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