acct 325 t3

What are the five steps of process costing?

1. analyze the physical flow of units 2. calculate EU 3. determine total cost for each cost input 4. compute average cost per EU 5. assign costs to units completed and units remaining

What determines the minimum and maximum range for transfer pricing negotiations?

The buyer sets the maximum transfer price usually based on what price the product would sell for in an external market. seller's minimum price (its variable manufacturing costs)

which method is easier? sales or production

The sales method is easier than the production method, since no inventory valuation of by-products or scrap is needed.

vision

The vision is a narrative that describes what the organization will look like, or a destination to achieve, by some future date.

when is process costing used

Used when it is impossible or impractical to distinguish the costs of one unit from another.

Target costing is used when there is little contrast among products and services between businesses. In turn, what two key questions must businesses answer to achieve target pricing? Select answer from the options below - Correct!

What target costs must be to achieve required ROI and how to cut costs to meet target costs.

if inflationary period fifo: WA:

Will spread out inflation's impact between years.

What is a balanced scorecard and how do companies use it?

a widely used performance measurement tool that tracks a company's objectives, initiatives, measures, and targets, and compares them to actual outcomes.

benefit of production:

comes via lower COGS (and higher gross margin) for the main products.

What is a management control system?

convergence of systems within an organization used to guide its people. Toward what? Toward the achievement of short-term objectives, long-term goals, and the company's mission and longer-term vision.

What are the U.S. tax implications related to international transfer pricing?

IRS tax code

What are the three methods to allocate joint costs?

Sales value at split-off method. Net realizable value method. Physical quantities method

What types of internal and external data are commonly used for data analytics?

Suppliers Production/operations Human resources Sales and marketing Customer service Customers Accounting and finance Information and technology external: industry analysis and market forecasts.

What is vertical integration and why does it create a need for transfer pricing?

is therefore expanding a business to include activities that either precede or follow the existing firm in the value chain, for example, a design firm getting into production.

How does the cost-plus pricing method work?

it factors in cost and a markup (the "plus"). This method is used in markets where products are differentiated from those of competitors.

is target costing market or cost based

market

What is goal congruence and why is it difficult to achieve?

means making decisions at all levels of the company to align the smallest business units with the company's overall goals. This isn't easy to achieve, since managers may be entirely incentivized and evaluated on the basis of their own business unit's operating results. It's simply human nature to want to maximize your personal take-home rewards (like bonuses) by making decisions and achieving positive outcomes for your business unit.

if inflationary period fifo:

old costs will be matched against new sales, allowing for higher profits.

the reduction in COGS would be a

positive impact on gross margin. Thus, there is some positive impact, which makes sense.

How do we account for byproduct, scrap and waste?

production and sales method

What is the difference between the production method and the sales method.

production method: recognizes by-products in the financial statements as soon as they're produced. sales method: treats by-products and scrap as if they don't exist until sold.

How does structured data differ from unstructured data?

uses a known, predefined format, often organized in rows and columns with fixed fields, ready to be added to a database, and is easy to manipulate and use. Manipulating data simply refers to making it easier to read or more organized. unstructured: exists in free form without definition, like images and voice messages. This data may be more EXPENSIVE to manipulate into broadly usable formats.

when is fifo best used

when used can be seperately identified ( vehicles)

What challenges and opportunities do big data and data analytics present for cost accounting?

1. Defining the business problem to be answered using data analytics, and then selecting the most relevant data available to answer it. 2. More professionals at the staff, analyst, and manager levels need a baseline of technical skills to work with structured and unstructured data. 3. Technical terms need to become part of business and executive language to facilitate business decision-making.

What is the function of big data and data analytics in cost accounting?

Big data is the structured and unstructured data generated from a variety of sources in volumes too large for traditional technologies to capture, manage, and process in a timely manner. to combine the traditional business skills of their work force with newer technical skills.

How do the four pillars of a management control system contribute to goal congruence?

Budgeting.-money follows our short-term and long-term goals. Responsibility centers.no o matter what your childhood household looked like, at some point there was a division of labor to fulfill the household's needs, Transfer pricing. Performance measurement.

What are the three ways that companies set transfer prices?

Cost-based transfer prices. Market-based transfer prices. Negotiated transfer prices.

what are transferred in costs

Costs transferred from one department to another during the production process; the previous department's costs are added to the current department's cost.

