M_ACCT Ch.4 – Flashcards
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tools that manager's use to make their companies competitive:
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refined costing systems, lean operations, total quality management and the costs of quality
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plantwide allocation systems work well for some companies, but may end up distorting costs if the following conditions exist:
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different departments incur different amounts and types of MOH; different jobs or products use the departments to a different extent
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Departmental overhead raters increase the accuracy of job costs when...
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each department incurs different types and amounts of MOH; each product, or job, uses the departments to a different extent
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4 steps to computing and using Departmental overhead rates:
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1. Co. estimates total MOH costs that will be incurred in each dept. in the coming year. These estimates are known as *departmental overhead cost pools.* 2. Co. selects an allocation base for each dept. & estimates the total amount that will be used during the year. 3. Co. calculates departmental overhead rates using the info. estimated in steps 1 & 2. 4. Co. allocates some MOH from each dept. to the individual jobs that use those depts.
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Departmental overhead rate =
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total estimated departmental overhead cost pool divided by total estimated amount of the departmental allocation base
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MOH allocated to job =
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departmental overhead rate multiplied by actual amount of departmental allocation base used by job
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Activity-Based Costing (ABC)
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focuses on activities as the fundamental cost objects. the costs of those activities become building blocks for compiling the indirect costs of products, services, and customers.
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Activity-Based Management (ABM)
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using activity-based cost information to make decisions that increase profits while satisfying customers' needs
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Appraisal Costs
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costs incurred to detect poor-quality goods or services
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Batch-Level Activities
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activities and costs incurred for every batch, regardless of the number of units in the batch
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cost distortion
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overcosting some products while undercosting other products
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costs of quality report
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a report that lists the costs incurred bu the company related to quality. the costs are categorized as prevention costs, appraised costs, internal failure costs, and external failure costs
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customer response time
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the time that elapses between receipt of a customer order and delivery of the product or service
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departmental overhead rates
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separate manufacturing overhead rates established for each department
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DOWNTIME
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acronym for the eight wastes: Defects, Overproduction, Waiting, Not utilizing people to their full potential, Transportation, Inventory, Movement, Excess processing.
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eight wastes
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Defects, Overproduction, Waiting, Not utilizing people to their full potential, Transportation, Inventory, Movement,
Excess processing
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external failure costs
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costs incurred when the company does not detect poor-quality goods or services until after delivery is make to customers
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facility-level activities
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activities and costs incurred no matter how many, units, batches, or products are produced in the plant
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5S
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A workplace organization system comprised of the following steps: Sort, Set in order, Shine, Standardize, and Sustain
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internal failure costs
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costs incurred when the company detects and corrects poor-quality goods or services before making delivery to customers
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just in time
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inventory management philosophy that focuses on purchasing raw materials just in time for production and completing finished goods just in time for delivery to customers
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Kaizen
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a Japanese word meaning "change for the better"
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lean thinking
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management philosophy and strategy focused on creating value for the customer by eliminating waste
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manufacturing cycle time
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the time that elapses between the start of production and the product's completion
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non-value-added activities
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activities that neither enhance the customer's image of the product or service nor provide a competitive advantage; also known as waste activities
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plantwide overhead reate
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when overhead is allocated to every product using the same manufacturing overhead rate
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Point of Use Storage (POUS)
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storage system used to reduce the waste of transportation and movement in which tools, materials, and equipment are stored in proximity to where they will be used most frequently
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prevention costs
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costs incurred to avoid poor-quality goods or services
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Product-Level Activities
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activities and costs incurred for a particular product, regardless of the number of units or batches of the product produced
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Takt Time
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the rate of production needed to meet customer demand yet avoid overproduction
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Total Quality Management (TQM)
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management philosophy of delighting customers with superior products and services by continually setting higher goals and improving the performance of every business function
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unit-level activities
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activities and costs incurred for every unit produced
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value engineering
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eliminating waste in the system by making the company's processes as effective and sufficient as possible
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value-added activities
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activities for which the customer is willing to pay because these activities add value to the final product or service
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waste activities
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activities that neither enhance the customer's image of the product or service nor provide a competitive advantage; also known as non-calue-added activities