question

a ____ is a grouping of individual indirect cost items.

answer

cost pool

question

___ is generally perceived to produce superior costing figures due to the use of muliple drivers across mutliple levels.

answer

actvity based costing

question

___costin is used by a business to price homogeneous prodcuts

answer

process

question

___ costing is used by a business to price unique products for different jobs

answer

job

question

a resource to be sacrificed to achieve a specific objective is a ___

answer

cost

question

true or false a top selling product might actually result in losses for the company

answer

true

question

true or false a customer could be considered a cost object

answer

true

question

true or false the longer the time horizon, the more likely a costt will be variable

answer

true

question

true or false it can be inferred that when there is a high correlation between two variables, one is the cause of the other.

answer

false

question

true or false when estimating a cost function, cost behavior can be approximated by a linear cost function within the relevant range

answer

true

question

If a product consumes a high level of resources but is allocated low costs per unit will the costs be overcosted or undercosted?

answer

Undercosted

question

A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the _____________

answer

Relevant Range

question

________ describe(s) the flow of goods, services, and information from the purchase of materials to the delivery of products to consumers, regardless of whether those activities occur in the same organization or with other organizations.

answer

Supply Chain

question

____________ examines the behavior of total revenues, total costs, and operating income as changes occur in the units sold, the selling price, the variable cost per unit, or the fixed costs of a product.

answer

cost-volume-profit (CVP)

question

_________ is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost.

answer

Cost Function

question

TRUE or FALSE? Management accounting information focuses on external reporting.

answer

FALSE Explanation: Management accounting information focuses on internal reporting.

question

True or False The key to a company's success is always to be the low cost producer in a particular industry.

answer

False Example Product Differentiation May be the Company Strategy

question

True or False Products, services, departments, and customers may be cost objects.

answer

True

question

True or False The following is an assumption in cost volume profit analysis: Unit selling price, total variable costs, and fixed costs are known and remain constant.

answer

False Unit selling price, unit variable costs, and total fixed costs are known and remain constant.

question

True or False ABC systems create homogenous activity-related cost pools

answer

True

question

Contribution Margin is Revenue minus ________

answer

Variable Cost

question

Fixed costs equal $12,000, unit contribution margin equals $20, and the number of units sold equal 1,600. How much is operating income?

answer

$20,000 (1,600Units × $20CMU) - $12,000FC = $20,000

question

Selling price per unit $20.00 Variable costs per unit: Direct material $4.00 Direct manufacturing labor $1.60 Manufacturing overhead $0.40 Selling costs $2.00 Annual fixed costs $96,000 What is the contribution margin per unit?

answer

$12.00 $20 - $4 - $1.60 - $0.40 - $2 = $12

question

Christi Manufacturing provided the following information for last month: Sales $10,000 Variable costs 3,000 Fixed costs 5,000 Operating income $2,000 If sales double next month, what is the projected operating income? A) $4,000 B) $7,000 C) $9,000 D) $12,000

answer

Answer: C Explanation: ($10,000 × 2) - ($3,000 × 2) - $5,000 = $9,000

question

Total personnel department costs are $320,000. Department A B C Number of employees 30 270 100 If the number of employees is considered the cost driver, what amount of personnel costs will be allocated to Department A?

answer

$24,000 [30 / (30 + 270 + 100)] × $320,000 = $24,000

question

Management accounting information includes: A) tabulated results of customer satisfaction surveys B) the cost of producing a product C) the percentage of units produced that are defective D) All of these answers are correct.

answer

D) All of these answers are correct

question

2) Actual costs are: A) the costs incurred B) budgeted costs C) estimated costs D) forecasted costs

answer

A) the costs incurred

question

5) Traditional cost systems distort product costs because: A) they do not know how to identify the appropriate units B) competitive pricing is ignored C) they emphasize financial accounting requirements D) they apply average support costs to each unit of product

answer

D) they apply average support costs to each unit of product Term: Cross subsidization

question

Which of the following does NOT affect the direct/indirect classification of a cost? A) the level of budgeted profit for the next year B) the materiality of the cost in question C) available technology to gather information about the cost D) the design of the operation

answer

A) the level of budgeted profit for the next year

question

Undercosting of a product is most likely to result from: A) misallocating direct labor costs B) underpricing the product C) overcosting another product D) overstating total product costs

answer

C) overcosting another product

question

All cost functions are linear. True or False?

