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55 Cards in this Set
- Front
- Back
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WHAT ARE THE SIX USES OF COST ACCOUNTING?
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1) MONITOR PROGRAM ECONOMY, EFFICIENCY, AND EFFECTIVENESS
2) PROGRAM EVALUATION 3) DEVELOP USER FEES 4) BUDGET AND COST CONTROL 5) COST REIMBURSEMENT 6) MAKING ECONOMIC CHOICES |
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HOW DO THE GOVERNMENT AND COMMERCIAL SECTOR DIFFER IN HOW THEY USE COST ACCOUNTING INFORMATION?
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COMMERCIAL ENTITIES- USE COST INFO TO TRACK PROFITS AND EFFICIENCIES OF PRODUCTION IN AN EFFORT TO MAXIMIZE EARNINGS POTENTIAL
GOVT- USES COST INFO FOR 1)MONITORING PROGRAM ECONOMY, EFFICIENCY, AND EFFECTIVENESS 2) PROGRAM EVALUATIONS 3) DEVELOP USER FEES 4) BUDGET AND COST CONTROL 5) COST REIMBURSEMENT 6) MAKING ECONOMIC CHOICES |
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WHO ARE THE PRIMARY USERS OF COST ACCOUNTING INFORMATION?
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GOVERNMENT MANAGERS
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WHAT IS THE ONE AREA WHERE GOVERNMENTS FUNCTION IN A MANNER THAT IS SIMILAR TO THE PRIVATE SECTOR?
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USER FEES
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MORE GOVERNMENT FINANCIAL MANAGERS ARE TRACKING COSTS AGAINST A VARIETY OF BENCHMARKS. THESE BENCHMARKS INCLUDE:
1) 2) 3) |
1) OTHER GOVERNMENTS WITH SIMILAR SERVICES
2) TARGETED PERFORMANCE GOALS PROVIDED BY PUBLIC INTEREST ORGANIZATIONS 3) MEASURES PROVIDED BY THE PRIVATE SECTOR |
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TO BE EFFECTIVE, COST ACCOUNTING HAS TO...
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BE APPLIED TO A COST OBJECTIVE
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WHAT COMPRISES A COST OBJECTIVE?
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*SOME PORTION OF AN ORGANIZATION OR SOME FUNCTION THAT IS RESPONSIBLE FOR CARRYING OUT A MISSION
* CONDUCTING A MAJOR LINE OF ACTIVITY PRODUCING ONE OR A GROUP OF RELATED PRODUCTS OR SERVICES * THE OUTPUT THEMSELVES |
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STATE AND LOCAL GOVERNMENTS USE _________________ FUNDS, WHILE FEDERAL GOVERNMENT AGENCIES USE ___________________ FUNDS.
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STATE & LOCAL- INTERNAL SERVICE FUNDS
FEDERAL- INTRAGOVERNMENTAL REVOLVING FUNDS |
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WHAT ARE THE TWO TYPES OF COSTS THAT ARE ASSOCIATED WITH AN OBJECTIVE?
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DIRECT COSTS & INDIRECT COSTS
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ARE COSTS THAT CAN BE SPECIFICALLY IDENTIFIED WITH A SINGLE OBJECTIVE OR OUTPUT
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DIRECT COST
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WHAT ARE FOUR EXAMPLES THAT DIRECT COSTS MAY TYPICALLY INCLUDE?
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1) SALARIES AND BENEFITS OF EMPLOYEES WORKING DIRECTLY ON THE OBJECTIVE OR OUTPUT (WIDGET)
2) MATERIALS & SUPPLIES USED BY OR FOR THE OBJECTIVE OR OUTPUT (WIDGET) 3) VARIOUS COSTS ASSOCIATED WITH SPACE, EQUIPT, FACILITIES, AND UTITILIES, if they are exclusively uses FOR THE OBJECTIVE OR OUTPUT 4) RELATED TRAVEL COSTS |
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COSTS THAT ARE ASSOCIATED WITH RESOURCES THAT ARE JOINTLY OR COMMONLY USED FOR TWO OR MORE OBJECTIVES OR OUTPUTS, OR ARE NOT SPECIFICALLY OR READILY IDENTIFIABLE WITH A SINGLE OBJECTIVE OR OUTPUT
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INDIRECT COSTS
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WHAT ARE FOUR EXAMPLES THAT INDIRECT COSTS MAY TYPICALLY INCLUDE?
