Accounting Test #2

Front 1

Job Costing

Back 1

A costing system that accumulates, tracks, and assigns costs for each job produced by a company

Front 2

Process Costing

Back 2

A costing system that accumulates and tracks costs for each process performed and then assigns those costs equally to each unit produced

Front 3

Normal Spoilage

Back 3

Spoilage resulting from the regular operations of the production process

Front 4

Operations Costing

Back 4

A hybrid of job and process costing; used by companies that make products in batches

Front 5

Abnormal Spoilage

Back 5

Spoilage resulting from unusual circumstances, including improper handling, poorly trained employees, faulty equipment, and so on

Front 6

Fringe Benefits

Back 6

Payroll costs in addition to the basic hourly wage

Front 7

Idle Time

Back 7

Worker time that is not used in the production of the finished product

Front 8

Overtime Premium

Back 8

An additional amount added to the basic hourly wage owing to overtime worked by the workers

Front 9

Allocation

Back 9

The process of finding a logical method of assigning overhead costs to the products or services a company produces or provides

Front 10

Cost Drivers

Back 10

Factors that cause, or drive, the incurrence of costs

Front 11

Cost Pools

Back 11

Groups of overhead costs that are similar; used to simplify the task of assigning costs to products using ABC costing

Front 12

Normal Costing

Back 12

A method of costing using an estimate of overhead and predetermined overhead rates instead of the actual amount of overhead

Front 13

Predetermined Overhead Rates

Back 13

Used to apply overhead to products; calculated by dividing the estimated overhead for a cost pool by the estimated units of the cost driver

Front 14

Overapplied Overhead

Back 14

The amount of applied overhead in excess of actual overhead

Front 15

Underapplied Overhead

Back 15

The amount of actual overhead in excess of applied overhead

Front 16

Equivalent Units

Back 16

The number of finished units that can be made from the materials, labor, and overhead included in partially completed units.

Front 17

Unit-Level Costs

Back 17

Costs that are incurred each time a unit is produced

Front 18

Batch-Level Costs

Back 18

Costs that are incurred each time a batch of goods is produced

Front 19

Product-Level Costs

Back 19

Costs that are incurred as needed to support the production of each type of product

Front 20

Facility-Level Costs

Back 20

Costs that are incurred to sustain the overall manufacturing process

Front 21

Activity-Based Costing (ABC)

Back 21

A system of allocating overhead costs that assumes that activities, not volume of production, cause overhead costs to be incurred

Front 22

Activities

Back 22

Procedures or processes that cause work to be accomplished

Front 23

Diverse Products

Back 23

Products that consume resources in different proportions

Front 24

Backflush Costing

Back 24

A costing system in which manufacturing costs are directly flushed into cost of goods sold instead of flowing through inventory

Front 25

Direct Method

Back 25

A method of allocating service department costs that allocates costs directly to production departments

Front 26

Step-Down or Sequential Method

Back 26

Recognizes that service departments consume resources of other service departments and allocates those costs to other service departments and then to production departments in a sequential fashion

Front 27

Budgets

Back 27

Plans dealing with the acquisition and use of resources over a specified time period

Front 28

Planning

Back 28

The cornerstone of good management; involves developing objectives and goals for the organization, as well as the actual preparation of budgets

Front 29

Operating

Back 29

Involves day-to-day decision making by managers, which is often facilitated by budgeting

Front 30

Control

Back 30

Involves ensuring that the objectives and goals developed by the organization are being attained; often involves a comparison of budgets to actual performance and the use of budgets for performance evaluation purposes

Front 31

Zero-Based Budgeting

Back 31

Requires managers to build budgets from the ground up each year

Front 32

Participatory Budgeting

Back 32

A budgeting process that starts with departmental managers and flows up through middle management and then to top management. Each new level of management has responsibility for reviewing and negotiating any changes in the proposed budget

Front 33

Master Budget

Back 33

Consists of an interrelated set of budgets prepared by a business

Front 34

Sales Forecast

Back 34

Combines with the sales budget to form the starting points in the preparation of production budgets for manufacturing companies, purchases budgets for merchandising companies, and labor budgets for service companies

Front 35

Sales Budget

Back 35

Used in planning the cash needs for manufacturing, merchandising, and service companies

Front 36

Operating Budgets

Back 36

Used to plan for the short term (typically one year or less)

Front 37

Production Budget

Back 37

Used to forecast how many units of product to produce in order to meet the sales projections

Front 38

Material Purchases Budget

Back 38

Used to project the dollar amount of raw materials purchased for production

Front 39

Direct Labor Budget

Back 39

Used to project the dollar amount of direct labor cost needed for production

Front 40

Manufacturing Overhead Budget

Back 40

Used to project the dollar amount of manufacturing overhead needed for production

Front 41

Cash Receipts Budget

Back 41

Used to project the amount of cash expected to be received from sales and cash collections from customers

Front 42

Cash Disbursements Budget

Back 42

Used to project the amount of cash to be disbursed during the budget period

Front 43

Summary Cash Budget

Back 43

Consists of three sections: (1) cash flows from operating activities, (2) cash flows from investing activities, (3) cash flows from financing activities; these three sections are the same as those used in the cash flow statement prepared under GAAP

Front 44

Pro Forma Financial Statements

Back 44

Budgeted financial statements that are sometimes used for internal planning purposes, but more often are used by external use

Front 45

Static Budgets

Back 45

Budgets that are set at the beginning of the period and remain constant throughout the budget period

Front 46

Flexible Budgets

Back 46

Budgets that take differences in spending owing to volume differences out of the analysis by budgeting for labor (and other costs) based on the ACTUAL number of units produced

Front 47

Control

Back 47

Involves the motivation and monitoring of employees and the evaluation of people and other resources used in the operations of the organization

Front 48

Variance Analysis

Back 48

Allows managers to see whether sales, production, and manufacturing costs are higher or lower than planned and, more important, WHY actual sales, production, and costs differ from budget

Front 49

Management By Exception

Back 49

The process of taking action only when actual results deviate significantly from planned results

Front 50

Standard Cost

Back 50

A budget for a single unit of product or service

Front 51

Standard Quantity

Back 51

The budgeted amount of materials, labor, or overhead for each product

Front 52

Standard Price

Back 52

The budgeted price of the materials, labor, or overhead for each unit

Front 53

Task Analysis

Back 53

A method of setting standards that also examines the production process in detail to determine what it should cost to produce a product

Front 54

Ideal Standard

Back 54

A standard that is attained only when near-perfect conditions are present

Front 55

Practical Standard

Back 55

A standard that should be attained under normal, efficient operating conditions

Front 56

Sales Volume Variance

Back 56

The difference between the actual sales volume and budgeted sales volume times the budgeted contribution margin

Front 57

Flexible Budget Variance

Back 57

The difference between the flexible budget operating income and actual operating income

Front 58

Sales Price Variance

Back 58

The difference between the actual sales price and the flexible budget sales price times the actual sales volume

Front 59

Price Variance

Back 59

The difference between the actual price and the standard price times the actual volume produced

Front 60

Usage Variance

Back 60

The difference between the actual quantity and the standard quantity times the standard price

Front 61

Budget Variance

Back 61

The difference between the amount of fixed overhead actually incurred and the flexible budget amount; also known as the spending variance

Front 62

Volume Variance

Back 62

The difference between the flexible budget amount and the fixed overhead applied to products