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

1. What is a decision model?
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
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
It is the marginal profit per unit sale. The difference between total revenues and total revenues cost. It indicates why operating income changes as the number of units sold changes. The difference between total revenues minus total variable costs.
When a joint production process yields one product with a high total sales value - compared with total sales values of other products of the process.

2. Single-rate method
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
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.
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

3. Purpose of a budget?
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.
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
Allocates joint costs using market base data such as revenues.
Cocoa butter and Cocoa powder

4. When do we use absorption costing?
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
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
Assignment of indirect costs to a particular cost object.

5. What are historical costs?
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
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.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
Accounting for spoilage aims to determine the magnitude of spoilage costs and to distinguish between costs of normal and abnormal spoilage. Also - to manage - control - and reduce spoilage costs - they can be highlighted - not simply folded into prod

6. Reciprocal method allocation
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
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
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.

7. Who are users of management accounting information?
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
Managers
Is a cost of a production process that yields multiple products simultaneously.

8. Qualitative costs
The juncture in a point-production process when two or more products become separately identifiable
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
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.
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.

9. 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.
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.
The juncture in a point-production process when two or more products become separately identifiable

10. 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
Cost allocation method that allocates each support department's costs to operating departments only
When a joint production process yields two or more products with high total sales values compared with the total sales values of other products - if any.
Are 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. Approach two of Joint Costs
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
When actual rates are used for cost allocation - managers do not know the rates until the end of the budget period. If actual rates are used - the efficiency of the supplier department affects the cost allocated to the user department.
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.
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.

12. How do we account for abnormal spoilage?
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
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
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.
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.

13. When do we use job order costing?
Cocoa beans
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
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

14. Joint cost
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
Is a cost of a production process that yields multiple products simultaneously.
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
Cocoa beans

15. 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
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
Is a cost of a production process that yields multiple products simultaneously.
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.

16. 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.
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.
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
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

17. What is variance?
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 difference between actual results and expected performance. The expected performance is also called budgeted performance - which is a point of reference for making comparisons.
All costs - manufacturing - marketing - distribution and so on incurred beyond the splitoff point that are assignable to each of the specific products identified at the splitoff point.
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.

18. Supporting department (service 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.
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
A. to compute inventory cost and cost of goods sold b. to determine cost reimbursement under contracts c. for insurance settlement computations d. for rate regulation e. for litigation purposes
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.

19. 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
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.
Managers
The juncture in a point-production process when two or more products become separately identifiable

20. 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.
Cost allocation method that allocates each support department's costs to operating departments only
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
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.

21. Relevant costs for decision making?
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
Are expected future costs that differ among alternative courses of action being considered. Relevant costs must occur in the future and differ among the alternative courses of action.
When actual rates are used for cost allocation - managers do not know the rates until the end of the budget period. If actual rates are used - the efficiency of the supplier department affects the cost allocated to the user department.
Cocoa butter and Cocoa powder

22. How is Cost Volume Profit used?
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.
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
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

23. Separable costs
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
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.
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.
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.

24. Operating department
Cocoa beans
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
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.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.

25. Constant Gross-Marging Percentage NRV method...
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
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
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.

26. Step down method allocation
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.
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.

27. Why would we use Just-in-time production system? Just-in-time (JIT) production (also called lean production)
Is a demand-pull manufacturing system in which each component in a production line is produced as soon as - and only when - needed by the next step in the production line. This system achieves close coordination among workstations. It smoothes the fl
When a joint production process yields one product with a high total sales value - compared with total sales values of other products of the process.
The 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.
Costing system in which the cost object is masses of identical or similar units of a product or service.

28. Main product
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.
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.
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 a joint production process yields one product with a high total sales value - compared with total sales values of other products of the process.

29. Reciprocal allocation
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.
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.

30. What is process costing?
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
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
Costing system in which the cost object is masses of identical or similar units of a product or service.

31. Budgeted costs
The juncture in a point-production process when two or more products become separately identifiable
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
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.
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.

32. What is spoilage?
Assignment of indirect costs to a particular cost object.
Is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost. Pg.341 It can be plotted on a graph by measuring the level of an activity - such as number of batches produces or number of machines u
The 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 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.

33. 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.
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.
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
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

34. What are sunk costs?
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
Allocates joint 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
Tanning cream and Instant cocoa mix

35. Dual rate method
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
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.
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 units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.

36. Why do we allocate costs?
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.
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
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 residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.

37. 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.
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.
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
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.

38. End products (Separable products at the split off point)
Tanning cream and Instant cocoa mix
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
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. 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.
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.
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
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

40. What is 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.
We use reciprocal method to have accurate service department cost allocations.
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
Assignment of indirect costs to a particular cost object.

41. Normal Spoilage
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
Is spoilage inherent in a particular production process. The cost of normal spoilage are typically included as a component of the cost of goods units manufactured because good units cannot be made without making some units that are spoiled. pp646 is
When a joint production process yields one product with a high total sales value - compared with total sales values of other products of the process.

42. 4 overhead variances.
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 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
Managers compare how revenue - costs - and contribution margin change across various alternatives then they choose the alternative that maximizes operating income. It also expands the use of information provided by breakeven analysis. Furthermore - i

43. Use of cost drivers in ABC system

44. Fixed costs in relation to flexible budget?
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
The budgeted total fixed costs are the same for static budget and flexible budget as long as long as the number of units falls within the relevant range. Therefore - the budget is the same amount of fixed costs.
Past manufacturing hourly wage rate and past manufacturing labor costs. Historical costs themselves are past costs that therefore are irrelevant to decision making. Managers divide the outcomes of decisions into two broad categories.
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.

45. Abnormal Spoilage
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 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
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

46. Physical-Measure Method (Physical Units)...
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
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.
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

47. What is contribution margin?
It is the marginal profit per unit sale. The difference between total revenues and total revenues cost. It indicates why operating income changes as the number of units sold changes. The difference between total revenues minus total variable costs.
When a joint production process yields one product with a high total sales value - compared with total sales values of other products of the process.
The juncture in a point-production process when two or more products become separately identifiable
Past costs because they are unavoidable and cannot be changed no matter What action is taken.

48. 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.
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.

49. Sales Value at splitoff 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 residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.

50. What is the value of feedback in decision-making?
Is spoilage that is not inherent in a particular production process and would not arise under efficient (normal) operating condition. Abnormal spoilage is usually regarded as avoidable and controllable. Cost of abnormal spoilage is written off as a l
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
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.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.