Accy 2002

Question 1

Managerial Accounting

Answer 1

-only for internal purposes
-breakdown info-product line, customer line, regional
-process of generating profits
-evaluate costs & performance of individuals
-helps internal parties make operations & HR decisions
-more real-time data
-proprietary data: not leaked to the public

Question 2

Cost information

Answer 2

costs are assigned to objects for a variety of purposes: pricing decisions, product decisions, make or buy decisions, profitability assessments

Question 3

Cost object

Answer 3

for which a measurement of cost is desired

Question 4

Direct costs

Answer 4

conveniently and economically traced to the cost object

Question 5

Indirect costs

Answer 5

cannot be conveniently and economically traced to the cost object.

Question 6

Types of manufacturing costs

Answer 6

direct materials, direct labor, manufacturing overhead

Question 7

Direct Materials

Answer 7

raw materials that become an integral part of the product and that can be traced directly to it

Question 8

Direct Labor

Answer 8

labor costs that can be easily traced to individual units of products

Question 9

Manufacturing Overhead

Answer 9

costs that cannot be traced directly to specific units produced

= all indirect

Question 10

Manufacturing costs

Answer 10

direct materials + direct labor + overhead

Question 11

Non-manufacturing costs

Answer 11

selling costs: costs necessary to secure an order and deliver product

administrative costs: all executive, organizational, and clerical costs

Question 12

Product vs. period costs

Answer 12

product cost: include direct materials, direct labor, and overhead: cost expensed at the time of sale, even if incurred earlier

period costs: include all selling costs and administrative costs: costs expensed as incurred (hits statement right away)

Question 13

Prime vs. conversion costs

Answer 13

prime costs: direct material + direct labor

conversion costs: direct labor + manufacturing overhead

Question 14

Variable vs. Fixed costs

Answer 14

variable: vary in total, in direct proportion to changes in the level of activity. Variable cost per unit is constant.

fixed: remain constant, in total, regardless of changes in the level of the activity. As activity increases, fixed cost per unit changes

Question 15

Mixed Costs

Answer 15

contains both variable and fixed elements
- total mixed cost line can be expressed as an equation y = a + bX

Question 16

Cost systems

Answer 16

assign manufacturing costs to products and provide mechanisms for computing unit product cost

Question 17

When are job order cost systems used

Answer 17

-many different products are produced each period
-products are manufactured to order
-unique nature of each order requires tracing or allocating costs to each job, and maintaining cost records for each job

Question 18

Job order costing

Answer 18

charge direct material and direct labor costs to each job as work is performed

materials requisition form: record how much materials cost and record job #

employee time ticket: record how many hours employee is working

Question 19

How allocate MOH

Answer 19

allocation base (cost driver): direct labor hours, machine hours, direct labor cost

predetermined overhead rate: used to apply overhead to jobs is determined before the period begins

Question 20

POHR

Answer 20

= (estimated total manufacturing overhead cost for the coming period) / (estimated total amount of the allocation base for the coming period)

Question 21

Four step process to computing POHR

Answer 21

1. estimate total amount of the allocation base that will required for next period’s estimated level of production
2. estimate the total fixed MOH costs and the variable overhead per unit of the allocation base
3. use Y = a + bX to estimate the total amount of MOH

Question 22

Sunk cost

Answer 22

Cost that have already been incurred and cannot be recovered

Question 23

Examples of MOH

Answer 23

property taxes. insurance premiums incurred to operate manufacturing facility, factory depreciation, factory manager salary, factory maintenance employee salary

Question 24

Examples of administrative costs

Answer 24

executive compensation, legal counsel, general accounting, PR

Question 25

Selling costs

Answer 25

advertising, shipping, sales travel, sales commission, sale salaries

Question 26

Job-order costing

Answer 26

costing system used when many different products, jobs or services are produced each period

Question 27

absorption cost

Answer 27

costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product

Question 28

allocation base

Answer 28

measure of activity such as direct labor-hours or machine-hours used to assign costs to cost objects

Question 29

Predetermined overhead rate

Answer 29

rate used to charge manufacturing overhead cost to jobs established in advance for each period

Question 30

overhead application

Answer 30

process of assigning overhead costs to specific jobs

Question 31

normal costing

Answer 31

costing system that applies overhead costs to jobs by multiplying predetermined overhead rate by the actual amount of the allocation base incurred by the job