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Cost Accounting
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Subject
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business-skills
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
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Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Reciprocal method allocation
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
Cost allocation method that allocates each support department's costs to operating departments only
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
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
2. What is cost allocation?
Assignment of indirect costs to a particular cost object.
Special orders are used when a company receives a onetime only unexpected order that will not affect the company's current fixed manufacturing costs - nor will the special order affect the selling price or the quantity of items sold to regular custom
We use reciprocal method to have accurate service department cost allocations.
The difference between actual results and expected performance. The expected performance is also called budgeted performance - which is a point of reference for making comparisons.
3. 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
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 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
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.
4. Reciprocal allocation method
The juncture in a point-production process when two or more products become separately identifiable
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 units of production whether fully or partially completed that do not meet the specifications required by customers for good units and that are discarded or sold at reduced prices.
Allocates 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.
5. 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.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
The 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 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
6. Supporting department (service department)
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-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.
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
7. Separable costs
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
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.
Costing system in which the cost object is masses of identical or similar units of a product or service.
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.
8. 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.
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.
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
When 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
9. Qualitative costs
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
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
Qualitative costs and benefits (those costs and benefits that are non-quantifiable and/or immeasurable within the scope of this analysis) were determined based on the literature review and information gathering process.
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
10. Abnormal Spoilage
Is spoilage that is not inherent in a particular production process and would not arise under efficient (normal) operating condition. Abnormal spoilage is usually regarded as avoidable and controllable. Cost of abnormal spoilage is written off as a l
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
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.
11. Main product
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
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.
Cocoa beans
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
12. 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
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 the relative total sales value at the splitoff point.
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.
13. 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.
Is units of production whether fully or partially completed that do not meet the specifications required by customers for good units and that are discarded or sold at reduced prices.
Allocates joint cost to joint products produced during the accounting period 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
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.
14. Rework
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.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
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.
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 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.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
16. What are sunk costs?
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
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
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
17. Direct method allocation
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18. What is process costing?
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
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation 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.
19. Operating department
Variable manufacturing overhead costs
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
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
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
20. Main product
Past manufacturing hourly wage rate and past manufacturing labor costs. Historical costs themselves are past costs that therefore are irrelevant to decision making. Managers divide the outcomes of decisions into two broad categories.
Is units of production whether fully or partially completed that do not meet the specifications required by customers for good units and that are discarded or sold at reduced prices.
When a joint production process yields one product with a high total sales value - compared with total sales values of other products of the process.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
21. Splitoff point
Cocoa butter and Cocoa powder
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
Costing system in which the cost object is masses of identical or similar units of a product or service.
The juncture in a point-production process when two or more products become separately identifiable
22. 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
The products of a joint production process that have low total sales values compared with the total sales value of the main product or of joint products.
Cocoa beans
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.
23. When do we have a favorable price variance?
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
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
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
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
24. When to use special order?
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25. Constant Gross-Marging Percentage NRV method...
Managers
Allocates joint cost to joint products produced during the accounting period in such a way that each individual product achieves an identical gross margin percentage. The method works backward int that the overall gross margin is computed first. Then
Are expected future costs that differ among alternative courses of action being considered. Relevant costs must occur in the future and differ among the alternative courses of action.
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. Actual cost allocation
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.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
When actual rates are used for cost allocation - managers do not know the rates until the end of the budget period. If actual rates are used - the efficiency of the supplier department affects the cost allocated to the user department.
The budgeted total fixed costs are the same for static budget and flexible budget as long as long as the number of units falls within the relevant range. Therefore - the budget is the same amount of fixed costs.
27. Intermediate products (Separable products at the split off point)
The normal spoilage is the spoilage related to the good units produced - normal spoilage rates are computed by dividing units or normal spoilage by total good units completed - not total actual units started in production.
Cocoa beans
Cocoa butter and Cocoa powder
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
28. Joint cost
Is a cost of a production process that yields multiple products simultaneously.
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
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
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.
29. Dual rate method
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
Allocates joint costs to joint products produced during the accounting period on the basis of a compatible physical measure - such as the relative weight - quantity - or value at the split off point.
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.
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
30. Equivalent unit computation in process costing.
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
Is spoilage that is not inherent in a particular production process and would not arise under efficient (normal) operating condition. Abnormal spoilage is usually regarded as avoidable and controllable. Cost of abnormal spoilage is written off as a l
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.
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
31. When do we use absorption costing?
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
A. to compute inventory cost and cost of goods sold b. to determine cost reimbursement under contracts c. for insurance settlement computations d. for rate regulation e. for litigation purposes
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.
32. Know the cost function
Variable manufacturing overhead 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
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation 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.
33. Single-rate method
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.
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.
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
34. 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.
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
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
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
35. Scrap
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
The difference between actual results and expected performance. The expected performance is also called budgeted performance - which is a point of reference for making comparisons.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
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.
36. What is spoilage?
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
Assignment of indirect costs to a particular cost object.
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.
Costing system in which the cost object is masses of identical or similar units of a product or service.
37. What is a decision model?
It is the marginal profit per unit sale. The difference between total revenues and total revenues cost. It indicates why operating income changes as the number of units sold changes. The difference between total revenues minus total variable costs.
Accounting for spoilage aims to determine the magnitude of spoilage costs and to distinguish between costs of normal and abnormal spoilage. Also - to manage - control - and reduce spoilage costs - they can be highlighted - not simply folded into prod
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
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
38. 4 overhead variances.
Variable manufacturing overhead costs
It is the marginal profit per unit sale. The difference between total revenues and total revenues cost. It indicates why operating income changes as the number of units sold changes. The difference between total revenues minus total variable costs.
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable 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.
39. Step down method allocation
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
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.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
40. Approach one of Joint Costs
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
Allocates joint costs using market base data such as revenues.
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.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
41. 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 a cost allocation method that fully recognizes the mutual services provided among all support departments.
Cost allocation method that allocates each support department's costs to operating departments only
Variable manufacturing overhead costs
42. Joint product
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.
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
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
Managers
43. What are relevant 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
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 allocation method that fully recognizes the mutual services provided among all support departments.
Cocoa beans
44. When do we use job order costing?
Cocoa butter and Cocoa powder
Costing system in which the cost object is masses of identical or similar units of a product or service.
When the cost object is a distinct product or service called a job. Job costing systems accumulate costs separately for each product or service. Work is broken into jobs; each job is tracked separately
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
45. When do we use reciprocal allocation?
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
We use reciprocal method to have accurate service department cost allocations.
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
46. What is the value of feedback in decision-making?
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
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
47. Quantitative costs
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
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
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
48. End products (Separable products at the split off point)
Tanning cream and Instant cocoa mix
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
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
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.
49. Physical-Measure Method (Physical Units)...
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.
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
Cost allocation method that allocates each support department's costs to operating departments only
Costing system in which the cost object is masses of identical or similar units of a product or service.
50. Budgeted costs
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
Used when implementing strategy. It is the quantitative expression of a proposed plan of action by management and is an aid to coordinating what needs to be done to execute that plan.
Cocoa butter and Cocoa powder