Cost Accounting - Final Exam (06/11/2013)

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Review Questions for my Final.

What should Materials be categorized as in financial statements?

Assets.

Conversion Cost:

Cost of Direct Labor
+ Factory Overhead
= Conversion Cost
(which is necessary to Convert the Direct Materials into Finished Goods)

Order Point:

Daily Usage * Lead Time
+ Safety Stock Required
= Order Point
(point at which an item should be ordered)

Cost Per Unit:

Cost of Direct Materials
+ Cost of Direct Labor
+ Factory Overhead
= Total Manufacturing Cost
/ Number of Units Produced
= Cost Per Unit

Annual Order Cost:

Number of Orders * Cost of Ordering
= Annual Order Cost
(# of orders = annual demand / order quantity)

Economic Order Quantity (EOQ):

Square Root of
2 Cost of Placing an Order (C) Number of Units Required Annually (N)
/ Annual Carrying Cost Per Unit of Inventory (K)
= Economic Order Quantity (EOQ)

What is the First -In, First -Out (FIFO) Method?

The First -In, First -Out (FIFO) Method assumes that Materials Issued are taken from the Oldest Materials in stock so the Materials are Costed at the Prices Paid for the Oldest Materials.

What inventory method results in the most recent costs being assigned to the inventory on hand at the end of the period?

FIFO, First -In, First -Out.

What is a Make -Up Guarantee?

The amount paid to Employees under a Modified Wage Plan when the Established Production Quotas aren't met during a Work Period.

An Accrued Expense, such as Wages Payable, can best be described as an amount that is _____.

Not Paid Yet and Currently Matched With Earnings.

What is the High -Low Method?

The High -Low Method compares a High Production Volume and its related cost to a Low Production Volume with its related cost.

Least -Squares Regression Method:

Y = a + bX:
Total Semivariable Cost (Y)
= Total Fixed Cost (a)
+ Variable Cost Per Unit (b) * Activity Level (X)
(uses all of the data to separate a semivariable cost into its fixed and variable elements)

A Manufacturer is _____.

The business that converts purchased raw materials into finished goods by using labor, technology, and facilities.

What are Direct Materials (DM)?

Materials used in the Manufacturing Process that become a significant part of the Finished Goods.

What is Direct Labor (DL)?

Cost of Personnel who Work Directly with the Raw Materials Converting them to Finished Goods.

Are the wages paid to a Plant Mechanic to Repair Equipment Direct or Indirect Labor?

Indirect Labor.

Is the Depreciation on a Factory Building a Direct or Indirect Material?

Indirect Material.

The best way to allocate factory building rent to specific departments would be the ____.

Square footage of each department.

What are the 3 Types of Inventory?

Raw Materials, Work -In -Process, and Finished Goods.

Manufacturing Cost of Goods Sold:

Beginning Finished Goods
+ Cost of Goods Manufactured
= Finished Goods Available for Sale
- Ending Finished Goods
= Cost of Goods Sold

Prime Cost refers to _____.

The sum of direct material costs and direct labor costs.

Net Operating Income:

Total Revenues (Net Sales)
- Cost of Goods Sold
= Gross Profit
- Operating Expenses
= Net Income from Operations

In a factory all of the following are considered service departments EXCEPT: (Inspection and packing, Assembly, Power, Human resources)

Assembly.

Which of the following is most likely to be considered a service department in a manufacturing plant? (Assembly, Maintenance, Finishing, Fabrication)

Maintenance.

Examples of Service Businesses Include ____.

Airlines, architects, and hair stylists.

Factory Overhead includes ____.

All manufacturing costs, except direct materials and direct labor.

Overapplied Overhead always results when a predetermined Factory Overhead Rate is Employed and when ____.

Overhead Incurred is Less Than Overhead Applied.

When preparing a flexible budget for factory overhead costs, what will happen to fixed costs (on per-unit basis) as production increases?

Fixed costs per unit will decrease.

If the amount of Overtime Premium is to be charged to all jobs worked on during the period because of random scheduling of jobs, the debit will be to _____.

Factory Overhead Account.

How should Idle Time be treated?

It should be recorded, along with the reason for it, and charged to Factory Overhead.

Which of the following costs would be included in Factory Overhead in the manufacture of a student's desk? (Wages of operator of machine that bends the metal legs, Wages of forklift operator who moves finished desks to finished goods warehouse, Cost of plastic used to form writing surface, Wages of worker who assembles components)

The wages of the Forklift Operator who moves finished desks to the finished goods warehouse.

Which of the following costs would NOT be included in Factory Overhead in the manufacture of a student's desk? (Oil used to maintain machinery, Salary of supervisor of the Assembly department, Metal used to form legs of desk, Wages of personnel who perform inspections of incoming materials)

The metal used to form the legs of the desk.