answer

False Example: Experience or learning curves

question

3) The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is: A) cost accumulation B) cost assignment C) cost tracing D) Cost accounting

answer

B) cost assignment

question

Within the relevant range, if there is a change in the level of the cost driver, then: A) total fixed costs and total variable costs will change B) total fixed costs and total variable costs will remain the same C) total fixed costs will remain the same and total variable costs will change D) total fixed costs will change and total variable costs will remain the same

answer

C) total fixed costs will remain the same and total variable costs will change

question

Place the four business functions in the order they appear along the value chain: Customer service Design Marketing Production A) Customer Service, Design, Production, Marketing B) Customer Service, Marketing, Production, Design C) Design, Production, Marketing, Customer Service D) Design, Customer Service, Production, Marketing

answer

C) Design, Production, Marketing, Customer Service

question

Kaiser's Kraft Korner sells a single product. 7,000 units were sold resulting in $70,000 of sales revenue, $28,000 of variable costs, and $12,000 of fixed costs. Contribution margin per unit is: A)$4.00 B) $4.29 C)$6.00 D) None of these answers are correct.

answer

Explanation: C) ($70,000 - $28,000) / 7,000 units = $6 per unit

question

Contribution margin = Contribution margin percentage * ? (in dollars) Or Contribution Margin = contribution margin percentage times X. What is X?

answer

Revenues

question

For each item below indicate the source documents that would most likely authorize the journal entry in a job-costing system. a. direct materials purchased b. direct materials used c. direct manufacturing labor

answer

a. purchase invoice b. materials requisition record c. labor time card/record

question

Stewart Company's actual manufacturing overhead is $2,800,000. Overhead is allocated on the basis of direct labor hours. The direct labor hours were 50,000 for the period. What is the manufacturing overhead rate?

answer

$56.00 2,800,000/50,000 = 56.00

question

O'Reilly Enterprises manufactures digital video equipment. For each unit $2,950 of direct material is used and there is $2,000 of direct manufacturing labor at $20 per hour. Manufacturing overhead is applied at $35 per direct manufacturing labor hour. Calculate the cost of each unit.

answer

$8,450 2,950+2,000+((2,000/20)*35)

question

Holly's Ham, Inc. sells hams during the major holiday seasons. During the current year 11,000 hams were sold resulting in $220,000 of sales revenue, $55,000 of variable costs, and $24,000 of fixed costs. Contribution margin per ham is:

answer

$15 per ham ($220,000 - $55,000) / 11,000 hams = $15 per ham

question

Management accounting information includes A) tabulated results of customer satisfaction surveys B) the cost of producing a product C) the percentage of units produced that are defective D) All of these answers are correct.

answer

D) All of these answers are correct.

question

7) Assigning direct costs to a cost object is called: A) cost allocation B) cost assignment C) cost pooling D) cost tracing

answer

D) cost tracing

question

If indirect-cost rates are calculated monthly, distortions might occur because of: A) rental costs paid monthly B) property tax payments made in July and December C) routine monthly preventive-maintenance costs that benefit future months D) Both B and C are correct.

answer

B) property tax payments made in July and December

question

In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the ________ allocated to a job. A) direct materials B) direct labor C) manufacturing overhead costs D) total costs

answer

C) manufacturing overhead costs

question

The budgeted indirect-cost rate for each cost pool is computed as A) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base. B) budgeted annual quantity of cost allocation base divided by budgeted annual indirect costs. C) actual annual indirect costs divided by budgeted annual quantity of cost allocation base. D) budgeted annual indirect costs divided by budgeted actual quantity of cost allocation base.

