Chapter 13
cost object
any reference point for which a cost is measured - any sub-part of an organization for which managers are interested in having cost measurement information
true
cost accounting reports the cost of goods manufactured and sold, as well as the cost of goods manufactured and NOT sold
hybrid cost accounting systems
cost accounting systems that mix elements of job order and process costing systems to accomplish the objective of assigning manufacturing costs to units produced are known as _____
product costs
costs accounted for initially when produced and later as expense when sold
period
costs not incurred for the manufacturing of a product and not included in inventory as a product cost are known as ________ costs
manufacturing overhead
includes all manufacturing costs except direct materials and direct labor - indirect cost because not feasible to trace
expenses Income statement
period costs are accounted for as _______ and recorded on the ________ __________
cost management
the process of using cost information from the accounting system to manage the activities of the organization that leads to data collection and performance feedback
data collection and performance feedback
cost management involves using cost information to manage the activities of an organization that leads to _____
process
equivalent units of production is a technique used to value the ending work in process inventory in a ________ costing manufacturing environment
raw materials inventory
holds the cost of parts, assemblies, and materials that will be used in the manufacturing process
finished goods inventory
holds the total cost of items manufactured that are now complete and available for sale
examples of cost drivers
machine setup - quality inspection - production order preparation - materials handling activities
true
the activity based costing information to support the decision making process of an organization is known as activity based management
predetermined overhead application rate
the rate per unit of activity used to apply manufacturing overhead to work in process
activity based management
the use of activity based costing information to support the decision making process
activity based costing
to achieve a more refined cost application for the assignment of overhead costs to products manufactured, the use of a single predetermined overhead rate is being replaced by:
direct costing
under _______________ costing, if inventories have increased, it is an expense in the income statement
printing press operator
An example of a worker classified as direct labor in a production plant that prints textbooks:
true
when inventories increase, expenses are lower and profits are higher under absorption costing than under direct costing
decreased increased
when manufacturing overhead is applied to units in production, the resulting cost flow is that the manufacturing overhead account is _______ and the work in process account is ________
raw materials for a specific product
a cost that has a direct relationship with products being produced
electricity cost for packaging equipment
a cost that has an indirect relationship with computers being produced
process costing system
a costing system used to accumulate costs for a production process that is continuous frequently involving several departments
work in process
a predetermined overhead application rate is established to apply manufacturing overhead to _______
absorption costing
a product costing method by which both variable and fixed manufacturing costs are included in product costs
cost accounting
a subset of both financial and managerial accounting that relates primarily to the accumulation and determination of product, process, or service costs
activity based costing system
a system that has replaced the application of overhead on the basis of a few broad rates based on direct labor hours and/or machine hours
assets balance sheet
Product costs are accounted for as ________ and recorded on the ______ ________
lean accoutning
a system that focuses on product or process cost accumulation by element of the value chain -reflects the requirement for managers to have increasingly relevant cost data
false
the manufacturing overhead account will have a balance at the beginning or end of a period
job order costing system
used when discrete products, such as sailboats, are manufactured
when a manufactured item is sold
The cost is transferred form the balance sheet Finished Goods inventory TO the cost of goods sold account in the income statement
WIP WIP
When applying manufacturing overhead costs to production using absorption costing, variable overhead is assigned to ________ and fixed overhead is assigned to ________
WIP OE
When applying manufacturing overhead costs to production using direct/variable costing, variable overhead is assigned to ______ and fixed overhead is assigned to _______
overapplied overhead
a credit balance in the manufacturing overhead account that results from applied overhead in excess of actual overhead costs
manufacturing overhead is underapplied
a debit balance in the manufacturing overhead account at the end of a period indicates that
underapplied overhead
a debit balance in the manufacturing overhead account that results from actual overhead costs in excess of applied overhead
is required
a firm _____ ________ to use absorption costing for both financial reporting and income tax purposes
textbook printing
a manufacturing environment that would use a job order costing system
coal mining
a type of manufacturing environment that would use a process costing system
assign indirect costs to units produced
how is a predetermined overhead rate used
false
hybrid cost accounting systems use elements of only job order costing systems in order to achieve the objective of assigning manufacturing costs to units produced
cost driver
the activity that causes the incurrence of a cost
direct labor
the effort provided by workers who are directly involved with the manufacture of the product
raw materials
the ingredients of a product - the materials that are put into the production process and from which the finished product is made
cost assignment
the process of attributing an appropriate amount of cost in the cost pool to each cost object
cost accumulation
the process of collecting and recording transaction data through the accounting information systems - drilling down to varying levels of an organization for the purpose of observing separate and specific cost measurement info
process
the product cost accounting system used when homogeneous products are manufactured in a relatively continuous production flow is known as a _______ costing system
value chain
the sequence of functions and related activities that over the life of a product or service, add value for the customer - R&D - design - production - marketing - distribution - customer service
cost distortion
the shift in the amount of manufacturing overhead costs applied to the mix of products produced that occurs when using a single cost driver rate as compared to using activity-based costing rates
period cost
these are the selling, general, and administrative costs of the firm that are not related to production activities -recorded as expenses in the period incurred
Work in process inventory
used to accumulate all of the manufacturing costs, including raw materials, direct labor, and manufacturing overhead while the product is being manufactured
decreased increased
when manufacturing overhead is applied to units in production, the resulting cost flow is the the Manufacturing overhead account is ________ and the Work in Process account is _________
Steps in the Cost Accumulation and Assignment process
1. accumulate costs 2. identify cost objects 3. pool costs 4. assign costs
Organizational Functions of the Value Chain
1. research and development 2. design 3. production 4. marketing 5. distribution 6. customer service
true about ABM
- managers seeking to achieve the broad range of organizational objectives encompassed in the value chain use ABM - ABM is the use of activity based costing info to support decision making process
Examples of manufacturing overhead
- production manager salary - depreciation expense for factory building - electriciy for factory machines - factory maintenance
equivalent units of production
- refers to the number of units that would have been produced if all production efforts during the period had resulted in completed products - it's calculated by adding units completed and transferred to the finishing department and products of the units in process and the percent complete
cost pool
-the classification of cost emphasizes the managerial point of reference -the total amount of cost accumulated by the accounting information system logically categorized by different cost objects
Statement of Cost of Goods Manufactured
A supplementary financial statement that supports cost of goods sold, which is an element of the income statement. This statement summarizes raw material, direct labor, and manufacturing overhead costs during the period.
Raw materials inventory Work in process finished goods
The 3 inventory accounts involved in a manufacturing cost accounting system