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INCURRED WITHIN THE SEGMENT & CONTROLLABLE BY MGMT:
1) GENERAL ADMINISTRATIVE SERVICES 2) RENT 3) SPACE 4) UTILITIES INCURRED OUTSIDE THE ORGANIZATION & NOT CONTROLLABLE BY MGMT 1) HUMAN RESOURCES 2) PAYROLL PROCESSING 3) CENTRAL DATA PROCESSING 4) ACCOUNTING AND FLEET MAINTENANCE |
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COSTS INCURRED BY ONE AGENCY ON BEHALF OF ANOTHER FOR WHICH THERE IS NO REIMBURSEMENT OR REIMBURSEMENT IS FOR AN AMOUNT LESS THAN THE ACTUAL COST; ALSO INCLUDED IN DETERMINING THE FULL COST OF OUTPUTS
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INTER-ENTITY COSTS
EXAMPLE: OFFICE OF PERSONNEL MGMT ADMINISTERS FEDERAL RETIREMENT SYSTEMS OF BEHALF OF FEDERAL AGENCIES. IT MAINTAINS FUNDS TO FINANCE BENEFITS & EACH AGENCY MAKES CONTRIBUTIONS OFTEN LESS THAN THE FULL COST OF BENEFITS EARNED BY EMPLOYEES |
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ENSURES THAT THE FULL COST OF EARNED BENEFITS IS INCLUDED IN THE FINANCIAL STMTS OF EMPLOYER AGENCIES SINCE THEY INCUR THE COST BY EMPLOYING INDIVIDUALS TO SUPPORT AGENCY PROGRAMS
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INTER-ENTITY COSTING
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TO OBTAIN THE BEST INFO THRU COST ACCOUNTING, THE PREFERRED METHOD OF ASSIGNING COST IS....
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BY DIRECTLY TRACING THE COSTS USED INT EH PRODUCTION OF OUTPUTS
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WHEN IT IS IMPRACTICAL TO DIRECTLY TRACE COSTS , THEN COSTS MAY BE...
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ASSIGNED ON A CAUSE-AND-EFFECT BASIS
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IS THE INTERMEDIATE STEP BETWEEN DIRECT ASSIGNMENT OR TRACING, AND COST ALLOCATION
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CAUSE-AND-EFFECT ASSIGNMENTS
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CAUSE-AND-EFFECT ASSIGNMENTS ARE BASED ON THE PREMISE THAT....
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OUTPUTS REQUIRE THE PERFORMANCE OF CERTAIN ACTIVITIES TO TAKE PLACE AND THAT THE ACTIVITIES CAUSE COSTS TO OCCUR. THUS, THE ACTIVITY IS THE LINK BETWEEN THE OUTPUTS AND THE COSTS
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EXAMPLE OF CAUSE-AND-EFFECT ASSIGNMENT
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AN AIRCRAFT CONSUMES FUEL. IF IT IS IMPRACTICAL TO READILY ASCERTAIN THE PRECISE NUMBER OF GALLONS OF FUEL USED FOR A FLIGHT, AN ALTERNATIVE WOULD BE TO MULTIPLY THE HOURS THE PLANE WAS FLOWN BY THE HOURLY CONSUMPTION RATE FOR THAT TYPE OF AIRCRAFT
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WHEN IT IS IMPRACTICAL OR NOT ECONOMICALLY FEASIBLE TO ASSIGN COSTS DIRECTLY OR THRU THE USE OF CAUSE-AND-EFFECT, THEN COSTS SHOULD BE...
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ALLOCATED ON A REASONABLE AND CONSISTENT BASIS
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WHAT ARE SOME EXAMPLES OF COST ALLOCATION?
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1) MOST GENERAL MGMT & ADMIN COSTS
2) SUPPORT COSTS 3) DEPRECIATION 4) RENT 5) MAINTENANCE 6) UTILITY & SECURITY COSTS FOR EXAMPLE THE TOTAL FUEL USED BY THE AIR BASE COULD BE DIVIDED UP BY THE NUMBER OF AIRPLANES STATIONED AT THE BASE; THIS MIGHT PROVIDE A FAIRLY ACCURATE ESTIMATE OF THE TOTAL FUEL USED BY EACH AIRPLANE AT A LOW COST |
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WHAT ARE THE THREE METHODS OF ASSIGNING COSTS?