answer

A) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base.

question

) The person most likely to use ONLY financial accounting information is a: A) factory shift supervisor B) vice president of operations C) current shareholder D) department manager

answer

C) current shareholder

question

Cost behavior refers to: A) how costs react to a change in the level of activity B) whether a cost is incurred in a manufacturing, merchandising, or service company C) classifying costs as either inventoriable or period costs D) whether a particular expense has been ethically incurred

answer

A) how costs react to a change in the level of activity

question

In a homogeneous cost pool, all costs have a similar cause-and-effect relationship with the cost-allocation base.

answer

TRUE

question

The same cost may be direct for one cost object and indirect for another cost object. True or False

answer

True

question

The _______ of the cost is a factor in classifying the cost as a direct or indirect cost.

answer

Materiality

question

Financial acct

answer

focus on reporting to external users including investors, creditors, govnmnt agencies

question

Management acct

answer

-measures, analyzes, reports financial and nonfinancial info to help manger make decisions to fulfill org goals, answers important ?, who r our most important customers, what substitute products exist in the marketplace, how do they differ from ours, what is our critical capability, will we have enough $ to support our strategy, cost benefit approach is commonly used

question

5-step decision making process

answer

-identify the problem uncertainties, obtain information, make predictions about the future, make decisions by choosing between alternatives, implement the decision, evaluate performance & learn.

question

Strategy

answer

how an org matches its won capabilities with the opportunities in the market place to accomplish its org, creating value is an important part of planning and implementing strategy, value is the usefulness a customer gains from a company's product or service.

question

Strategic cost mngmnt

answer

focuses spec on the cost dimension writing a firms overall strategy

question

Value chain

answer

r&d, design, production, marketing, distribution, customer service-is the seq of business functions in which customer usefulness is added to products or services

question

Key success factors

answer

the dimensions of performance that customers expect, and that are key to te success of a company-cost and efficiency, quality, time, innovation

question

Planning & control systems

answer

planning select goals, predicts results, decides how to attain goals, and communicates this to the org, control-takes action that implement the planning decision, decides how to evaluate perf and provides feedback to the org.

question

Cost

answer

sacrificed resource to achieve a specific org

question

Actual cost

answer

a cost that has occurred

question

Budgeted cost

answer

a predicted cost

question

Cost obj

answer

anything of interest for which a cost is desired

question

cvp

answer

-cost volume profit-behavior of total rev, total costs, op income as changes occur in the units sold, the selling price, the var cost per unit, or the fixed costs of a product. changes in prod/sales volume are the sole cause for cost and revenue changes. total cost consist of fixed cost and variable costs. rev and costs behave and can be graphed as a linear function. selling price, var cost per unit, fixed cost are all know an constant. in many cases only a single product will be analyzed. if multiple products are studied their relations sales proportions are known and constant. time value of money is ignored. manipulation of basic equations yields and extremely important and powerful tool extensively used in cost acct: cm. cvp answer a var of what if scenarios, what happens to profit if selling price changes, volume changes, cost structure changes, vc per untit changes, fc changes.

question

criteria for evaluating alternative cost drivers

answer

Economic plausibility, goodness of fit, significance of the indep var

question

Residual term

answer

measures the distance between actual cost and estimated cost for each observation

question

goodness of fit

answer

indicated the strength of the relationship between the cost driver and cost

question

cost estimating methods

answer

industrial engineering method- figures everything out, conference method - estimating, acct analysis method-forecasting, quantitative analysis methods-high-low method and regression analysis(more accurate than h/l, is a statistical method that measures the average amount of change in the dep var associated with a unit change in one or more indep var

question

Cost accumulation

answer

a collection of cost data in an org manner

question

Cost assignment

answer

a general term that includes gathering accumulated cost to a boost obj:includes tracing accumulated costs with a direct relationship to the cost obj and allocating accumulated cost with a n indirect relationship to a cost object

question

Direct & indirect costs

answer

dc can be conveniently & economically traced(tracked) to a cost object., ic cannot be conveniently or economically traced (tracked) to a cost obj. instead of being traced these cost are allocated to a cost object in a rational and systematic manner. factors that affect cost classification: cost materiality, availability of inf-gathering technology, op design-how you allocate it out.

