Accounting 272 Midterm

Front 1

External Failure Costs

Back 1

Customers find & you fix.

Front 2

Internal Failure Costs

Back 2

The company finds & fixes problem.

Front 3

Appraisal Costs

Back 3

Finding the erros

Front 4

Prevention Costs

Back 4

Keeping errors from occuring.

Front 5

Fixed Costs

Back 5

Constant in total

Front 6

Variable Costs

Back 6

Constant per unit.

Front 7

Direct Labor

Back 7

Can be traced back to the cost object.

Front 8

Indirect Labor

Back 8

Cannot be traced back to the cost object.

Front 9

Direct Costs

Back 9

Will be variable based on cost objects.

Front 10

Direct Materials

Back 10

Easy to physically trace to the final product

Front 11

Direct Labor

Back 11

Workers on the assembly line

Front 12

Manufacturing Overhead

Back 12

Includes Indirect materials, indirect labor, other indirect costs.

Front 13

Indirect materials examples

Back 13

supplies maintenance supplies, glue, etc.

Front 14

Indirect Labor examples

Back 14

Supervisors, security guards, maintenance workers, quality control, janitors.

Front 15

Other Indirect Cost Examples

Back 15

Depreciation OF FACTORY, patents, utilities, insurance, property tax OF FACTORY

Front 16

Manufacturing Overhead Rate Equation

Back 16

Estimated (Budgeted) MO / Estimated (Budgeted) Activity Choice

Front 17

Typical Cost Driver Choices

Back 17

- Direct labor hours
- Direct labor dollars
- Machine hours
- Machine dollars

Front 18

Applied MOH Equation

Back 18

MOH Rate * Actual Amount of Cost Drive Incurred

Front 19

Actual MOH > Applied MOH

Back 19

Under Applied MOH

Front 20

Actual MOH < Applied MOH

Back 20

Over Applied MOH

Front 21

Committed Fixed Costs

Back 21

Are long term in nature. Ex: investments in long term assets.

Front 22

Discretionary Fixed Costs

Back 22

Short term in nature, can be reduced in the short term with minimal damage to the business.

Front 23

Margin of Safety in Dollars

Back 23

Actual Sales Dollars - Break Even Sales Dollars

Front 24

Margin of Safety Ratio

Back 24

Margin of Safety Dollars / Actual Sales Dollars

Front 25

Net Income

Back 25

Sales - VC - FC


(Salespriceperunit x q) - (VCperunit x q) - (TFC)

Front 26

Break Even Point where...

Back 26

Contribution Margin = Fixed Costs

Front 27

Contribution Margin

Back 27

Sales - Variable Costs

Front 28

Contribution Margin

Back 28

Contribution Margin / Sales Dollars

Front 29

Contribution Margin Per Unit

Back 29

Sales price per unit - VC per unit

Front 30

Break Even in Sales Dollars

Back 30

Fixed Costs / CM Ratio

Front 31

Breakeven in Units

Back 31

Fixed Costs / CM per unit

Front 32

Degrees of Operating Leverage

Back 32

Contribution Margin / Net Income

Front 33

Raw Materials

Back 33

Materials that go into the final product.

Front 34

Direct Materials

Back 34

Materials that become an integral part of the finished product and whose costs can be conveniently traced back to the finished product.

Front 35

Direct Labor

Back 35

Labor costs that be easily traced individual units of product, sometimes called touch labor.

Front 36

Three elements of manufacturing cost

Back 36

- Direct Labor
- Direct Materials
- MOH

Front 37

Selling cost

Back 37

Costs that are incurred to secure customer orders and get finished products to the customer.

Front 38

Selling Cost Examples

Back 38

Advertising, shipping, sales travel, sales commissions, sales salaries, costs of finished goods warehouses.

Front 39

Administrative Costs

Back 39

All executive, organizational, or clerical costs associated with general management.

Front 40

Examples of Admin Costs

Back 40

Executive compensation, general accounting, secretarial, public relations,.

Front 41

Matching Principle

Back 41

Based on the accrual concept that costs incurred to generate particular revenue should be recognized as expenses in the same period that revenue is recognized.

Front 42

Product Costs

Back 42

Include all the costs involved in acquiring or making a product.

Front 43

Period Cost Examples

Back 43

Selling and Administrative Costs

Front 44

Prime Cost

Back 44

Direct Materials Cost + Direct Labor Cost

Front 45

Conversion Cost

Back 45

Direct Labor Cost + MOH

Front 46

Work in Progress

Back 46

Consists of units of product that are only partially complete and will require further work before they are ready for sale.

Front 47

Finished Goods

Back 47

Consits of completed units of product that have not yet been sold to customers.

Front 48

Net Operating Income Equation

Back 48

NOI = Sales - COGS - Selling and Admin costs.

Front 49

Relevant Range

Back 49

Range of activity within which the assumptions about variable and fixed costs are valid.

Front 50

Sunk Cost

Back 50

A cost that has already been incurred.

Front 51

Prevention Costs

Back 51

Support activities whose purpose is to reduce the number of defects.

Front 52

Appraisal Costs

Back 52

Sometimes called inspection costs, are incurred to identify defective products BEFORE they are shipped to customers.

Front 53

Internal Failure Costs

Back 53

Results from identifying defects before they are shipped to the customrs.

Front 54

External Failure Costs

Back 54

Results when a defective product is delivered to a customer.

Front 55

Process Costing System

Back 55

Used in situations where the company produces many units of a single product for a long time period (oreos)

Front 56

Job-order costing

Back 56

Used in situations where many DIFFERENT products are produced in each period. Also, used extensively in the service industry (hospitals, law firms, movie studios, repair shops).

Front 57

Materials Requisition Form

Back 57

Detailed sorce document that specifies the type and quantity of materials to be drawn from the storeroom.

Front 58

Allocation Base

Back 58

The same thing as a cost driver, measure such as DLH or MH that is used to assign overhead costs to products and services.

Front 59

High Low Method

Back 59

CHANGE IN COST HIGH-LOW / CHANGE IN QUANTITY HIGH-LOW

Front 60

Unit Sales to Attain Target Profit

Back 60

Fixed Expenses + Target Profit / CM Per Unit

Front 61

Unit Level Activities

Back 61

performed each time a unit is producd. the costs of unit-level activities should be proportinal to the number of units producd. for example providing power to run processing equipment would be a unit level activity since power tends to be consumed in proportion to the number of units produced.

Front 62

Batch Level Activities

Back 62

performed each time a batch is handled or processed, regardless of how many units are in the batch. For example, tasks such as placing pruchase orders, setting up equipment, and arranging shipments are batch leve.

Front 63

Product Level Activitie

Back 63

relate to specific products and typically are carried out regardless of how many batches or units are produced. Examples are designing a product, advertising a product, maintaining a product manager and staff.

Front 64

Customer Level Activities

Back 64

Relate to specific customer and include activities such as sales calls, catalog mailings, and general technical support that are not tied to specific products.

Front 65

Orgaization Sustaining Activities

Back 65

Carried out regardless of which customers are served, which products are produced, how many batches, etc.

Front 66

Sunk Cost

Back 66

A cost that has already been incurred and that cannot be changed by any decision made now or in the future.

Front 67

Opportunity Cost

Back 67

The potential benefit that is given up when one alternative is selected over another.

Front 68

Differential Cost

Back 68

A difference in cost between two alternatives.

Front 69

Net Income

Back 69

Quantity * CM - FC = NI