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Cost Accounting

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Answer 50 questions in 15 minutes.
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Match each statement with the correct term.
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1. What is process costing?
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
Cost allocation method that allocates each support department's costs to operating departments only
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
Costing system in which the cost object is masses of identical or similar units of a product or service.

2. Joint product
It is the marginal profit per unit sale. The difference between total revenues and total revenues cost. It indicates why operating income changes as the number of units sold changes. The difference between total revenues minus total variable costs.
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.
Cocoa beans
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

3. 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
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
Tanning cream and Instant cocoa mix
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

4. Constant Gross-Marging Percentage NRV method...
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
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 the relative total sales value at the splitoff point.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.

5. Approach one of Joint Costs
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-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
Allocates joint costs using market base data such as revenues.
Cocoa beans

6. Who are users of management accounting information?
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
Managers
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.
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.

7. 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.
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
All costs - manufacturing - marketing - distribution and so on incurred beyond the splitoff point that are assignable to each of the specific products identified at the splitoff point.
Is 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.

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

9. How is Cost Volume Profit used?
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
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
Cost allocation method that allocates each support department's costs to operating departments only
Allocates joint cost to joint products produced during the accounting period in such a way that each individual product achieves an identical gross margin percentage. The method works backward int that the overall gross margin is computed first. Then

10. When do we use job order costing?
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 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 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
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

11. Separable costs
Is a demand-pull manufacturing system in which each component in a production line is produced as soon as - and only when - needed by the next step in the production line. This system achieves close coordination among workstations. It smoothes the fl
They are expected future costs and relevant revenues are expected future revenues that differ among the alternative courses of action being considered. In order to be relevant costs and relevant revenues - they must: Occur in the future - every decis
All costs - manufacturing - marketing - distribution and so on incurred beyond the splitoff point that are assignable to each of the specific products identified at the splitoff point.
Allocation method that 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.

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

13. When do we have a favorable price variance?
Is a demand-pull manufacturing system in which each component in a production line is produced as soon as - and only when - needed by the next step in the production line. This system achieves close coordination among workstations. It smoothes the fl
Allocates joint cost to joint products produced during the accounting period on the basis of their relative NRV final sales value minus separable costs. The NRV method is typically used in preference to the sales value at splitoff method - only when
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.
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.

14. 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
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
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.

15. What is variance?
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 residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
Is a cost of a production process that yields multiple products simultaneously.

16. What are the steps in the decision-making model?
Step 1 - Identify the problem and uncertainties Step 2 - Obtain information Step 3 - Make predictions about the future Step 4 - Make decisions by choosing among alternatives Step 5 - Implement the decision - Evaluate Performance - and learn
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.
Cocoa beans
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

17. Step down method allocation
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
Cocoa beans
Costing system in which the cost object is masses of identical or similar units of a product or service.

18. 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
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
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.

19. 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
We use reciprocal method to have accurate service department cost allocations.
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.
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

20. Intermediate products (Separable products at the split off 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
Managers
Cocoa butter and Cocoa powder
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.

21. Single-rate 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.
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
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.

22. 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.
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 cost of a production process that yields multiple products simultaneously.
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.

23. What are sunk costs?
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.
Allocation method that classifies costs in each cost pool into two pools (a variable-cost pool and a fixed-cost pool) with each pool using a different cost-allocation base.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.

24. Reciprocal allocation method
Are expected future costs that differ among alternative courses of action being considered. Relevant costs must occur in the future and differ among the alternative courses of action.
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.
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
Step 1 - Identify the problem and uncertainties Step 2 - Obtain information Step 3 - Make predictions about the future Step 4 - Make decisions by choosing among alternatives Step 5 - Implement the decision - Evaluate Performance - and learn

25. Main product
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
Used when implementing strategy. It is the quantitative expression of a proposed plan of action by management and is an aid to coordinating what needs to be done to execute that plan.
Cocoa beans
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.

26. Budgeted costs
Is a cost of a production process that yields multiple products simultaneously.
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.
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.

27. When to use special order?

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28. Relevant costs for decision making?
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
Cost allocation method that allocates each support department's costs to operating departments only
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

29. Reciprocal method allocation
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
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 a demand-pull manufacturing system in which each component in a production line is produced as soon as - and only when - needed by the next step in the production line. This system achieves close coordination among workstations. It smoothes the fl
A. 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

30. Main product
It is the marginal profit per unit sale. The difference between total revenues and total revenues cost. It indicates why operating income changes as the number of units sold changes. The difference between total revenues minus total variable costs.
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
When a joint production process yields one product with a high total sales value - compared with total sales values of other products of the process.
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.

31. Dual rate 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.
Assignment of indirect costs to a particular cost object.
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.
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.

32. 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.
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.

33. Fixed costs in relation to flexible budget?
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.
The normal spoilage is the spoilage related to the good units produced - normal spoilage rates are computed by dividing units or normal spoilage by total good units completed - not total actual units started in production.
They are expected future costs and relevant revenues are expected future revenues that differ among the alternative courses of action being considered. In order to be relevant costs and relevant revenues - they must: Occur in the future - every decis

34. End products (Separable products at the split off point)
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.
Tanning cream and Instant cocoa mix
Cocoa butter and Cocoa powder

35. How do we account for abnormal spoilage?
Managers
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 a cost of a production process that yields multiple products simultaneously.
Assignment of indirect costs to a particular cost object.

36. What is spoilage?
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
When 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
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
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.

37. 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
Allocates joint costs using market base data such as revenues.
Is a cost of a production process that yields multiple products simultaneously.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.

38. Purpose of a budget?
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable 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 difference between actual results and expected performance. The expected performance is also called budgeted performance - which is a point of reference for making comparisons.
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.

39. What are relevant costs?
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
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
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.

40. Actual cost allocation
When actual rates are used for cost allocation - managers do not know the rates until the end of the budget period. If actual rates are used - the efficiency of the supplier department affects the cost allocated to the user department.
Qualitative costs and benefits (those costs and benefits that are non-quantifiable and/or immeasurable within the scope of this analysis) were determined based on the literature review and information gathering process.
The difference between actual results and expected performance. The expected performance is also called budgeted performance - which is a point of reference for making comparisons.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.

41. Byproduct
Step 1 - Identify the problem and uncertainties Step 2 - Obtain information Step 3 - Make predictions about the future Step 4 - Make decisions by choosing among alternatives Step 5 - Implement the decision - Evaluate Performance - and learn
Is a cost of a production process that yields multiple products simultaneously.
Past manufacturing hourly wage rate and past manufacturing labor costs. Historical costs themselves are past costs that therefore are irrelevant to decision making. Managers divide the outcomes of decisions into two broad categories.
The 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.

42. Direct method allocation

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43. Operating department
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 a cost of a production process that yields multiple products simultaneously.
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.

44. Use of cost drivers in ABC system

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45. What is variable costing?
The juncture in a point-production process when two or more products become separately identifiable
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
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.

46. Why do we allocate 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.
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.
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.

47. What is cost allocation?
Assignment of indirect costs to a particular cost object.
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.
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.
Variable manufacturing overhead costs

48. What is a decision model?
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.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
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
Managers

49. Quantitative 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.
Step 1 - Identify the problem and uncertainties Step 2 - Obtain information Step 3 - Make predictions about the future Step 4 - Make decisions by choosing among alternatives Step 5 - Implement the decision - Evaluate Performance - and learn
The 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
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

50. 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.
Costing system in which the cost object is masses of identical or similar units of a product or service.
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
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.