question

Cost behavior

answer

variable costs-total $ change in proportion with output(more output=more cost), cost pr unit unchanged in relation to output, fixed costs-total $ unchanged in relation to output, cost per unit change inversely with output(more output=lower cost per unit)

question

Cost driver

answer

a variable that costs over a given time span

question

Cost flows

answer

the COG manuf and the COGS section of the income statement are accounting representation of actual flow of cost through a production system

question

3 common features of cost accounting and cost management

answer

-calculation the cost of products, services and other cost obj-obtaining info for planning and control and performance evaluation-analyzing the relevant info for making decisions.

question

Mos

answer

margin of safety-measures the distance between budgeted sales and breakeven sales

question

ol

answer

operating leverage-fc have on changes in oi as changes occur in units sold, expressed as changes in contribution margin.

question

cost functions

answer

a mathematical rep of how a cost changes with changes in the level of an activity relation to that cost

question

variable cost

answer

that change in total in relation to some chosen activity or output

question

fixed cost

answer

costs that do not change in total in relation to some chosen activity or output

question

mixed cost

answer

costs that have both fixed and variable components, also called semi variable cost, fixed(base salary + variable commissions

question

cost function assumptions

answer

variations in the level of a single activity, the cost driver, explain the variations in the related total cost. cost behavior is approximated by a linear cost function within the relevant range.

question

linear cost function

answer

=a+bX, y-the dep variable the cost that is being predicted, a-the intercept fixed costs, b-the slope of the line variable cost per unit, X-the independent variable the cost driver.

question

criteria for classifying var and fixed components of a cost-

answer

choice of cost obj-diff obj may result in diff classification of the same cost, time horizon-the longer the period, the more likely the cost will var, relevant range-behavior is predictable only within this band of activity.

question

cause and effect as it relates to cost drivers

answer

a cf is determining whether a cause and effect relationship exist between the level of an activity and the costs related to that level of activity.

question

How does ABC implementation help a firm?

answer

Significant overhead costs allocated using one or two cost pools, most or all overhead is considered unit level, products that consume different amounts of resources, products that a firm should successfully make and sell consistently show small profits, operations staff disagreeing with accounting over manufacturing and marketing cost

question

Activity based management

answer

- a method of management that used ABC as an integral part in critical decision making situations - pricing and product mix decisions, cost reduction and process improvement decisions, design decisions, planning and managing activities

question

ABC vs. Simple Costing Schemes

answer

ABC is generally perceived to produce superior costing figures due to the use of multiple drivers across multiple levels. ABC is only as good as the drivers selected, and their actual relationship to cost. Poorly chosen drivers will produce inaccurate cost, even with ABC

question

Cost hierarchies

answer

ABC uses a 4 level cost structure to determine how far down the production cycle cost should be pushed - unit level, bath level, product or facility

question

Broad averaging

answer

to allocate costs uniformly regardless of how they are actually incurred, end result: over or undercosting

question

Overcosting

answer

a product consumes a low level of resources but is allocated high cost per unit

question

Undercosting

answer

a product consumes a high level of resources but is allocated low cost per unit

question

Cross subsidization

answer

- the results of overcosting one product and undercosting another, the overcosted product absorbs too much cost, making it seem less profitable than it really is. The undercosted product is left with too little cost, making it seem more profitable than it really is.

question

Rationale for selecting a more refined costing system

answer

increase in product diversity, increase in indirect cost, advances in information technology, competition in foreign markets

question

Cost driver

answer

is the base

question

Journal entries

answer

the purpose is to have the accounting system closely reflect the actual state of the business, its inventories, and its production processes. All product cost are accumulated in the work in process control account - direc material used, direct labor incurred and factory overhead allocated or applied.