Why is the sales value at split-off method preferred? Two main reasons:

Earning revenues is our means of earning the target return on investment (ROI), the whole point of being in business. Since revenues and related cash comprise the future benefit from incurring production costs, using the sales value at split-off method measures benefits returned to the company. When sales prices at the split-off point are available, they are objective, which is a valuable reason for using this method.

is fifo or WA more complex

FIFO due to separately tracking physical units and costs from different periods.

how is inventory costed with process costing

FIFO or weighted average

is FIFO or WA more accurate

FIFO, More accurate but also takes more time; therefore, MORE costly.

What are the four perspectives of the balanced scorecard?

Financial perspective. Customer perspective. Internal business process perspective. Learning and growth perspective

when is WA used?

Fits best when it's difficult or impossible to separately identify units (think: liquids or gases).

what is forward vertical integration

Forward vertical integration occurs when a company purchases a business farther down the current value chain.

Why is it important to allocate joint costs?

It enables management decision-making: 1. identifying which products to produce and how many, 2. determining what further costs are needed to ready them for sale, and 3. considering possible uses for the by-products. maximize profitability.

how to find MU %

MU / full cost of product or service

how is inventory costed with job costing

actual or normal costing

mission

an organization's mission is its purpose—its reason for existing—and is an essential first step.

What is a joint production process and how are the various resulting products defined?

by products waste scrap byproducts: have future use and/or economic value. waste: is an unintended output but has no future use and is therefore disposed of. We may even have to pay to dispose of waste, as in the case of biohazardous waste. scrap: While scrap may or may not have future use to us, it likely has economic value upon disposal. For example, the corn husks left over from canning corn might be sold to local farms for pig feed.

? Define each of the following categories of data analytics: descriptive, diagnostic, predictive, and prescriptive.

descriptive: helps a user describe what has already happened in the past or what's happening right now. diagnostic: supplies the meaning for observations or patterns seen in descriptive analytics by focusing on "why?" questions, like: predictive: uses historical data and statistical models to predict future outcomes, as opposed to descriptive analytics and diagnostic analytics, which help explain what happened in the past and why. prescriptive: provides authoritative recommendations, given after serious assessment of a situation, in order to arrive at an improved outcome.

A company that follows yours in the value chain is said to be _______ since it is one step closer to the final consumer.

downstream

for sales method, Upon sale of the by-product, the sale is recorded. The benefit to the company is

higher sales and gross margin

What are the relevant costs and revenues to consider when deciding whether to sell a product as is right after the split-off point or to process it further to a final product?

if sales value at split of greater than NRV of final product then sell at split off

for sales method, are production costs are

initially given to the main products.

what are the resulting impacts on the Income Statement and Balance Sheet for production and sales method:

production: The FG Inventory—By-Product account remains on the balance sheet until by-product units are sold. At that time, the sales value of the quantity sold is removed from FG Inventory—By-Product, but there is neither a sale nor an expense (i.e. COGS) recorded on the income statement. It's simply removed from inventory, and Cash or Accounts Receivable is recorded. sales: That means there is NO GROSS MARGIN impact on the by-product sale to be shown on the income statement.

what are equivalent units

reflect the number of physical units that could have been fully completed with the amount of resources used.

what is the only impact on the IS for production method?

relatively lower COGS on the sale of the main products.

How do you decide which method to use?

sales value: are sale prices at split off available? Npv: What happens if two products are evident at the split-off point, but they don't have ready markets or sales prices at that point? The NRV method also allocates joint costs based on the benefit the products yield to the company.a

what is process costing

similar products made in continuous process. The costs for each process are accumulated in separate WIP Inventory accounts, with each one labeled for its process until complete, like: WIP Inventory—Assembly WIP Inventory—Packaging

How does the target costing method work?

tarts with the price and then subtracts the plus to determine the target cost per unit. Why this difference? Because target pricing is MARKET-based, not cost-based like the cost-plus method Target costing is used for products and services sold in competitive markets, where the products are identical (like orange juice concentrate or electricity), no particular firm can influence prices, and customers have good information on the market, products, and prices.

what would be the maximum transfer price

the market price

what would be the minimum transfer price

the variable costs