ACC 200 Lecture Notes - Lecture 4: Cost Driver, Financial Statement

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purplewater-buffalo170

17 Nov 2017

School

NCSU

Department

Accounting

Course

ACC 200

Professor

Christopher Tague Mc Kittrick

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Document Summary

Comparison of methods for separating mixed costs into fixed and variable components. Companies can be divided into two major types. If a company"s products/ services are unique, they require a job-order accounting system. On the other hand, those firms producing similar products or services can use a process-costing accounting system. Customized or built-to-order products fit into this category, as do services that vary from customer to customer. A job is one distinct unit or set of units. Examples: printing, construction, furniture making, medical and dental services, automobile repair, and beautician services. For job-order production systems, costs are accumulated by job. This approach to assigning costs is called a job-order costing system. Firms in process industries mass-produce large quantities of similar or homogeneous products. Process firms accumulate production costs by process or by department for a given period of time. This approach to cost accumulation is known as a process-costing system. Unit costs are measured using the following equation:

Related Questions

I. The basic parts of a joborder costing system are the:

A. Cost______________ and _________________ procedures.

B. ____________________ documents.

C. Accountsthat a company uses when it incurs costs for direct ____________,direct ________________, and ___________________.

II. Accounting for materialsrequires three types of entries.

A. With the ______________ of materials,debit Materials Inventory and credit Accounts Payable.

B. With the _______________ of directmaterials to ________________, debit Work in Process Inventory andcredit Materials Inventory.

C. With the transfer of__________________ materials to production, debit Overhead andcredit Materials Inventory.

III. Accounting for labor requirestwo types of entries.

A. For payroll costs incurred for_____________ labor, debit Work in Process Inventory and creditPayroll Payable.

B. For payroll costs incurred for_______________ labor, debit Overhead and credit PayrollPayable.

IV. Accounting for other overhead requires twotypes of entries.

A. Other overhead includes plant____________, property _____________, insurance, and_______________.

B. To record _____________ overhead costs,debit Overhead and credit Cash or Accumulated Depreciation.

C. To record _____________ overheadcosts, debit Work in Process Inventory and credit Overhead.

D. The actual (debits) and estimated(credits) overhead costs are ________________ at the end of theperiod to determine the accuracy of overhead costrecognition.

V. To recordthe transfer of ________________ units, debit Finished GoodsInventory and credit Work in Process Inventory.

VI. When a companyuses a perpetual inventory system, two accounting entries are madewhen products are sold.

A. To record the sold productâs________________, debit Accounts Receivable (or Cash) and creditSales.

B. To record the sold productâsassociated ____________, debit Cost of Goods Sold and creditFinished Goods Inventory.

VII. Each job in production has a job order_________________.

A. Hasspace for direct materials, direct labor, and overhead costs.

B. Includesthe job order number, product specifications, customer name, dateof order, projected completion date, and a cost summary.

C. Forincomplete jobs, they make up the _______________ ledger for theWork in Process Inventory account.

D. When ajob is completed, the costs are totaled on the_____________________.

1. Unit cost is computed to_____________ items in inventory.

2. Product ___________Cost = Total Costs for Job Ã· Number of Good Units Produced

VIII. Job order costing systems are also used in______________ organizations.

A. Job ordercost cards track ________________ contracts.

IX. Overhead costs are allocated in foursteps.

A. Step 1: _____________ the overheadrate.

1. A ________________ overheadrate is calculated as estimated overhead costs divided by estimatedcost driver activity.

B. Step 2:______________ the overhead rate.

1. Costs are assigned by multiplyingthe actual cost _____________ activity by the predeterminedoverhead rate.

C. Step 3:Record ________________ overhead costs

D. Step 4:_________________ applied and actual overhead amounts

1. Ifover- or underapplied amounts are minimal, credit or debit_________________.

2. Ifover- or underapplied amounts are material, adjustments should bemade to the inventory accounts affected.

X. The__________________ approach to applying overhead costs is to use asingle plantwide rate.

XI. The moreaccurate _____________________ approach to applying overhead costscreates many smaller activity pools and establishes separate ratesfor each pool.

carminewhale946

1. A cost pool is :

A. a collection of homogeneous cost to be assigned.

B. almost always the combined result of decision made bydifferent responsibility center manager.

C. The primary function of a responsibility accountingsystem.

D. the amount of cost that has been allocated say, 10% to a userdepartment.

E. The tool used to allocate cost dollars to userdepartments.

2.Variable costs are those costs that:

