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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. What is cost behavior?
The sensitivity of costs to changes in production or sales volume. Better collaboration - planning - and motivation are a result of different sets of budget decisions. It helps managers make strategic and operating decisions that have a positive envi
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.
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

2. Splitoff point
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
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.
Past manufacturing hourly wage rate and past manufacturing labor costs. Historical costs themselves are past costs that therefore are irrelevant to decision making. Managers divide the outcomes of decisions into two broad categories.
The juncture in a point-production process when two or more products become separately identifiable

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

4. When do we use reciprocal allocation?
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
We use reciprocal method to have accurate service department cost allocations.
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.

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

6. Sales Value at splitoff method...
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 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
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.

7. Qualitative 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.
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.
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 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.

8. Know the cost function
Is spoilage that is not inherent in a particular production process and would not arise under efficient (normal) operating condition. Abnormal spoilage is usually regarded as avoidable and controllable. Cost of abnormal spoilage is written off as a l
Is 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
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.

9. 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
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.
Cocoa beans
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

10. Approach one of Joint Costs
Method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventorial costs. - Fixed and manufacturing overhead are the same. It is a method of inventory costing in which all variable/fixe
Allocates joint costs using market base data such as revenues.
Tanning cream and Instant cocoa mix
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.

11. When to use special order?

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12. How do we account for abnormal spoilage?
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
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable 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

13. Reciprocal allocation method
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential 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.
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.
Costing system in which the cost object is masses of identical or similar units of a product or service.

14. Main product
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.
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.
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.

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

16. Separable costs
Allocates joint costs using market base data such as revenues.
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
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.

17. Intermediate products (Separable products at the split off point)
Cocoa butter and Cocoa powder
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
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

18. Abnormal Spoilage
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.
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 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 the actual price of a product is less than the budgeted price - resulting in an increase in operating income.

19. Why would we use Just-in-time production system? Just-in-time (JIT) production (also called lean production)
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
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
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

20. Dual rate 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.
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
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.

21. End products (Separable products at the split off point)
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.
The juncture in a point-production process when two or more products become separately identifiable
Tanning cream and Instant cocoa mix
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.

22. Single-rate 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 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
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.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.

23. 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.
Cocoa butter and Cocoa powder
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
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.

24. What is spoilage?
Allocates joint costs using market base data such as revenues.
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.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.

25. Use of cost drivers in ABC system

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26. Who are users of management accounting information?
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
Managers
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
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

27. how do we account for normal spoilage?
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
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.
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
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.

28. Joint cost
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
The sensitivity of costs to changes in production or sales volume. Better collaboration - planning - and motivation are a result of different sets of budget decisions. It helps managers make strategic and operating decisions that have a positive envi
Is a cost of a production process that yields multiple products simultaneously.
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

29. Quantitative 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
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
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
Allocates joint costs using market base data such as revenues.

30. Direct method allocation

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31. What are sunk costs?
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable 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
We use reciprocal method to have accurate service department cost allocations.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.

32. Operating department
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 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
Managers compare how revenue - costs - and contribution margin change across various alternatives then they choose the alternative that maximizes operating income. It also expands the use of information provided by breakeven analysis. Furthermore - i
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.

33. Reciprocal allocation
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
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.
Is a cost of a production process that yields multiple products simultaneously.

34. Scrap
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.
Used to estimate the cost function of individual activities - the manager collects data on the activity's costs and the quantities of competing cost drivers over a reasonably long period. Managers must identify a cost driver for each activity in the
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
Cocoa beans

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.
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
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.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.

36. Byproduct
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
The products of a joint production process that have low total sales values compared with the total sales value of the main product or of joint products.
Cost allocation method that 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.

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

38. What is a decision model?
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
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.

39. Purpose of a budget?
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
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
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.

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

41. What is cost allocation?
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.
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
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

42. When do we have a favorable price variance?
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.
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
Managers

43. 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
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.
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.

44. What is variable costing?
Managers
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
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
Allocates joint costs using market base data such as revenues.

45. Physical-Measure Method (Physical Units)...
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
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.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.

46. Approach two of Joint Costs
We use reciprocal method to have accurate service department cost allocations.
Cocoa butter and Cocoa powder
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
Managers

47. Reciprocal method allocation
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
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 provides the services that assist other internal departments (operating departments and other support departments) in the company.

48. What are the steps in the decision-making model?
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.
Allocates joint costs using market base data such as revenues.
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

49. Step down method allocation
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
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation 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.
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.

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