Cost Accounting Final Exam Review

What types of service businesses would use job order costing?

Accounting firms and auto repair companies

What is the practice of taking overhead costs previously in a single indirect cost pool and separating them into a number of homogereous cost pools with separate cost driver for each pool?

Activity-Based Costing

What is the method of applying overhead to products and services that considers non-volume-related activities that create overhead costs as well as volume-related activities?

Activity-Based-Costing Method

The method of distributing service department costs to production departments that takes into consideration that service departments not only may provide service to but also may receive service from other service departments?

Algebraic or Reciprocal Method

What costs are included in Factory Overhead?

All manufacturing costs except direct materials and direct labor

How should a company treat an efficiency variance that is material in amount?

As an addition or deduction from Cost of Goods Sold

What are the Financial Budgets?

Balance sheet, retained earnings statement, and cash flows statement

What is absorption cost required for?

Both external financial reporting and income tax purposes

In the three-variance method of factory overhead analysis, what standard cost variance represents the difference between actual factory overhead incurred and budgeted factory overhead based on actual hours worked?

Budget (spending) Variance

In a three-variance method of factory overhead analysis, which variance indicates that the volume of production was more or less than budgeted?

Capacity Variance

What is the computation of inventory carrying costs?

Carrying Cost= Average Inventory x Carrying Cost per Unit

Which budget adds a new month at the end of the budget when a month is completed, resulting in a budget that is always one year in advance?

Continuous Budget

If the selling price and variable cost per unit both increase 10 percent and fixed costs do not change, what is the effect on the contribution margin per unit and the contribution margin ratio?

Contribution margin per unit increases and the contribution ratio remains unchanged

What includes those parts of financial and management accounting that collect and analyze cost information?

Cost Accounting

What is the direct materials, direct labor, and factory overhead costs associated with products completed during the period?

Cost of Goods Manufactured

In creating a balanced scorecard, the number of customer complaints would belong to which category of performance measures?

Customer

What is the journal entry to record payroll taxes?

Debit- Payroll Tax Expense Credit- Taxes Payable

What is the journal entry to distribute payroll?

Debit- Work in Process Debit- Factory Overhead Credit- Payroll

What costs are classified as variable?

Direct Materials and Direct Labor

What focuses on gathering historical financial information to be used in preparing financial statements that meet the needs of investors, creditors, and other external users of financial information?

Financial Accounting

What budgets are used to determine an organization's generation and use of funds during a period?

Financial Budgets

What items are included in the four categories of a balanced scorecard?

Financial, Customer, Internal Business Processes, and Learning and Growth Performance Measures

For a manufacturer, what is the total cost of manufactured goods completed but still on hand?

Finished Goods

What are the types of manufacturing inventories?

Finished Goods, Work in Process, and Materials

What are costs that remain the same, in total, when production levels increase or decrease?

Fixed Costs

What budget is used to provide an "apples to apples" comparison of budgeted and actual performance at the actual unit volume attained?

Flexible Budget

What is the reporting system wherein the budget shows estimated costs at different levels of production volume?

Flexible Budgeting

What does not appear on an income statement prepared using variable costing?

Gross Margin/ Profit

In what situation would process costing techniques be used in assigning costs to products?

If the product is composed of mass-produced homogeneous units

In creating a balanced scorecard, the number of quality defects would belong to which category of performance measures?

Internal Business Processes

In creating a balanced scorecard, the rate of employee turnover would belong to which category of performance measures?

Learning and Growth

To effectively control materials, what must a business maintain?

Limited Access

To effectively control materials, what three things must a business maintain?

Limited Access, Segregation of Duties, and Accuracy in Recording

Activity-based costing considers non-volume-related activities that create costs such as what?

Machine setups and product design changes

Taylor is an accountant with the Tanner Corporation. Taylor's duties include preparing reports that focus on both historical and estimated data needed to conduct ongoing operations. What is Taylor Logan?

Management Accountant

What focuses on historical and estimated data that management needs to conduct ongoing operations and do long-range planning?

