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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 have a favorable price variance?
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.
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.
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.

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

3. End products (Separable products at the split off point)
Allocates joint cost to joint products produced during the accounting period in such a way that each individual product achieves an identical gross margin percentage. The method works backward int that the overall gross margin is computed first. Then
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
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.

4. Joint cost
Is a cost of a production process that yields multiple products simultaneously.
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
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.
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

5. What is process costing?
Costing system in which the cost object is masses of identical or similar units of a product or service.
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.
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
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

6. When to use special order?

7. Qualitative 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.
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.
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
Variable manufacturing overhead costs

8. When do we use reciprocal allocation?
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.
We use reciprocal method to have accurate service department cost allocations.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
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.

9. What is cost allocation?
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
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
Assignment of indirect costs to a particular cost object.

10. 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.
Allocates joint cost to joint products produced during the accounting period in such a way that each individual product achieves an identical gross margin percentage. The method works backward int that the overall gross margin is computed first. Then
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.

11. What is a decision model?
Costing system in which the cost object is masses of identical or similar units of a product or service.
Allocates support-department costs to operating departments by fully recognizing the mutual services provided among all support departments. It fully incorporates interdepartmental relationships into the support-department cost allocation.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
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

12. Scrap
Accounting for spoilage aims to determine the magnitude of spoilage costs and to distinguish between costs of normal and abnormal spoilage. Also - to manage - control - and reduce spoilage costs - they can be highlighted - not simply folded into prod
The sensitivity of costs to changes in production or sales volume. Better collaboration - planning - and motivation are a result of different sets of budget decisions. It helps managers make strategic and operating decisions that have a positive envi
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
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

13. What are the steps in the decision-making model?
It is the marginal profit per unit sale. The difference between total revenues and total revenues cost. It indicates why operating income changes as the number of units sold changes. The difference between total revenues minus total variable costs.
Step 1 - Identify the problem and uncertainties Step 2 - Obtain information Step 3 - Make predictions about the future Step 4 - Make decisions by choosing among alternatives Step 5 - Implement the decision - Evaluate Performance - and learn
Managers compare how revenue - costs - and contribution margin change across various alternatives then they choose the alternative that maximizes operating income. It also expands the use of information provided by breakeven analysis. Furthermore - i
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.

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

15. Main product
Cocoa beans
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
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.
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.

16. Operating department
When the cost object is a distinct product or service called a job. Job costing systems accumulate costs separately for each product or service. Work is broken into jobs; each job is tracked separately
Is units of production 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.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
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

17. How is Cost Volume Profit used?
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
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 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
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

18. Abnormal Spoilage
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
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
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

19. What are sunk costs?
Allocates joint costs using market base data such as revenues.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
The products of a joint production process that have low total sales values compared with the total sales value of the main product or of joint products.
Costing system in which the cost object is masses of identical or similar units of a product or service.

20. Use of cost drivers in ABC system

21. Reciprocal allocation 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
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.
Cocoa beans

22. Joint product
When a joint production process yields two or more products with high total sales values compared with the total sales values of other products - if any.
Is 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 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.

23. What are historical 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.
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.
Tanning cream and Instant cocoa mix
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.

24. 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
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.
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.

25. Reciprocal 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.
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
Cocoa beans

26. What is cost behavior?
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
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
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.
It is the marginal profit per unit sale. The difference between total revenues and total revenues cost. It indicates why operating income changes as the number of units sold changes. The difference between total revenues minus total variable costs.

27. What are relevant costs?
They are expected future costs and relevant revenues are expected future revenues that differ among the alternative courses of action being considered. In order to be relevant costs and relevant revenues - they must: Occur in the future - every decis
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.
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.
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

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

29. Splitoff point
The juncture in a point-production process when two or more products become separately identifiable
Assignment of indirect costs to a particular cost object.
Allocates joint costs using market base data such as revenues.
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

30. Relevant costs for decision making?
Special orders are used when a company receives a onetime only unexpected order that will not affect the company's current fixed manufacturing costs - nor will the special order affect the selling price or the quantity of items sold to regular custom
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.
Past manufacturing hourly wage rate and past manufacturing labor costs. Historical costs themselves are past costs that therefore are irrelevant to decision making. Managers divide the outcomes of decisions into two broad categories.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.

31. Physical-Measure Method (Physical Units)...
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
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
Allocates joint costs to joint products produced during the accounting period on the basis of a compatible physical measure - such as the relative weight - quantity - or value at the split off point.
Assignment of indirect costs to a particular cost object.

32. Dual rate method
A. to compute inventory cost and cost of goods sold b. to determine cost reimbursement under contracts c. for insurance settlement computations d. for rate regulation e. for litigation purposes
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.
Is a cost of a production process that yields multiple products simultaneously.
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.

33. 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.
Managers
Past manufacturing hourly wage rate and past manufacturing labor costs. Historical costs themselves are past costs that therefore are irrelevant to decision making. Managers divide the outcomes of decisions into two broad categories.
Are 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.

34. Separable costs
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
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 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.

35. how do we account for normal spoilage?
Managers
We use reciprocal method to have accurate service department cost allocations.
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.

36. 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.
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
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.

37. Supporting department (service department)
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
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
Allocates joint costs using market base data such as revenues.
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.

38. Purpose of a budget?
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.
Used when implementing strategy. It is the quantitative expression of a proposed plan of action by management and is an aid to coordinating what needs to be done to execute that plan.
Is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost. Pg.341 It can be plotted on a graph by measuring the level of an activity - such as number of batches produces or number of machines u
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.

39. What is the value of feedback in decision-making?
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 residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
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
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

40. Constant Gross-Marging Percentage NRV 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
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
They are expected future costs and relevant revenues are expected future revenues that differ among the alternative courses of action being considered. In order to be relevant costs and relevant revenues - they must: Occur in the future - every decis
Cost allocation method that allocates each support department's costs to operating departments only

41. What is spoilage?
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
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
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.

42. Byproduct
The products of a joint production process that have low total sales values compared with the total sales value of the main product or of joint products.
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.
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.
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.

43. When do we use absorption costing?
Tanning cream and Instant cocoa mix
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
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
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

44. Equivalent unit computation in process costing.
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
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
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.
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

45. Main product
Variable manufacturing overhead costs
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
When a joint production process yields one product with a high total sales value - compared with total sales values of other products of the process.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.

46. Direct method allocation

47. Fixed costs in relation to flexible 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
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.
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
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.

48. How do we account for abnormal spoilage?
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
Allocates joint costs using market base data such as revenues.
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

49. Approach one of Joint Costs
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
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 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

50. Intermediate products (Separable products at the split off point)
Assignment of indirect costs to a particular cost object.
Cocoa butter and Cocoa powder
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
We use reciprocal method to have accurate service department cost allocations.