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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. Dual rate method
Allocation method that classifies costs in each cost pool into two pools (a variable-cost pool and a fixed-cost pool) with each pool using a different cost-allocation base.
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
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

2. Rework
Managers
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
Allocation method that classifies costs in each cost pool into two pools (a variable-cost pool and a fixed-cost pool) with each pool using a different cost-allocation base.
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.

3. Joint cost
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 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 of a production process that yields multiple products simultaneously.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.

4. What are sunk costs?
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
When a joint production process yields one product with a high total sales value - compared with total sales values of other products of the process.
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

5. What is a decision model?
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.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
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

6. When do we use reciprocal allocation?
Are outcomes that are measured in numerical terms. Some quantitative factors are financial; examples include the cost of direct materials - direct manufacturing labor - and marketing. Other quantitative factors are nonfinancial; they can be measured
We use reciprocal method to have accurate service department cost allocations.
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 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.

7. Reciprocal allocation
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
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 a cost allocation method that fully recognizes the mutual services provided among all support departments.
When actual rates are used for cost allocation - managers do not know the rates until the end of the budget period. If actual rates are used - the efficiency of the supplier department affects the cost allocated to the user department.

8. Use of cost drivers in ABC system

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9. Supporting department (service department)
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
Used when implementing strategy. It is the quantitative expression of a proposed plan of action by management and is an aid to coordinating what needs to be done to execute that plan.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.

10. Single-rate method
Is a cost of a production process that yields multiple products simultaneously.
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
Allocation method that classifies costs in each cost pool into two pools (a variable-cost pool and a fixed-cost pool) with each pool using a different cost-allocation base.

11. 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.
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 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 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.

12. What is spoilage?
Allocates joint costs using market base data such as revenues.
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
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 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.

13. 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
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 the relative total sales value at the splitoff point.
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.

14. Constant Gross-Marging Percentage NRV method...
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
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
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

15. What is cost allocation?
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
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
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.

16. When to use special order?

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17. 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.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-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 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.

18. Byproduct
All costs - manufacturing - marketing - distribution and so on incurred beyond the splitoff point that are assignable to each of the specific products identified at the splitoff point.
Allocates joint costs to joint products produced during the accounting period on the basis of a compatible physical measure - such as the relative weight - quantity - or value at the split off point.
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 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.

19. What is contribution margin?
Derived amount of output units that (a) takes the quantity of each output (factor of production) in units completed and in incomplete units of work in process and (b) converts the quantity of input into the amount of completed output units that could
When 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 a cost allocation method that fully recognizes the mutual services provided among all support departments.
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.

20. What is 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
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
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
Costing system in which the cost object is masses of identical or similar units of a product or service.

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

22. Purpose of a budget?
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.
Cocoa beans
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.
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.

23. When do we use absorption costing?
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.
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
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.

24. Net realizable value (NRV) method...
Variable manufacturing overhead 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
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
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

25. Who are users of management accounting information?
Managers
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 when implementing strategy. It is the quantitative expression of a proposed plan of action by management and is an aid to coordinating what needs to be done to execute that plan.
Cost allocation method that allocates each support department's costs to operating departments only

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

27. Qualitative costs
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
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.
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
Tanning cream and Instant cocoa mix

28. What is the value of feedback in decision-making?
When a joint production process yields one product with a high total sales value - compared with total sales values of other products of the process.
Costing system in which the cost object is masses of identical or similar units of a product or service.
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.

29. Know the cost function
We use reciprocal method to have accurate service department cost allocations.
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 products of a joint production process that have low total sales values compared with the total sales value of the main product or of joint products.
Is a 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

30. Operating department
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.
Cocoa butter and Cocoa powder
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
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.

31. Why do we allocate costs?
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. 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
Allocates joint costs using market base data such as revenues.
Are outcomes that are measured in numerical terms. Some quantitative factors are financial; examples include the cost of direct materials - direct manufacturing labor - and marketing. Other quantitative factors are nonfinancial; they can be measured

32. Budgeted costs
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
Managers compare how revenue - costs - and contribution margin change across various alternatives then they choose the alternative that maximizes operating income. It also expands the use of information provided by breakeven analysis. Furthermore - i
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
Tanning cream and Instant cocoa mix

33. Joint 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.
Is a cost of a production process that yields multiple products simultaneously.
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 two or more products with high total sales values compared with the total sales values of other products - if any.

34. Approach one of Joint Costs
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
Allocates joint costs using market base data such as revenues.
We use reciprocal method to have accurate service department cost allocations.
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.

35. Relevant costs for decision making?
Tanning cream and Instant cocoa mix
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.
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 the relative total sales value at the splitoff point.

36. Actual cost allocation
Are outcomes that are measured in numerical terms. Some quantitative factors are financial; examples include the cost of direct materials - direct manufacturing labor - and marketing. Other quantitative factors are nonfinancial; they can be measured
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.
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
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.

37. 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.
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.
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

38. Scrap
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
Variable manufacturing overhead costs
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.

39. Main product
Cocoa beans
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
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
Assignment of indirect costs to a particular cost object.

40. What are relevant costs?
When a joint production process yields two or more products with high total sales values compared with the total sales values of other products - if any.
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
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
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.

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

42. 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
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.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
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.

43. When do we have a favorable price variance?
Is a cost of a production process that yields multiple products simultaneously.
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.
Cocoa beans

44. 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.
The juncture in a point-production process when two or more products become separately identifiable
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 the relative total sales value at the splitoff point.

45. 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 actual rates are used for cost allocation - managers do not know the rates until the end of the budget period. If actual rates are used - the efficiency of the supplier department affects the cost allocated to the user department.
Is 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
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.

46. When do we use job order costing?
Tanning cream and Instant cocoa mix
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
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
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. What is variable costing?
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
Is a cost of a production process that yields multiple products simultaneously.
Allocates joint costs using market base data such as revenues.
Managers

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

49. 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.
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
Cocoa beans
Cocoa butter and Cocoa powder

50. Normal Spoilage
Allocates joint costs using market base data such as revenues.
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
The juncture in a point-production process when two or more products become separately identifiable
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.