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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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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.

1. Purpose of a budget?
Used when implementing strategy. It is the quantitative expression of a proposed plan of action by management and is an aid to coordinating what needs to be done to execute that plan.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
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 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

2. What are historical 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
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
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

3. Fixed costs in relation to flexible budget?
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
Allocates joint cost to joint products produced during the accounting period on the basis of their relative NRV final sales value minus separable costs. The NRV method is typically used in preference to the sales value at splitoff method - only when
The 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 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.

4. 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.
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
Assignment of indirect costs to a particular cost object.
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.

5. 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.
The juncture in a point-production process when two or more products become separately identifiable
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.
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.

6. When do we use reciprocal allocation?
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 a joint production process yields one product with a high total sales value - compared with total sales values of other products of the process.
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.
We use reciprocal method to have accurate service department cost allocations.

7. Rework
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
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
When the cost object is a distinct product or service called a job. Job costing systems accumulate costs separately for each product or service. Work is broken into jobs; each job is tracked separately
Is a cost of a production process that yields multiple products simultaneously.

8. Supporting department (service department)
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
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.
Department that provides the services that assist other internal departments (operating departments and other support departments) in the company.
Assignment of indirect costs to a particular cost object.

9. how do we account for normal 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
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
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.
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.

10. What is variable costing?
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 a joint production process yields one product with a high total sales value - compared with total sales values of other products of the process.
Managers
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.

11. 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
Cocoa butter and Cocoa powder
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
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.

12. 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
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.
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 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.

13. Why would we use Just-in-time production system? Just-in-time (JIT) production (also called lean production)
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 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 juncture in a point-production process when two or more products become separately identifiable
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

14. Equivalent unit computation in process costing.
Derived amount of output units that (a) takes the quantity of each output (factor of production) in units completed and in incomplete units of work in process and (b) converts the quantity of input into the amount of completed output units that could
Variable manufacturing overhead costs
Cost allocation method that allocates each support department's costs to operating departments only
Feedback is important because it might affect future predictions - the prediction methods used - the way choices are made - or the implementation of the decision.

15. When to use special order?

16. 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.
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. 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

17. Net realizable value (NRV) method...
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
Is spoilage that is not inherent in a particular production process and would not arise under efficient (normal) operating condition. Abnormal spoilage is usually regarded as avoidable and controllable. Cost of abnormal spoilage is written off as a l
Derived amount of output units that (a) takes the quantity of each output (factor of production) in units completed and in incomplete units of work in process and (b) converts the quantity of input into the amount of completed output units that could

18. Actual cost allocation
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.
When actual rates are used for cost allocation - managers do not know the rates until the end of the budget period. If actual rates are used - the efficiency of the supplier department affects the cost allocated to the user department.

19. Operating department
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.
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.

20. What is spoilage?
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.
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
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.

21. 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.
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 residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
Is units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units.

22. Direct method allocation

23. Normal Spoilage
Is residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
Is 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
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.
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

24. Joint 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.
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 budgeted total fixed costs are the same for static budget and flexible budget as long as long as the number of units falls within the relevant range. Therefore - the budget is the same amount of fixed costs.
Is a cost of a production process that yields multiple products simultaneously.

25. 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
The juncture in a point-production process when two or more products become separately identifiable
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.

26. What is variance?
Allocation method that allocates costs in each cost pool to cost objects using the same rate per unit of a single 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.
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.

27. Abnormal Spoilage
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 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
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.

28. When do we use absorption costing?
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
Managers
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
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

29. Reciprocal allocation method
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
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.
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.

30. Use of cost drivers in ABC system

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

32. Quantitative costs
Costing system in which the cost object is masses of identical or similar units of a product or service.
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.
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 fully recognizes the mutual services provided among all support departments. Also called matrix-method.

33. Scrap
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
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 residual material that results from manufacturing a product. It has low total sales value compared with the total sales value of the product.
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.