Management Accounting

What is the business entity that converts purchased raw materials into finished goods by using labor, technology, and facilities?

Manufacturer

For a manufacturer, what is the cost of all materials purchases on hand to be used in the manufacturing process?

Materials

What is the form that serves as authorization to withdraw materials from the storeroom?

Materials Requisition

According to the IMA Statement of Ethical Professional Practice, under the Integrity Standard, each member has what responsibility?

Mitigate actual conflicts on interest

What combines some features of the hourly-rate and piece-rate plans?

Modified Wage Plan

An accrued expense such as Wages Payable can best be described as an amount?

Not paid and currently matched with earnings

What is an example of a non-financial performance measure for the learning and growth perspective of a college's balanced scorecard?

Number of conferences attended by faculty members

When should a budget use historical data?

Only as a stepping-off point for projections into the future

Which budgets include components of the "projected financial statements" such as the sales, cost of goods sold, and selling and administrative expense budgets that are part of the budgeted income statement?

Operating Budgets

If the amount of loss in the manufacturing process is abnormal, what should it be classified as?

Period Cost

What are all of the operating expenses in the professional firm known as?

Period Costs.

The basic assumption made in a variable costing system with respect to fixed costs is that fixed costs are categorized as what?

Period costs

What is the process of establishing objectives or goals for the firm and determining the means by which they will be met?

Planning

What are normal losses that occur in the manufacturing process properly classified as?

Product Costs

What is not one of the categories of a balanced scorecard?

Quality

ISO 9000 is a set of international standards for what?

Quality Management

What is the relative percentage of unit sales among the various products made by a firm?

Sales Mix

What are joint costs commonly allocated based upon?

Sales Value

What is commonly accounted for as a by-product?

Sawdust resulting from processing lumber at a lumber mill

What is a by-product?

Secondary products with relatively little value that are obtained in the process of manufacturing the primary product

What actions can be taken when analyzing variances?

Separate actual and applied overhead into variances

What is the report that is prepared after the posting is completed at the end of the accounting period that shows the items of expense by department and in total, and is used to prove the balance of the Factory Overhead Control account?

Summary of Factory Overhead

When selecting a method of inventory costing, what must a company consider?

Tax liabilities, inventory turnover, and current economic positions

What should be done if the amount of under- or over- applied overhead is large enough to affect net income?

The balance should be pro rated to Cost of Goods Sold

What is not a feature of a standard cost system?

The company determines the actual cost of manufacturing a unit

Consider the following costs: I. The cost of electricity which is used to power machinery and light the plant. II. Depreciation on the building which houses both the factory and the sales office. Which of these are semivariable costs?

The cost of electricity which is used to power machinery and light the plant is a semivariable cost

What are distribution costs?

The costs incurred to sell a product

What companies typically use process costing?

Those in the food and textile industry

What is the purpose of a flexible budget?

To compare actual and budgeted results at virtually any level of production

What is a more descriptive term of the type of cost accounting often called "direct costing"?

Variable Costing

What are costs that vary in direct proportion to volume changes?

Variable Costs

When will over-applied factory overhead occur?

When factory overhead costs incurred were less than standard costs

When will net income reported under absorption costing exceed net income reported under variable costing?

When production exceeds sales for that period

When does an over- or under-applied overhead occur when using standard costs?

When there is a difference between actual and standard costs

Control is the process of monitoring the company's operations to determine whether the company's objectives are being achieved. Effective control is achieved through all of the following except: a. Assigning responsibility b. Periodically measuring and comparing results c. Taking necessary corrective action d. Constantly monitoring employees to ensure they do exactly as they are told

d. Constantly monitoring employees to ensure they do exactly as they are told

Unit cost information is important for making all of the following marketing decisions except: a. Determining the selling price of a product b. Analyzing profitability c. Bidding on contracts d. Determining the amount of advertising needed to promote the product

d. Determining the amount of advertising needed to promote the product