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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. When do we use absorption costing?
Method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventorial costs. - Fixed and manufacturing overhead are the same. It is a method of inventory costing in which all variable/fixe
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.
Cocoa beans

2. how do we account for normal spoilage?
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 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.
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 of a production process that yields multiple products simultaneously.

3. 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.
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.
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

4. 4 overhead variances.
Variable manufacturing overhead costs
The products of a joint production process that have low total sales values compared with the total sales value of the main product or of joint products.
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.
Managers

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

6. Who are users of management accounting information?
Managers
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.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.

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

8. Step down method 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.
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.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
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

9. 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
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
We use reciprocal method to have accurate service department cost allocations.
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.

10. When to use special order?

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11. What is process costing?
Costing system in which the cost object is masses of identical or similar units of a product or service.
Are outcomes that are measured in numerical terms. Some quantitative factors are financial; examples include the cost of direct materials - direct manufacturing labor - and marketing. Other quantitative factors are nonfinancial; they can be measured
The 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.

12. What is the value of feedback in decision-making?
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.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
When the cost object is a distinct product or service called a job. Job costing systems accumulate costs separately for each product or service. Work is broken into jobs; each job is tracked separately
The sensitivity of costs to changes in production or sales volume. Better collaboration - planning - and motivation are a result of different sets of budget decisions. It helps managers make strategic and operating decisions that have a positive envi

13. Quantitative 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
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
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
Cost allocation method that allocates each support department's costs to operating departments only

14. Constant Gross-Marging Percentage NRV method...
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
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.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.

15. Net realizable value (NRV) method...
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 the relative total sales value at the splitoff point.
The sensitivity of costs to changes in production or sales volume. Better collaboration - planning - and motivation are a result of different sets of budget decisions. It helps managers make strategic and operating decisions that have a positive envi
Allocates joint cost to joint products produced during the accounting period 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

16. When do we use job order costing?
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
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 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

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

18. What is cost allocation?
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
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
Assignment of indirect costs to a particular cost object.

19. Reciprocal method allocation
Tanning cream and Instant cocoa mix
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.
We use reciprocal method to have accurate service department cost allocations.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.

20. What is spoilage?
Is units of production whether fully or partially completed that do not meet the specifications required by customers for good units and that are discarded or sold at reduced prices.
Cocoa beans
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.

21. Why do we allocate costs?
Qualitative costs and benefits (those costs and benefits that are non-quantifiable and/or immeasurable within the scope of this analysis) were determined based on the literature review and information gathering process.
Assignment of indirect costs to a particular cost object.
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
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

22. What is a decision model?
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.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
Allocation method that classifies costs in each cost pool into two pools (a variable-cost pool and a fixed-cost pool) with each pool using a different cost-allocation base.
Allocates 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

23. Sales Value at splitoff method...
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
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.
We use reciprocal method to have accurate service department cost allocations.
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

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

25. Supporting department (service department)
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
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 actual rates are used for cost allocation - managers do not know the rates until the end of the budget period. If actual rates are used - the efficiency of the supplier department affects the cost allocated to the user department.
Allocates joint costs using market base data such as revenues.

26. Separable costs
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
All costs - manufacturing - marketing - distribution and so on incurred beyond the splitoff point that are assignable to each of the specific products identified at the splitoff point.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
When a joint production process yields two or more products with high total sales values compared with the total sales values of other products - if any.

27. Splitoff point
Managers
The difference between actual results and expected performance. The expected performance is also called budgeted performance - which is a point of reference for making comparisons.
Is 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
The juncture in a point-production process when two or more products become separately identifiable

28. Approach two of Joint Costs
Is spoilage that is not inherent in a particular production process and would not arise under efficient (normal) operating condition. Abnormal spoilage is usually regarded as avoidable and controllable. Cost of abnormal spoilage is written off as a l
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.
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
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

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

30. Main product
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.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-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
Cocoa beans

31. Approach one of Joint Costs
Allocates support-department costs to operating departments by fully recognizing the mutual services provided among all support departments. It fully incorporates interdepartmental relationships into the support-department cost allocation.
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
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.

32. Physical-Measure Method (Physical Units)...
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
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.
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.
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.

33. Relevant costs for decision making?
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
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 cost object is a distinct product or service called a job. Job costing systems accumulate costs separately for each product or service. Work is broken into jobs; each job is tracked separately
Variable manufacturing overhead costs

34. How is Cost Volume Profit used?
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff 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
When actual rates are used for cost allocation - managers do not know the rates until the end of the budget period. If actual rates are used - the efficiency of the supplier department affects the cost allocated to the user department.
Allocates joint costs using market base data such as revenues.

35. 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.
Managers
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.

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

37. Qualitative 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
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.
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.
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.

38. Use of cost drivers in ABC system

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39. Reciprocal allocation 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
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 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.

40. End products (Separable products 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.
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
Tanning cream and Instant cocoa mix
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.

41. How do we account for abnormal spoilage?
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
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

42. Normal Spoilage
Is spoilage inherent in a particular production process. The cost of normal spoilage are typically included as a component of the cost of goods units manufactured because good units cannot be made without making some units that are spoiled. pp646 is
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.
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 costs because they are unavoidable and cannot be changed no matter What action is taken.

43. What is variable costing?
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
The juncture in a point-production process when two or more products become separately identifiable
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
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

44. Dual rate method
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.
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
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.

45. When do we use reciprocal allocation?
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
We use reciprocal method to have accurate service department cost allocations.
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

46. Know the cost function
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
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
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

47. Reciprocal 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.
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
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

48. Direct method allocation

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49. Purpose of a budget?
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
We use reciprocal method to have accurate service department cost allocations.
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.
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

50. What is variance?
Allocates joint costs using market base data such as revenues.
Variable manufacturing overhead costs
Allocates joint cost to joint products produced during the accounting period on the basis of their relative NRV final sales value minus separable costs. The NRV method is typically used in preference to the sales value at splitoff method - only when
The difference between actual results and expected performance. The expected performance is also called budgeted performance - which is a point of reference for making comparisons.