34. What are sunk 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.
Past costs because they are unavoidable and cannot be changed no matter What action is taken.
Costing system in which the cost object is masses of identical or similar units of a product or service.
Allocates joint costs using market base data such as revenues.

35. Qualitative 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 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.
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.

36. 4 overhead variances.
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
Variable manufacturing overhead costs
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
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

37. Separable costs
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
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.
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.
We use reciprocal method to have accurate service department cost allocations.

38. What are relevant costs?
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
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
Allocates joint costs using market base data such as revenues.
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

39. Approach one of Joint Costs
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.
Allocates joint costs using market base data such as revenues.
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.

40. Reciprocal method allocation
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.
The juncture in a point-production process when two or more products become separately identifiable
The budgeted total fixed costs are the same for static budget and flexible budget as long as long as the number of units falls within the relevant range. Therefore - the budget is the same amount of fixed costs.

41. Sales Value at splitoff method...
Accounting for spoilage aims to determine the magnitude of spoilage costs and to distinguish between costs of normal and abnormal spoilage. Also - to manage - control - and reduce spoilage costs - they can be highlighted - not simply folded into prod
Allocates joint costs using market base data such as revenues.
We use reciprocal method to have accurate service department cost allocations.
Allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point.

42. What is cost behavior?
When the actual price of a product is less than the budgeted price - resulting in an increase in operating income.
The sensitivity of costs to changes in production or sales volume. Better collaboration - planning - and motivation are a result of different sets of budget decisions. It helps managers make strategic and operating decisions that have a positive envi
Department that directly adds value to a product or service. Also called a production department in manufacturing companies.
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

43. Main 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
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 allocates costs in each cost pool to cost objects using the same rate per unit of a single allocation base.
Cocoa beans

44. 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.
Cocoa beans
Is a cost allocation method that fully recognizes the mutual services provided among all support departments.
Costing system in which the cost object is masses of identical or similar units of a product or service.

45. Constant Gross-Marging Percentage NRV method...
Managers
Allocates joint cost to joint products produced during the accounting period in such a way that each individual product achieves an identical gross margin percentage. The method works backward int that the overall gross margin is computed first. Then
The difference between actual results and expected performance. The expected performance is also called budgeted performance - which is a point of reference for making comparisons.
Tanning cream and Instant cocoa mix

46. Intermediate products (Separable products at the split off point)
Cocoa butter and Cocoa powder
When actual rates are used for cost allocation - managers do not know the rates until the end of the budget period. If actual rates are used - the efficiency of the supplier department affects the cost allocated to the user department.
All costs - manufacturing - marketing - distribution and so on incurred beyond the splitoff point that are assignable to each of the specific products identified at the splitoff point.
It is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs.

47. Relevant costs for decision making?
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
Cost allocation method that fully recognizes the mutual services provided among all support departments. Also called matrix-method.
Is a cost of a production process that yields multiple products simultaneously.

48. What is a decision model?
The difference between actual results and expected performance. The expected performance is also called budgeted performance - which is a point of reference for making comparisons.
Cost allocation method that partially recognizes the mutual services provided among all support departments. Also called sequential allocation method.
Accounting for spoilage aims to determine the magnitude of spoilage costs and to distinguish between costs of normal and abnormal spoilage. Also - to manage - control - and reduce spoilage costs - they can be highlighted - not simply folded into prod
A formal method of making a choice between different courses of action - which often involves both quantitative and qualitative analyses.

49. How is Cost Volume Profit used?
The normal spoilage is the spoilage related to the good units produced - normal spoilage rates are computed by dividing units or normal spoilage by total good units completed - not total actual units started in production.
Is spoilage inherent in a particular production process. The cost of normal spoilage are typically included as a component of the cost of goods units manufactured because good units cannot be made without making some units that are spoiled. pp646 is
Allocates 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.
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

50. Why do we allocate costs?
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.
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
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.
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