question

Managerial Accounting

answer

Provides economic and financial information for managers and other internal users

question

What are the three stages of managerial accounting?

answer

Planning, controlling, and decision making

question

Value chain

answer

Refers to all activities associated with providing a product or service

question

Lean production (just in time)

answer

Inventory system in which goods are manufactured or purchased just in time for sale

question

Theory of constraints

answer

A specific approach to identify and manage constraints in order to achieve goals

question

Constraint

answer

Limits the company's potential profitability

question

Sarbanes-Oxley Act of 2002

answer

Clarifies management's responsibilities, certifications by CEO and CFO, selection criteria for Board of Directors and Audit Committee, and increases penalties for misconduct

question

What act looks to improve business ethics?

answer

Sarbanes-Oxley Act of 2002

question

What are the 3 classifications of manufacturing costs?

answer

Direct materials, direct labor, and manufacturing overhead

question

Direct materials

answer

Raw materials that can be physically, directly, and conveniently associated with the finished product during the manufacturing process

question

Indirect materials

answer

Raw materials that cannot be easily associated with the finished product

question

Direct ("Touch") labor

answer

Work of factory workers that can be physically and directly associated with converting raw materials into finished goods

question

Indirect labor

answer

Work of factory employees that has no physical association with the finished product or for which it is impractical to trace costs to the goods

question

Manufacturing overhead

answer

Costs that are indirectly associated with manufacturing the finished products

question

What is included in manufacturing overhead?

answer

All manufacturing costs except for direct labor and direct materials

question

Prime costs

answer

Direct materials + direct labor

question

Conversion costs

answer

Direct labor + manufacturing overhead

question

Non-manufacturing costs

answer

Selling, general, and administrative

question

Product costs

answer

Costs that are a necessary and integral part of producing the product

question

What are the components of product costs?

answer

Direct material, direct labor, and manufacturing overhead

question

When do product costs become an expense?

answer

Not an expense until the finished goods inventory is sold, then becomes COGS

question

Period costs

answer

Includes all selling and administrative costs

question

Variable cost

answer

Varies, in total, in direct proportion to changes in level of activity, cost per unit is constant

question

Fixed cost

answer

Remains constant, in total, regardless of changes in activity level, cost per unit varies inversely with changes in activity

question

Mixed cost

answer

Contains variable and fixed elements

question

Cost object

answer

Anything for which cost data are desired (products, customers)

question

Differential (Incremental) costs

answer

Difference in cost between any two alternatives

question

Opportunity cost

answer

Potential benefit given up when one alternative is selected over another

question

Sunk costs

answer

Cost that has already been incurred and can't be changed

question

High quality of conformance

answer

Goal of companies to produce products that conform to design specifications and are free from defects

question

4 categories of high quality of conformance

answer

1) Prevention costs 2) Appraisal costs 3) Internal failure costs 4) External failure costs

question

Prevention costs

answer

Incurred to reduce the number of defects (i.e. quality training)

question

Appraisal costs

answer

Incurred to identify defective products before they are shipped to customers (i.e. testing/inspection)

question

Internal failure costs

answer

Incurred as a result of identifying defects before they are shipped to customers (i.e. scrap/spoilage)

question

External failure costs

answer

Incurred as a result of defective products being delivered to customers (i.e. warranty repairs, customer service)

question

ISO 9000 Standards

answer

Internal Organization for Standardization established quality control guidelines that are widely accepted in Europe and the US, created in Geneva

question

Job order cost system

answer

Products are manufactured to order and costs are assigned to each job or batch of goods

question

What are some key characteristics of job order cost system?

answer

Each job or batch has its own distinguishing characteristics, and many different products are produced each period, measures costs of each job completed, not by period

question

Process cost system

answer

Used when a large volume of similar products are manufactured and costs are accumulated for a specific time period

question

Where are costs assigned in process cost system?

answer

Costs are assigned to departments or processes for a set time period, production is continuous

question

Job cost sheet

answer

Used to record costs of a specific job and determines the total and unit costs of a completed job. Postings made daily

question

What is job cost sheet a subsidiary ledger for?

answer

Work in progress

question

Raw materials costs

answer

Assigned to a job when materials are issued

question

Materials requisition slip

answer

Written authorization for issuing raw materials

question

When and how are materials requisition slips posted?

answer

Posted daily to job sheets and periodically journalized

question

Factory labor costs

answer

Assigned to jobs on the basis of time tickets

question

Time tickets

answer

Prepared when the work is performed

question

What does a time ticket indicate?

answer

Employee, hours worked, account and job charged, and total labor costs

question

What account do direct labor costs go into?

answer

Debited to WIP

question

What account do indirect labor costs go into?

answer

Debited to manufacturing overhead

question

Where is manufacturing overhead assigned?

answer

Cannot be assigned to specific jobs based on actual costs incurred but must be assigned to WIP and to specific jobs on an estimated basis through the use of a predetermined overhead rate

question

Predetermined overhead rate

answer

A way to assign overhead to WIP and specific jobs, based on the relationship between estimated overhead costs and expected annual operating activity

question

How is predetermined overhead expressed?

answer

In terms of an activity basis

question

Activity basis

answer

Any activity that is an equitable base for applying overhead costs to jobs

question

What is included in a job cost sheet?

answer

Materials requisition slip, labor time tickets, and predetermined overhead rate

question

Debit balance in manufacturing overhead

answer

Means that overhead is under applied, OH assigned to WIP is less than OH incurred

question

Credit balance in manufacturing overhead

answer

Means that overhead is over applied, OH assigned to WIP is less than overhead incurred

question

Process cost accounting

answer

Focuses on the processes involved in mass producing products that are identical or very similar in nature

question

How are job order charges applied and summarized?

answer

Charges are applied to individual jobs and summarized on job cost sheets

question

How are process costs summarized?

answer

Summarized in production cost reports for each department

question

When is job order totaled?

answer

When job is complete

question

When are process costs totaled?

answer

At the end of each period

question

What type of system uses time tickets?

answer

Both systems

question

Where are manufacturing overhead costs applied in process cost system?

answer

Assigned to allocate overhead to departments with the activity that drives or causes the cost

question

Equivalent units of production

answer

Measures the work done during a period and expressed in fully completed units

question

What are equivalent units of production used for?

answer

To determine the cost per unit of the completed product

question

How do you find equivalent units of production?

answer

Units completed and transferred out + equivalent units of ending WIP

question

Production cost report

answer

Key document prepared for each department that is used to understand activities

question

4 steps of production cost report

answer

1. Compute physical unit flow 2. Compute equivalent unites of production 3. Compute unit production costs 4. Prepare a cost reconciliation schedule

Managerial Accounting Midterm 1 Test Questions – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards