Accounting 2 Exam 3

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
a sunk cost is an expenditure that has proven to be nonproductive (T/F)
opportunity costs are recorded in the accounting records (T/F)
sunk costs are relevant to decisions about replacing plant assets (T/F)
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
If there is no over or under applied overhead, equivalent units of production will equal the exact number of units actually produced (T/F)
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
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