question

Seven step job costing

answer

identify the job that is the chosen cost object. Identify the direct cost of the job. Select the cost allocation base to use for allocating indirect costs to the job. Match indirect cost to their respective cost allocation base. Calculate an overhead allocation rate (budgeted manufacturing overhead cost/budgeted total quantity of cost allocation base). Allocate overhead cost to the job (budgeted allocation rate x actual base activity for the job). Compute total job cost by adding all direct and indirect cost together.

question

Normal costing allocates

answer

indirect cost based on the budgeted indirect cost rates times the actual activity consumption

question

Actual costing allocates

answer

indirect cost based on the actual indirect cost rates times the actual activity consumption

question

Rate

answer

pool /base

question

Process costing

answer

system accounting for mass production of identical or similar products (oil refining, oj, soda pop)

question

Pool

answer

indirect- rent supervisors, utilities

question

Base

answer

material, labor

question

Cost objects

answer

including responsibility centers, department, customers, products, and so on

question

Direct cost and tracing

answer

materials and labor

question

Indirect cost and allocation

answer

overhead

question

Cost pool

answer

any logical grouping of related cost objects

question

Cost allocation base

answer

cost drive is used as a basis upon which to build a systematic method of distributing indirect costs

question

Job costing

answer

system accounting for distinct cost objects called jobs. Each job many be different from the next, and consumes different resources (wedding announcements, aircraft, advertising)

question

Which of the following is not a factor in cost volume profit analysis? 1. Units sold 2. Selling price 3. Total variable costs 4. Fixed costs of a product

answer

Total variable costs

question

Which of the following is not an assumption of cost volume profit analysis? 1. The time value of money is incorporated in the analysis 2. Costs can be classified into variable and fixed componenst 3. The behavior of revenues and expenses is accurately portrayed as linear over the relevant range 4. The number of output units is the only driver

answer

The time value of money is incorporated in the analysis

question

Contribution margin is calculated as 1. Total revenue - total fixed cost 2. Total revenue - total manufacturing cost 3. Total revenue - total variable costs 4. Operation income + total variable cost

answer

Total revenue - total variable costs

question

When the high low method is used to estimate a cost function, the variable cost per unit is found by 1. Performing regression analysis on the associated cost and cost driver database. 2. Subtracting the fixed cost per unit from the total cost per unit based on either the highest or lowest observation of the cost driver 3. Dividing the difference between the highest and lowest observations of the cost driver by the difference between costs associated with the highest and lowest observations of the cost driver 4. Dividing the difference between costs associated with the highest and lowest observations of the cost driver by the difference between the highest and lowest observations of the cost driver.

answer

Dividing the difference between costs associated with the highest and lowest observations of the cost driver by the difference between the highest and lowest observations of the cost driver.

question

In supporting manager, management accountants have four guidelines. These guidelines are: 1. Cost benefit analysis, performance reporting, behavioral considerations, and technical considerations. 2. Cost benefit analysis, behavioral considerations, technical considerations, and different cost for different purposes. 3. Financial statement preparation, technical considerations, strategic directions, and budgeting. 4. Following functional lines of authority, cost benefit analysis, behavioral considerations, and use of the value chain.

answer

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

question

Tanner Co. management desires cost information regarding their Rawhide brand. The Rawhide brand is a(n) 1. Cost object 2. Cost driver 3. Cost assignment 4. Actual cost

answer

Cost object

question

What is the total fixed cost of the shipping department of EX Mail Clothing Co. if it has the following information for 2002? • Salaries $800,000 75% of employees on guaranteed contracts • Packaging $400,000 depending on size of items shipped • Postage $500,000 depending on weight of items shipped • Rent of warehouse $250,000 annual lease 1. $850,000 2. $900,000 3. $1,050,000 4. $1,950,000

answer

$850,000

midterm cost acct columbia college

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