A. vary (in total ) inversely with changes in activity.

B. vary (in totals) directly with in activity.

C. remain constant (in total) as activity changes.

D. Decrease on a per unit basis as activity increase.

E. Increase on a per unit basis as activity increases.

3. When comparing EOQ and JIT inventory system, which of thefollowing statement is false?

A. The EOQ approach takes the viewpoint that some inventory isnecessary.

B. The EOQ system assumes a constant order quantity.

C. JIT argues that inventory investments should beminimized.

D. The EOQ system focuse on acquistion and holding costs.

E. JIT argues that safety stocks are necessary to reduce theprobability of a stock shortage.

4. Procust costing in manufacturing firm is the process of:

A. Accumulating the company 's period costs

B. Allocating costs among the firm departments.

C. Placing a value on the company's fixed assets.

D. Assigning cost to the firm's inventory.

E. Assinging costs to the comapny's managers.

5.Decentralized firms can delegate authority by structuring anorganization into responsibility centers. Which of the followingorganizational segments is most like a totally independent,standalone business where managers are expected to "make it on theown?

A. Cost center

B. Revenue Center

C. Profit Center

D. Investment center

E. Contribution center

6. Costs that are expensed when incurred are called:

A. Product costs

B. Direct Costs

C. Inventoriable Cost

D. Period Cost

E. Indirect costs

7. A budget serves as a benchmark against which:

A. Actual result can be compared

B. Allocated results can be compared

C. actual result be inconsequential

D. Alloated results become inconsequential.

E. Cash balances can be compared to expense totals.

8. Activity based costing system.

A. use a single volume based cost driver.

B. Assign overhead to product based on the products' relativeusage of direct labor.

C. often reveal products that were under or over costed bytraditional costing.

D. Typically use fewer cost driver than more traditional costingsystem.

E . Have a tendency to distort product costs/

9.The point in a joint production process where each individualproduct becomes separately identifiable is commonly called the:

A. Decision point

B. Separation point

C. Individual product point

D. Split-off point

E. Joint product point.

10.The RIO calculation will indicate:

A. the percentage of each sale dollar that is invested inassets.

B. The sale dollars generated from each dollar of income.

C.How effectively a company used its invested capital

D. the invested capital generated from each dollar of income

E. the overall quality of the company's earnings.

burgundyrhinoceros92

Need Answers and why:

12. _____ is an example of a monetary incentiveused to control a manager's tendency to shirk and wasteresources.

a. A recognition program

b. Job enrichment

c. A promotion

13. Which of the following is true ofparticipative budgeting?

a. It imposes budgets on subordinate managers.

b. It fosters a sense of responsibility among managers.

d. It discourages creativity.

14. In March, Burlywood had the followingresults:

Production:

Units in process, March 1, 80% complete	36,000 units
Units completed and transferred out	120,000 units
Units in process, March 31, 40% complete	44,500 units
Costs:
Work in process, March 1	$11,600
Costs added during March	$32,000

Determine the total cost to be assigned using the first-in,first-out costing method.

a. $55,200

c. $48,080

d. $52,320

9. In cost-volume-profit analysis, amultiple-product problem is converted into a single-product problemby:

a. determining the sales prices.

b. defining the features of the products.

c. determining the unit variable cost.

d. defining a particular sales mix inunits.

13. Which of the following is true ofsensitivity analysis?

a. It allows managers to vary costs, prices, and salesmix to show various possible break-even points.

b. It can be performed only when managers have accurate dataabout financial forecasts.

c. It provides accurate data about sales, contribution margin,and operating income without ambiguity.

d. It can be easily performed on hand with limited knowledge ofrevenue and cost systems.

1.Decisions that involve choosing betweendifferent alternatives that attempt to provide a competitiveadvantage over a particular time frame are called:

b. strategic decisions.

c. relevant decisions.

d. short-term decisions.

4. Which of the following is an example of adirect fixed cost?

a. Cost of a mold for a product

c. Cost of printing annual reports

d. Salary of a receptionist

10. Which of the following is true of targetpricing?

a. It aims to increase cost on redesigning the product duringthe production stage.

b. It requires the use of fewer materials, labor, and processesduring production, delivery and customer service.

c. It recognizes that only 50% of a product's cost becomescommitted by the time it reaches the design stage.

Budgets can be improved as performance measures by:

a. holding managers accountable for noncontrollable costs.

b. using fixed budgeting.

c. setting standards that are either too high or too low.

d. using participative budgeting.

_____ are an example of nonmonetary incentives used to enhance abudgetary control system.

a. Bonuses paid to managers

b. Salary increases to workers

c. Recognition programs

d. Promotions offered to supervisors

ACC 200 Lecture Notes - Lecture 4: Cost Driver, Financial Statement

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