ACC 321 Exam #1

Types of Inventory

1) Direct Materials Inventory 2) Work-in-Progress Inventory 3) Finished-goods-inventory

Planning and Control Decisions Process

1) Identify the problem and uncertainties. 2) Obtain information. 3) Make predictions about the future. 4) Make decisions by choosing between alternatives. 5) Implement the decision, evaluate performance, and learn.

Actual Costing

Actual Manufacturing Overhead Cost / Actual units of Allocation Base

Under Applied Overhead

An accounting record in cost accounting where the overhead costs assigned for a work-in-progress product does not reach the amount of the actual overhead costs

Identify the correct statements about the direct/indirect cost classification? Indirect costs are always traced. Indirect costs are always allocated. The design of operations affects the direct/indirect classification. The direct/indirect classification depends on the choice of cost object.

B) Indirect costs are always allocated. C) The design of operations affects the direct/indirect classification. D) The direct/indirect classification depends on the choice of cost object.

Normal Costing

Budgeted Manufacturing Overhead Cost / Budget units of Allocation Base

The advantage of using normal costing instead of actual costing is: indirect costs are assigned at the end of the year when they are known the job cost is more accurate under normal costing indirect costs are assigned to a job on a timely basis normal costing provides a higher gross profit margin

C) indirect costs are assigned to a job on a timely basis

Cost and efficiency

Cost and efficiency - understanding the activities that cause costs to arise and managing them allows managers to react to the continuous pressure to reduce costs

In supporting managers, management accountants have three guidelines. These guidelines are:

Cost-benefit analysis, behavioral and technical considerations, and different costs for different purposes.

Key Success Factors

Customers want companies to use the value chain and supply chain to deliver ever-improving levels of performance when it comes to several (or even all) of the following: - Cost and efficiency - Quality - Time - Innovation - Sustainability

Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year: Cost Pool Overhead Costs Cost driver Activity level Supervision of direct labor $320,000 Direct labor-hours 800,000 Machine maintenance $120,000 Machine-hours 960,000 Facility rent $200,000 Square feet of area 100,000 Total overhead costs $640,000 The accounting records show the Mossman Job consumed the following resources: Cost driver Actual level Direct labor-hours 200 Machine-hours 1,600 Square feet of area 50 19._____ If Gregory Enterprises uses the three activity cost pools to allocate overhead costs, what are the activity-cost driver rates for supervision of direct labor, machine maintenance, and facility rent, respectively? 20._____ Using the three cost pools to allocate overhead costs, what is the total amount of overhead costs to be allocated to the Mossman Job?

D) $0.40 per dlh, $0.125 per mh, $2 per sq ft B) $380

For a manufacturing company, direct material costs may be included in: direct materials inventory only merchandise inventory only both work-in-process inventory and finished goods inventory direct materials inventory, work-in-process inventory, and finished goods inventory accounts

D) direct materials inventory, work-in-process inventory, and finished goods inventory accounts

Describe the Inventory Types

Direct Materials Inventory: Direct materials in stock that will be used on the manufacturing process Work-in-progress Inventory:Goods partially worked on but not yet completed Finished-Goods Inventory: Goods completed, but, not yet sold

Predetermined Overhead Rate

Estimated Manufacturing Overhead Costs / Estimated Total units in the allocation base

Innovation

Innovation - a constant flow of innovative products or services is the basis for the ongoing success of a company.

Direct Cost

Is a cost that can be easily and conveniently traced to a particular cost object.

Indirect Cost

Is a cost that cannot be easily and conveniently traced to a particular cost object.

Cost objects

Is anything for which cost data are desired

Over Applied Overhead

Is excess amount of overhead applied during a production period over the actual overhead incurred during the period. In other words, it's the amount that the estimated overhead exceeds the actual overhead incurred for a production period.

Product Cost

Manufacturing Costs (Direct Materials + Direct Labor + Manufacturing Overhead)

Period Cost

Non-Manufacturing Costs (Selling Cost + Administrative Costs)

Applied Overhead Rate

Predetermined Overhead Rate X Actual Total Units in the Allocation Base

Quality

Quality- customers expect high levels of quality

Amber Manufacturing provided the following information for last month: Sales $20,000 Variable costs 6,000 Fixed costs 9,000 Operating income $5,000 If sales double next month, what is the projected operating income?

Sales x2 $40,000 Variable Cost x2 $12,000 Fixed Costs x2 $5,000 Operating Profit $19,000

Sustainability

Sustainability - the development and implementation of strategies to achieve long-term financial, social and environmental goals.

Management Accounting Guidelines

Three guidelines help management accountants provide the most value to the strategic and operational decision- making of their companies: 1) Cost-benefit approach: benefits of an action/purchase generally must exceed costs as a basic decision rule. 2) Behavioral and technical considerations: people are involved in decisions, not just dollars and cents. 3) Different Costs for Different Purposes: Managers use alternative ways to compute costs in different decision-making situations.

Time

Time - two important dimensions of time are new-product development and customer-response time

Production-cost cross-subsidization results from allocating indirect costs to multiple products. assigning traced costs to each product. assigning costs to different products using varied costing systems within the same organization. assigning broadly averaged costs across multiple products without recognizing amounts of resources used by which products.

assigning broadly averaged costs across multiple products without recognizing amounts of resources used by which products.

Variable Cost

changes in total in proportion to changes in activity; variable cost is constant on a per-unit basis but total variable cost changes.

Advertising of a specific product is an example of unit-level costs. batch-level costs. product-sustaining costs. facility-sustaining costs.

product-sustaining costs.

Fixed Cost

remains constant in total amount throughout wide ranges of activity.

A significant limitation of activity-based costing is the attention given to indirect cost allocation. the many necessary calculations. that it is still an allocation method the use it makes of technology.

that it is still an allocation method (best answer) the many necessary calculations