D196

What is an indirect cost?

Also known as common costs or joint costs. Are costs normally incurred for the benefit of several segments within the organization. can be fixed or variable, nearly always fixed.

How is a common size income statement created?

By dividing our income statement amounts for a given year by sales for the year

What is the US organization that sets accounting standards for publicly listed companies?

FASB

The money that a company needs to buy it's Land, pay its employees, and buy it supplies called capital. What are the potential sources of capital for business?

Investors and creditors and retain business earnings

What costs are included in manufacturing overhead?

Manufacturing costs that are not classified as direct materials or Direct labor.

Shows the amount of cash inflows and outflows from organizations operating investing in financing activities?

Statement of cash flow's

What problem will be caused if overhead is underapplied?

Total cost of products or orders will be understated

What is work in process inventory?

All material on the factory floor that is not yet completed

What is the organization that monitors a financial accounting disclosures of companies for the US and foreign who stocks trade on US stock exchanges?

(SEC) Securities and Exchange Commision

What is process costing?

A method of product costing in which costs are accumulated by process and averaged over all products made during a period.

Four tax consulting companies are very different sets of customers. Which of these four tax consulting companies is most likely to use this process system in determining the cost of each customer engagement?

A company that serves tax customers who are middle income individuals who are basically the same tax issues

Lucas works for professional consulting firm. He has been asked to compare his firms financial performance to the performance of another firm. Which company should look at Sue's as a benchmark for his company's performance?

A consulting firm

What is a period cost?

A cost associated with activities occurring outside the factory

What is a mixed cost?

A cost that includes both a fixed portion and a variable portion

Which statement is true with respect to fixed and variable costs?

A fixed cost is fixed in total and decreases per unit as a number of units increases (because that constant fixed costs is spread over more units as a number of units increases)

What describes job order costing?

A system in which manufacturing costs are accumulated by separate product orders or batches

What measures the results accurately and follow the standards of procedures referred to as the accounting cycle?

Accountants

What is an important difference in the cost accounts of a merchandising company compared to a manufacturing company?

And merchandising company has no raw materials inventory or work in process inventory (merchandise inventory, by definition, is essentially complete and ready for sale when purchased)

What are the Four steps in the financial accounting cycle?

Annalyze, Record the effects of transactions, Summarize, Prepare

What is a basic accounting equation?

Assets = Liabilities + Owner's Equity

What shows a financial position of an organizations assets liabilities and equity at a specific date and time?

Balance sheet

Why do companies allocate overhead costs based on estimated overhead numbers instead of actual numbers?

Because overhead costs must be allocated beginning the very first day of the period, but the actual number is not available until the end of the period

One important result of using an ABC system is more accurate product costing. What is another important result of using an ABC system?

Better decisions made

Which types of cost does the merchandiser have?

Both product and period costs

What is estimated manufacturing overhead?

Budgeted manufacturing overhead costs that are used to establish the predetermined overhead rate

How is contribution margin analysis used by management in making business decisions?

Contribution margin analysis helps management evaluate whether to continue selling a product

Which activity involves the process of tracking the actual performance of a company?

Controlling

Which product costs are substantial in both a service company and a manufacturing company?

Direct labor and overhead

Which item is a product cost?

Direct materials (Direct materials as a product cost because it is directly associated with production activity)

What are the three components of product costs?

Direct materials, direct labor, and manufacturing overhead

What is the role of IASB be in regulating accounting standards?

Establish international accounting standards

How is a predetermined overhead rate calculator for a new product line?

Estimated overhead costs divided by estimated level of activity

What are the three functions of an accounting system?

Evaluation, bookkeeping, and analysis

What is the definition of financial statement analysis?

Examining both the relationships among financial statement numbers and the trends in those numbers overtime

Which statement correctly distinguishes the uses of financial accounting information from the uses of manager accounting information?

Financial accounting information is prepared according to a generally accepted set of rules

What are differential costs?

Future costs that change as a result of a decision

Maria just started a cosmetics company. She purchases make up and nail polish from a wholesale distributor and sells products and social media. Which costs will maria's new company have?

Goods product costs and period Costs

IASB (International Accounting Standards Board)

Group that identifies preferred accounting practices & encourages global acceptance; issues IFRS

Accounting plays a vital role in the decision making process. Which action is the first step in the decision making process?

Identify the issue

What shows a profitability of an organization by comparing revenues and expenses for a period of time

Income statement

What must be true of an indirect cost?

It is a cost that cannot be traced to a specific business unit or product

What must be true of a direct cost?

It is a cost traceable to a specific business unit

Which group uses financial information to evaluate whether company will be able to repay alone?

Lenders

Which primary area of accounting generate reports for internal users?

Management accounting

Which characteristic is a unique feature of management accounting information?

Management accounting information is composed of both financial and non-financial data

Which statement about managerial accounting data is true?

