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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. Joint cost
Cost allocation method that allocates each support department's costs to operating departments only
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 cost of a production process that yields multiple products simultaneously.
They are expected future costs and relevant revenues are expected future revenues that differ among the alternative courses of action being considered. In order to be relevant costs and relevant revenues - they must: Occur in the future - every decis

2. Reciprocal allocation
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.
Tanning cream and Instant cocoa mix
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.

3. Purpose of a budget?
Costing system in which the cost object is masses of identical or similar units of a product or service.
Variable manufacturing overhead costs
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.
Tanning cream and Instant cocoa mix

4. Dual rate method
Costing system in which the cost object is masses of identical or similar units of a product or service.
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 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
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

5. Scrap
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
Method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventorial costs. - Fixed and manufacturing overhead are the same. It is a method of inventory costing in which all variable/fixe
The 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.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.

6. When do we use reciprocal allocation?
We use reciprocal method to have accurate service department cost allocations.
Is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost. Pg.341 It can be plotted on a graph by measuring the level of an activity - such as number of batches produces or number of machines u
Are 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
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.

7. What is variable costing?
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
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.
Tanning cream and Instant cocoa mix
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.

8. Relevant costs for decision making?
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
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.
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.

9. What are the steps in the decision-making model?
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
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
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

10. 4 overhead variances.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
Allocates joint costs to joint products produced during the accounting period on the basis of a compatible physical measure - such as the relative weight - quantity - or value at the split off point.
Tanning cream and Instant cocoa mix
Variable manufacturing overhead costs

11. Equivalent unit computation in process costing.
Cost allocation method that allocates each support department's costs to operating departments only
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 units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
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

12. Intermediate products (Separable products at the split off point)
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
Cocoa butter and Cocoa powder
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
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.

13. Step down method 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 residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
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
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.

14. Direct method allocation

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15. 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.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.

16. What are sunk costs?
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
Assignment of indirect costs to a particular cost object.
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.
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

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

18. Operating department
Is a cost of a production process that yields multiple products simultaneously.
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.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
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

19. Splitoff point
The juncture in a point-production process when two or more products become separately identifiable
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.
Allocates joint costs using market base data such as revenues.

20. Rework
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
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 units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
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.

21. Net realizable value (NRV) method...
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
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 provides the services that assist other internal departments (operating departments and other support departments) in the company.
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.

22. Approach two of Joint 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.
Is a cost of a production process that yields multiple products simultaneously.
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.
Approach 2 Allocates joint cost using Physical measures - such as the weight - quantity (physical units) or volume of the joint products.

23. Reciprocal method allocation
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 fully recognizes the mutual services provided among all support departments. Also called matrix-method.
All costs - manufacturing - marketing - distribution and so on incurred beyond the splitoff point that are assignable to each of the specific products identified at the splitoff point.
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.

24. Supporting department (service department)
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
Cocoa butter and Cocoa powder
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
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.

25. 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.
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.

26. What is cost allocation?
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 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 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.
Assignment of indirect costs to a particular cost object.

27. 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.
Is a cost of a production process that yields multiple products simultaneously.
Variable manufacturing overhead costs
Past costs because they are unavoidable and cannot be changed no matter What action is taken.

28. What is process costing?
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
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.
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
Costing system in which the cost object is masses of identical or similar units of a product or service.

29. What is spoilage?
Is units of production whether fully or partially completed that do not meet the specifications required by customers for good units and that are discarded or sold at reduced prices.
Is a cost of a production process that yields multiple products simultaneously.
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.
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

30. What is cost behavior?
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.
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.
Tanning cream and Instant cocoa mix

31. End products (Separable products at the split off point)
Tanning cream and Instant cocoa mix
Is a demand-pull manufacturing system in which each component in a production line is produced as soon as - and only when - needed by the next step in the production line. This system achieves close coordination among workstations. It smoothes the fl
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
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.

32. Fixed costs in relation to flexible 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.
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.
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.

33. Reciprocal allocation method
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.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
Variable manufacturing overhead 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.

34. Physical-Measure Method (Physical Units)...
Allocates joint costs to joint products produced during the accounting period on the basis of a compatible physical measure - such as the relative weight - quantity - or value at the split off point.
Allocates 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.
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 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

35. How is Cost Volume Profit used?
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 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.
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.

36. Why would we use Just-in-time production system? Just-in-time (JIT) production (also called lean production)
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.
Is a demand-pull manufacturing system in which each component in a production line is produced as soon as - and only when - needed by the next step in the production line. This system achieves close coordination among workstations. It smoothes the fl
Is 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

37. Separable costs
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
All costs - manufacturing - marketing - distribution and so on incurred beyond the splitoff point that are assignable to each of the specific products identified at the splitoff point.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
Variable manufacturing overhead costs

38. Why do we allocate costs?
A. to compute inventory cost and cost of goods sold b. to determine cost reimbursement under contracts c. for insurance settlement computations d. for rate regulation e. for litigation purposes
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
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.

39. Normal Spoilage
Is spoilage inherent in a particular production process. The cost of normal spoilage are typically included as a component of the cost of goods units manufactured because good units cannot be made without making some units that are spoiled. pp646 is
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.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.

40. Constant Gross-Marging Percentage NRV 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.
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
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
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

41. How do we account for abnormal spoilage?
Cost allocation method that allocates each support department's costs to operating departments only
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 juncture in a point-production process when two or more products become separately identifiable
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.

42. What is a decision model?
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
Cost allocation method that allocates each support department's costs to operating departments only
Allocates joint costs using market base data such as revenues.
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

43. 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.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
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.
Managers

44. Use of cost drivers in ABC system

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45. When do we use job order costing?
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 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
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.
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

46. What is variance?
We use reciprocal method to have accurate service department cost allocations.
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.
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
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.

47. When do we have a favorable price variance?
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
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.
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

48. Approach one 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.
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.
Allocates joint costs using market base data such as revenues.

49. 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
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.
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.

50. Who are users of management accounting information?
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
Managers
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.
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