ACCT 3221 - Exam 1

A _______________ links an indirect cost to a cost object

cost allocation base

a _________________ is anything for which a measurement of cost is needed

cost object

the determination of a cost as either direct or indirect depends on the ________________.

cost object chosen

A __________________ is a grouping of individual indirect cost items

cost pool

what happens when an inventoriable cost is sold?

expensed & becomes COGS

___________________ costs are all costs of a product that are regarded as assets when they are incurred

inventoriable costs

difference between job costing and process costing

job = specific products (airplanes, baseball stadium) process = identical products (books, oil)

how does a service firm's income statement differ from a merchandising or manufacturing firm?

no COGS

________________ costing is timely, while ____________ costing is accurate

normal; actual

under-applied overhead: effect on overhead costs and allocation base

overhead costs = higher than expected allocation base = lower than expected

over-applied overhead: effect on overhead costs and allocation base

overhead costs = lower than expected allocation base = higher than expected

________________ costs are expensed in the period in which they are incurred

period

value chain

research and development design of products and processes production marketing distribution customer service

Relevant Range

the range over which cost relationships remain valid; the volume or activity that can be sustained without increasing capacity.

effect on total and unit variable cost if more units are produced

total = higher unit = same

effect on total and unit fixed cost if more units are produced

total = same unit = lower

Effect of variable costs on total cost & cost per unit

total cost = changes with volume cost per unit = remains constant

Effect of fixed costs on total cost & cost per unit

total cost = remains constant cost per unit = changes based on volume/activity

financial accounting

- external - looks at past - comparability - follow GAAP, IRFS

reasons to select activity based costing

- increase in product diversity - increase in indirect costs - advances in information technology - increased competition

managerial accounting

- internal - looks to future - decision-making - follows rules of logic

ethical issues - Institute of Management Accountants (IMA) guidelines

1. Discuss with immediate supervisor or the next level up if immediate supervisor is involved 2. Clarify relevant ethical issues by initiating a confidential discussion with an objective advisor 3. Consult an attorney as to legal obligations and rights

For externally reported inventory costs, the Work-in-Process Control account is increased (debited) by ________. A) marketing costs B) allocated plant utility costs C) the purchase costs of direct and indirect materials D) customer-service costs

B

for merchandising companies, inventoriable costs include _________________. A.) sales costs B.) incoming freight costs C.) marketing costs D.) outgoing freight costs

B

Classifying a cost as either direct or indirect depends upon: A) the behavior of the cost in response to volume changes B) whether the cost is expensed in the period in which it is incurred C) whether the cost can be easily identified with the cost object D) whether an expenditure is avoidable or not in the future

C

COGS formula for a manufacturing firm

COGS = beginning finished goods inventory + COGM - ending finished goods inventory

Cost objects include: A) products B) customers C) departments D) All of these answers are correct.

D

Cost of goods sold includes: A) all fixed costs B) only variable costs C) period costs that change with the volume of production D) only inventoriable costs

D

Indirect manufacturing costs: A) can be traced to the product that created the costs B) can be easily identified with the cost object C) generally include the cost of material and the cost of labor D) may include both variable and fixed costs

D

On occasion, the FIFO and the weighted-average methods of process costing will result in the same dollar amount of costs being transferred to the next department. Which of the following scenarios would have that result? A) when the beginning and ending inventories are equal in terms of unit numbers B) when the beginning and ending inventories are equal in terms of the percentage of completion for both direct materials, and conversion costs C) when there is no ending inventory D) when there is no beginning inventory

D

The purpose of the equivalent-unit computation is to: A) convert completed units into the amount of partially completed output units that could be made with that quantity of input B) assist the business in determining the cost assigned to ending inventory and work-in-process inventory. C) convert partially completed units into the amount of completed output units that could be made with that quantity of input D) Both B and C are correct.

D

Transferred-in costs are treated as if they are: A) conversion costs added at the beginning of the process B) costs of beginning inventory added at the beginning of the process C) direct labor costs added at the beginning of the process D) a separate direct material added at the beginning of the process

D

____________ costs are traced to the cost object

Direct

total manufacturing costs equation

Direct Labor + Direct Materials + Manufacturing Overhead

_______________ costs are allocated to the cost object

Indirect

cost of goods purchased (merchandising firm) equation

Purchases + Freight-in - purchases returns & allowances - purchase discounts = cost of goods purchased

actual manufacturing overhead rate

actual MOH / actual base

direct materials used equation

beginning direct materials inventory + direct materials purchased - ending direct materials inventory

COGM equation

beginning inventory of WIP + total manufacturing costs - ending inventory of WIP

COGS (manufacturing firm) equation

beginning inventory of finished goods + COGM - ending inventory of finished goods

COGS (merchandising firm) equation

beginning merchandise inventory + cost of goods purchased - ending merchandise inventory = COGS

normal manufacturing overhead rate

budgeted MOH / budgeted base