Managerial accounting data are created based on competitive needs that are unique to the organization

Which statement identifies a difference between managerial and financial accounting?

Managerial accounting has substantial competitive value while financial accounting is not competitive tool

What is a characteristic of manager accounting systems that is not also a characteristic of financial accounting systems?

Managerial accounting includes budget and forecast data

Which group represents the primary users of managerial accounting information?

Managers

What is actual manufacturing overhead?

Manufacturing costs other than direct materials and direct labor

For some production processes job order costing is the correct production costing Systems to use. With other production processes, process costing is more appropriate. For which product is process more appropriate?

Manufacturing identical residential refrigerators (a process costing system is used for nearly identical units are mass produced. As a result all units produced during that period or assign the same cost)

In a job order costing system how our factory supervisor wages classified?

Manufacturing overhead

What type of cost are the wages paid to a factory supervisor?

Manufacturing overhead. (includes all manufacturing costs that are not classified as direct materials or direct labor. This includes miscellaneous materials used in production, such as glue or nails; wages for the factory supervisor, controller, and custodians who work in the factory but not directly on products.; And other manufacturing costs such as utilities, depreciation of manufacturing facilities, insurance, and property taxes)

Which type of business purchases finished goods for resale?

Merchandising

Which type of business is a typical retailer?

Merchandising business

Which statement is correct with respect activity-based costing (ABC) overhead allocation?

Overhead is allocated based on several different measures of activity

What are sunk costs?

Pass costs that cannot be changed by current decision

What group of people make up the FASB?

People from a variety of business related backgrounds

Company managers are important users of managerial accounting information. What are the three primary functions of company managers?

Planning controlling and evaluating

What is a sequence of the flow of cost of a manufacturing operation?

Purchase from materials, transfer raw materials to production, add direct labor and manufacturing overhead costs, transfer the cost of completed goods to finish goods inventory, sell goods and transfer cost to cost of goods sold.

What is an opportunity cost?

Revenue loss from selecting a different alternative

How is contribution margin calculated?

Sales minus variable cost

Jack just started a business that develops websites for other businesses. Which type of organization is Jack's new business?

Service organization

What does long run planning include?

Strategic planning in capital budgeting

What is the role of GASB in setting accounting standards?

The GSP is a private sector organization that establishes accounting and financial reporting standards for US state and local governments.

What is applied manufacturing overhead?

The amount of manufacturing overhead that is assigned to goods produced

Which of the primary financial statements reports the resources obligations and owners equity of a company?

The balance sheet

What is under applied manufacturing overhead?

The excess of actual manufacturing overhead costs over the applied manufacturing overhead cost for the period

What is overapplied manufacturing overhead?

The excess of applied manufacturing overhead costs over the actual manufacturing overhead cost for the period

What is true if the quantity sold for a product line is below the break even point?

The product line is operating at a loss

What is the relevant range?

The range of volume over which the variable cost per unit is expected to remain the same and the fixed cost remains the same in total.

GAAP (Generally Accepted Accounting Principles)

The standards and rules that accountants follow while recording and reporting financial activities.

If overhead is under applied during a period, which statement below is true?

The total cost of good sold will be understated

In what way do accountants have an economic incentive to conduct themselves ethically?

The value of the information produced by accountants is related to the confidence that users have in the reliability of that information

How is it possible for an accountant to intentionally to see financial statement users and yet still technically be in the compliance with generally excepted accounting principles (GAAP)?

There is flexibility inherent in the assumptions underlying the preparation of financial statements

What is a predetermined overhead rate?

This is estimated manufacturing overhead cost for the year divided by total estimated activity base such as machine hours direct labor hours direct labor cost and so forth

What is the purpose of performing horizontal analysis of financial statements?

To highlight trends may be occurring in the company overtime

Which statement below is true with regard to fixed costs?

Total fixed cost do not change in total within irrelevant change of activity. (they do not change unless production goes outside the relevant range of activity)

What happens at a true break even point?

Total revenues equal total costs

Which statement below is true with regard to variable costs?

Total variable costs change in relationship to the volume of activity

What is an example of an indirect cost in a hospital?

Utility cost for the hospital building

Which item is a period cost?

Wages of secretarial staff (if your cost is a cost that is incurred outside of production facility)

When is job order costing not appropriate?

When a company produces products or services in a continuous process in which jobs are products or projects can't be specifically identified

And ABC overhead allocation system is not always substantially better than a traditional system. When does a traditional overhead allocation system work well?

When the production process for each different product or project or process is basically the same

What is the language of business?

accounting

SEC (Securities and Exchange Commission)

an independent federal agency that oversees the exchange of securities to protect investors

Controlling

establish expectations create performance measures gather results compute variances

Planning

recognize needs identify alternatives evaluate choices implement decisions

Evaluating

reward performance provide feedback analyze results identify problems

FASB (Financial Accounting Standards Board)

the private board that establishes the generally accepted accounting principles used in the practice of financial accounting