Accounting 2 Exam 3

44 terms by laurenarzbecker 

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conversion costs

the direct labor and overhead costs associated with converting direct materials into the units transferred out

cost accounting systems

the method and techniques used by enterprises to track resources consumed in creating and delivering products and services to customers

equivalent units

a measure of the work done during an accounting period. includes work done on beginning and ending inventories of work in process as well as work on units completely processed during the period

job order costing

a cost accounting method under which the focal point of costing is a quantity of product known as a job of a lot. costs of direct materials, direct labor, and overhead applicable to each job are complied to arrive as average unit costs

process costing

a cost accounting method used in enterprises with process characterized by continuous mass production. costs are assigned to a manufacturing process or department before being averaged over units produced

production cost report

a detailed production report for a specified process and time period that details
1. the physical flow
2. equivalent units
3. cost per equivalent unit
4. total costs assigned

activity-based management

the process of using activity-based costs to help reduce and eliminate non-value added activities

cycle time

the length of time for a product to pass completely through a specific manufacturing process or the manufacturing process viewed as a whole. used as a measure of efficiency in JIT systems

just-in-time manufacturing system JIT

an approach to manufacturing that reduces or eliminates non-value added activities, such as maintenance of inventories. focuses on both efficiency and product quality

life-cycle costing

the consideration of all potential resources consumed by the product over its entire life. it is an important part of the target costing process where target costing teams estimate all potential costs to the customer over the product's life

manufacturing efficiency ratio

processing time stated as a percentage of cycle time
used a measure of efficiency in JIT systems

non-value added activity

an activity within the value chain that does not make the product or service more valuable to the customer

target costing

a business process aimed at the earliest stages of new production and service development, before creation and design or product methods. it is a process driven by the customer, focused on design, and encompassing the entire life of the product

total quality management TQM

an approach to eliminating wasteful activities and improving quality throughout the value chain by assigning quality management responsibility, monitoring quality costs, and rewarding low-cost, high-quality results

value-added activity

an activity within the value chain that makes the product or service more valuable to the customer

value chain

the set of activities necessary to create and distribute a desirable product or service to a customer

value engineering

the methods used by engineers and production personnel to determine the least costly combination of resources to create a product desired by the customer

complementary products

those products for which the sales of one may contribute to the sales of another

incremental (or differential) cost

the increase or decrease in total costs incurred by selecting one course of action over another

incremental (or differential) revenue

the increase or decrease in total revenue earned by selecting one course of action over another

joint costs

costs incurred in manufacturing processes that produce several different products
these costs cannot be traced directly to the individual types of products manufactured and, therefore, must be allocated in a more or less arbitrary manner

joint products

products that share, in part, common materials and production processes

opportunity cost

the benefit forgone by nor pursing an alternative course of action
not recorded in the accounting records but are an important part in making many types of business decisions

out-of-pocket costs

costs that have not yet been incurred and that may vary among alternative courses of action

split-off point

the point at which separate and distinct joint products emerge from common materials and a shared production process

sunk cost

a cost that has been incurred as a result of past actions
are irrelevant to decisions involving future actions

out-of-pocket costs

cots that have not yet been incurred and may vary among different courses of action

split-off point

the point at which joint products can be separated into 2 or more products

false

a sunk cost is an expenditure that has proven to be nonproductive (T/F)

false

opportunity costs are recorded in the accounting records (T/F)

false

sunk costs are relevant to decisions about replacing plant assets (T/F)

true

all incremental revenue and costs are relevant (T/F)

process costing

repetitive operations
identical products
high production volume
low product flexibility
high standardization of labor and material

Equivalent units of production

a measure representing the % of a unit's cost that has been completed
may be computed separately for each input added during production
may be assigned to beginning WIP or ending WIP

DM, DL, overhead

equivalent units are computed for...

# of equivalent units

may be less than, equal to, or greater than the number of physical units completed during the period

conversion costs

DL and overhead
so can be transferred out of WIP

false

If there is no over or under applied overhead, equivalent units of production will equal the exact number of units actually produced (T/F)

true

the process of using ABC to help reduce and eliminate non-value added activities is activity-based management (T/F)

target cost

target price - profit margin

true

non-value added activities do no directly increase the worth of a product to a customer (T/F)

target cost

directed toward the creation and design of products that will provide adequate profits

value-added time/cycle time

manufacturing efficiency ratio

cycle time

processing time
storage and waiting time
movement time
inspection time

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