allocation method that allocates each support department's costs to operating departments only
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
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. how do we account for normal spoilage?
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.
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.
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.

5. What are relevant 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.
Tanning cream and Instant cocoa mix
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.
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

6. 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.
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
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
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.

7. How is Cost Volume Profit used?
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
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 the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.

8. Rework
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 a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.

9. Approach two of Joint 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 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.
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

10. Quantitative 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.
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 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 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

11. Sales Value at splitoff method...
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
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

12. What are historical 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 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
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
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. What are the steps in the decision-making model?
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
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.
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

14. Why do we allocate 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.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
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 cost allocation method that fully recognizes the mutual services provided among all support departments.

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

16. Relevant costs for decision making?
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
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.
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.

17. 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.
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
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 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.

18. Abnormal Spoilage
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 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.
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

19. Qualitative costs
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.
Assignment of indirect costs to a particular cost object.
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.
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

20. What is the value of feedback in decision-making?
Assignment of indirect costs to a particular cost object.
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
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.

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

22. Who are users of management accounting information?
Cocoa butter and Cocoa powder
Managers
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.

23. Equivalent unit computation in process costing.
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
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
Cocoa beans
Managers

24. Know the cost function
We use reciprocal method to have accurate service department cost allocations.
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 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 fully recognizes the mutual services provided among all support departments. Also called matrix-method.

25. Intermediate products (Separable products at the split off point)
Variable manufacturing overhead costs
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
Cocoa butter and Cocoa powder
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

26. Constant Gross-Marging Percentage NRV method...
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.
Assignment of indirect costs to a particular cost object.
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
Cocoa beans

27. Splitoff point
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
The juncture in a point-production process when two or more products become separately identifiable
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

28. What is spoilage?
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
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 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
Variable manufacturing overhead costs

29. What is cost behavior?
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
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.
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

30. 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
Variable manufacturing overhead costs
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
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.

31. What is cost allocation?
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
Assignment of indirect costs to a particular cost object.
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
Managers

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

33. Reciprocal method allocation
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
Cocoa butter and Cocoa powder
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.

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

35. 4 overhead variances.
Cocoa butter and Cocoa powder
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 one product with a high total sales value - compared with total sales values of other products of the process.
Variable manufacturing overhead costs

36. Joint product
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.
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.
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.
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

37. Direct method allocation

38. Net realizable value (NRV) method...
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.
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
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 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

39. 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.
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.
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.
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.

40. Operating department
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.
We use reciprocal method to have accurate service department cost allocations.
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.

41. How do we account for abnormal spoilage?
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-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
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.
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

42. What is contribution margin?
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
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.
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.
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

43. Actual cost allocation
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
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
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.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.

44. What is a decision model?
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
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 formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.

45. Separable costs
Costing system in which the cost object is masses of identical or similar units of a product or service.
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
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
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.

46. What is variance?
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.
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
Cocoa butter and Cocoa powder

47. Budgeted 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
Tanning cream and Instant cocoa mix
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.
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.

48. Approach one of Joint Costs
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.
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
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. When to use special order?

50. When do we use absorption costing?
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
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.
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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