Fixed Overhead Costs includes all of the following EXCEPT: (Electricity to heat and light factory, Depreciation on machinery based on units of production basis, Plant manager's salary, Salary of security guard at the front door)

Depreciation on Machinery Computed Based on the Units of Production Basis.

Variable Overhead Costs include all of the following EXCEPT: (Electricity to power machinery, Factory supplies, Rental of factory building, Small tools)

Rental of Factory Building.

What about semivariable costs is NOT true?

They vary in direct proportion to volume changes.

Inventory Accounts for a Manufacturer include all of the following EXCEPT: (Merchandise Inventory, Finished Goods, Work In Process, Materials)

Merchandise Inventory.

What is the appropriate Cost Accounting System to use when Inventory Items are Produced on an Assembly Line?

Process Costing.

How are Costs Accounted for in Process Costing?

Job.

Which of the following characteristics applies to Process Costing? (Differentiated products are provided on a special order basis, Costs are accumulated by department, Costs are accumulated by jobs, Direct labor workers must keep records of which jobs they worked)

Costs are Accumulated by Department.

When should Process Costing techniques be used to Assign Costs to Products?

If the Product is composed of Mass -Produced Homogeneous ( similar) Units.

Which of the following is NOT a duty of the Cost Accountant in a Process Cost System? (Estimating stage of completion of in-process units, Collecting periodic production costs, Preparing journal entries to record factory operations, Computing amount of equivalent units)

Estimating the Stage of Completion of In -Process Units at the end of the month.

What are Transferred -In Costs, as used in a Process Cost Accounting System?

Costs that have been Incurred in a Prior Department on Units that have been moved into a Subsequent Department.

In what Department is Work Performed Directly on the Product?

Production Department.

What Department Assists Producing Departments?

Service Department.

What is the form prepared by the purchasing agent and sent to the vendor to obtain materials?

The Purchase Order.

What does Just In Time (JIT) Manufacturing emphasize?

Continuous Improvement, Elimination of Waste, and Reduction of Work -In -Process Inventories.

Where is an analysis of Total Labor Costs into Work In Process and Factory Overhead Components recorded?

Labor Cost Summary.

What is the wage plan based only on an employee's quantity of production?

Piece -Rate Plan.

The number of Whole Units that could've been completed in a period, using the Production Costs Incurred during that period is called _____.

Equivalent Production.

In what terms does Equivalent Units express all activity of the period?

Fully Completed Units.

What system would a Manufacturer of unique Special Orders or Batch Processes most likely use to Accumulate Cost?

Job -Order Costing.

When Products and their Cost are moved from One Process to the Next Process, these Costs are referred to as ____.

Transferred -In Costs.

The personnel involved in the physical control of materials includes all of the following EXCEPT: (Purchasing agent, Receiving clerk, Cost accountant, Production department supervisor)

Cost Accountant.

Aaron is the supervisor of the Machining Department of Bennett Corporation. He controls and is responsible for manufacturing cost traced to the department. The Machining Department is an example of ____.

A Cost Center.

Unit Cost Information is important for making all of the following marketing decisions EXCEPT: (Determining selling price of product, Bidding on contracts, Determining amount of advertising needed to promote product, Determining amount of profit each product earns)

Determining the amount of advertising needed to promote the product.

What best describes a characteristic of a performance report prepared for use by a production line department head?

The costs in the report should include only those controllable by the department head.

Resulting from recent accounting scandals involving Enron and World Com, the Sarbanes -Oxley Act of 2002 was written to protect shareholders of public companies by improving _____.

Corporate Governance.

How is Cost Accounting different from Financial Accounting?

Financial Accounting is mostly concerned with external financial reporting.

What should an effective Cost Control System include?

An established plan of objectives and goals to be achieved, regular reports showing the difference between goals and actual performance, and specific assignment of duties and responsibilities.

What is a Cost Driver?

The estimated cost of each activity pool.

All of the following can be included in the Cost of a Product located in the Final Production Department of a Multi -Step Process EXCEPT: (Costs of materials, labor, and overhead identifiable with that department, Marketing and distribution costs, Costs of service departments allocated to production departments, Costs of prior production departments)

Marketing and Distribution Costs.

Joint Costs are commonly allocated based upon relative ____.

Sales Value.

What is Control defined as?

The Process of setting Standards, Receiving Feedback on Actual Performance, and taking Corrective Action whenever Actual Performance Deviates Significantly from Plan.

____ is the Delegation of Decision -Making Authority to Lower Managements Levels in an Organization.

Decentralization.

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