Cost Accounting Exam #2 (CH 16-19)

True or False: Spoilage can be considered either normal or abnormal.

True

Pareto Diagram

A chart that indicates how frequently each type of defect occurs

Product

Any output that has a positive total sales value

FIFO method

Assigns the cost of the previous accounting period's equivalent units in beginning WIP to the first units completed and xfered out of the process, and assigns the cost of equivalent units worked on during the current period first to complete the beginning inventory, next to start and complete new units, and finally to units in ending WIP.

A graph of a series of successive observations of a particular step, procedure, or operation taken at regular intervals of time is a: A. Pareto diagram B. Control Chart C. Fishbone Diagram D. Cause-and-Effect Diagram

B. Control Chart

A business which enters into a contract to purchase a product (or products) and will compensate the manufacturer under a cost reimbursement formula, should take an active part in the determination of how joint costs are allocated because: A. the manufacturer will attempt to allocate as large a portion of its costs to these products B. if the manufacturer successfully allocates a large portion of its costs to these products then it will be able to sell its other nonr-eimbursed products at lower prices C. the FASB requires the business to participate in the cost allocation process Both A and B are correct.

Both A and B are correct.

Which of the following methods of allocating costs use market-based data? A. Sales value at splitoff method B. The constant gross-margin percentage method C. All of these answers are correct.

C. All of these answers are correct.

Costs of poor quality production include the: A. effect on potential customers B. effect on current customers C. opportunity cost of the plant and workers D. All of these answers are correct

D. All of these answers are correct

Quality management provides an important competitive edge because it: A. often results in substantial savings and higher revenues in the long run B. reduces costs C. increases customer satisfaction D. All of these answers are correct.

D. All of these answers are correct.

Which of the following manufactured products would not use process costing? A. 767 jet aircraft B. 19-inch television sets C. Custom built houses D. Both A and C are correct.

D. Both A and C are correct.

True or False: Reworked goods are unacceptable units of production usually not capable of being repaired or converted into a salable product.

False

What are the 2 approaches to allocating joint costs?

Market-based approach and the Physical Measures approach

Byproducts

Products of a joint production process that have low total sales value

Which of the following statements is true in regard to the cause-and-effect relationship between allocated joint costs and individual products? A. A high individual product value results in a high level of joint costs. B. A high individual product value results in a low level of joint costs. C. A low individual product value results in a low level of joint costs. D. There is no cause-and-effect relationship.

There is no cause-and-effect relationship.

There are 2 types of spoilage, normal and abnormal

True

True or False: Litigation may be a reason that joint costs are allocated to individual products.

True

True or False: The weighted-average process costing method does not distinguish between units started in the previous period but completed during the current period and units started and completed during the current period.

True

True or False: Under the weighted-average method, the costs of normal spoilage are added to the costs of their related good units. Hence, the cost per good unit completed and transferred out equals the total costs transferred out divided by the number of good units produced.

True

True or False: the number of defects shipped to customers as a percentage of total units shipped is a type of nonfinancial quality measure.

True

Joint products

When a joint production process yields 2 or more products with a high total sales value relative to the total sales values of other products

Seprable Costs

all costs incurred beyond the splitoff point that are assigned to each of the specific products identified at the splitoff point

Physical Measures approach

allocate joint costs by weight, quantity, or volume

Market-based approach

allocate joint costs using data such as revenues / sales value method, net realizable value method, or constant gross margin percentage NRV method

Weighted-Average process costing method

calculates the cost per equivalent unit of all work done to date and assigns this cost to equivalent units completed and xfered out of the process AND to equivalent units in ending WIP

Transferred-in costs

costs incurred in previous departments that are carried forward as the product's cost when it moves to a subsequent process in the cycle

Joint Costs

costs of a production process that yields multiple products simultaneously

Equivalent Units

derived measure of output calculated by taking the quantity of each input in units completed and in incomplete units of work in process and converting the quantity on input into the amount of completed output units that could be produced

Consider a graph that illustrates the relationship between the Cost of Quality (vertical axis) and the Percentage of Defects (horizontal axis), where the percentage ranges fro 0 to 100 percent from left to right on the horizontal axis. As the percentage of defects increases from 0 to 100 percent, the slope of the line representing total cost of quality is A. negative B. positive C. first negative, then positive D. first positive, then negative

first negative then positive

Normal Spoilage

inherent in a production process

Abnormal Spoilage

not inherent in a production process

Scrap

residual material resulting from manufacturing a product

splitoff point

the juncture in a joint production process when 2 or more products become separately identifiable

Why are joint costs allocated to individual products?

to reimburse companies that have some but not all of their products or services reimbursed under contracts, to compute inventoriable costs and COGS for reporting purposes, to regulate the rates or prices of one or more products, for any commercial litigation or insurance settlement situation

Rework

units of productions that do not meet specifications required by customers but are repairs and sold and good finished units

Spoilage

units of productions that don't meet the specifications required by customers for good units; discarded or sold at reduced prices

Main product

when a joint production process yields one product with a high total sales value comparable with the total sales values of other products of the process