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1) DIRECT TRACING
2) CAUSE-AND-EFFECT 3) ALLOCATION |
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WHAT IS THE COST ACCOUNTING LEGISLATION FOR FEDERAL AGENCIES
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July 1995, FASAB issued the STATEMENT OF FEDERAL FINANCIAL ACCOUNTING STANDARDS (SFFAS) 4: MANAGERIAL COST ACCOUNTING STANDARDS AND CONCEPTS. SFFAS 4 was amended by SFFAS 30 to provide full implementation of the original standards
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WHAT ARE THE 5 STANDARDS CONTAINED IN THE SFFAS?
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1) ACCUMULATE AND REPORT COSTS
- COLLECT DATA FROM COMMON DATA SOURCES - PROCESS DATA - REPORT COST INFO 2) RESPONSIBILITY SEGMENTS -CARRY OUT MISSION - CONDUCT MAJOR ACTIVITY -PRODUCE GOODS OR SERVICES 3) FULL COSTS 4) INTER-ENTITY COSTS 5) USE OF APPROPRIATE COSTING METHODOLOGY - ACTIVITY BASED, JOB ORDER, PROCESS, STANDARD |
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IS A METHOD FOR DETERMINING THE COST OF PRODUCING GOODS OR SERVICES USING APPROPRIATE PROCEDURES, AND MAY BE USEFUL WHEN THE COST INFORMATION IS NOT NEEDED ON A RECURRING BASIS
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COST FINDING
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COST FINDING TECHNIQUES OFTEN ENTAIL....
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ACCUMULATING EXPENDITURE DATE DURING THE YEAR AND THEN ASSIGNING THE COSTS TO THE COST OBJECTIVES BASED ON DEFINED ALGORITHMS
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WHILE FEDERAL STANDARDS DESCRIBE THE BASIC NEEDS AN ENTITY'S COST ACCOUNTING METHODS SHOULD MEET, THE CHOICE OF THE APPROPRIATE DETAIL FOR AN AGENCY'S COST ACCOUNTING WOULD DEPEND ON FACTORS SUCH AS?
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1) NATURE OF THE AGENCY'S OPERATIONS
2) DESIRED AND NEEDED PRECISION 3) PRACTICALITY OF DATA COLLECTION AND PROCESSING 4) AVAILABILITY OF ELECTRONIC DATA HANDLING FACILITIES 5) COSTS 6) MGMT'S SPECIFIC INFORMATIONAL NEEDS |
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IS RESPONSIBLE FOR CARRYING OUT A MISSION, CONDUCTING A MAJOR LINE OF ACTIVITY, OR PRODUCING ONE OR A GROUP OF RELATED PRODUCTS OR SERVICES
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RESPONSIBILITY SEGMENT
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A RESPONSIBILITY SEGMENT IS RESPONSIBLE FOR....
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* CARRYING OUT A MISSION
* CONDUCTING A MAJOR LINE OF ACTIVITY * PRODUCING ONE OR A GROUP OF RELATED PRODUCTS OR SERVICES |
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THE FULL COST OF AN OUTPUT PRODUCED BY A RESPONSIBILITY SEGMENT IS THE SUM OF....
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1) THE COSTS OF RESOURCES CONSUMED BY THE SEGMENT THAT DIRECTLY OR INDIRECTLY CONTRIBUTE TO THE OUTPUT, AND
2) THE COSTS OF IDENTIFIABLE SUPPORTING SERVICES PROVIDED BY OTHER RESPONSIBILITY SEGMENTS WITHIN THE REPORTING ENTITY, AND BY OTHER REPORTING ENTITIES |
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ARE THOSE COSTS THAT CAN BE SPECIFICALLY ATTRIBUTED TO AN OUTPUT
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DIRECT COSTS
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COSTS ARE NOT SPECIFICALLY IDENTIFIABLE WITH ANY OUTPUTS
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INDIRECT COSTS
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THERE ARE CIRCUMSTANCES WHERE THE BILLING IS LESS THAN FULL COST OR THERE IS NO BILLING WHATSOEVER IN INTER-ENTITY COSTS. THE STANDARD REQUIRES RECOGNITION OF THESE INTER-ENTITY COSTS THAT ARE NOT FULLY REIMBURSED WHEN
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THE ITEMS ARE MATERIAL AND
1) SIGNIFICANT TO THE RECEIVING ENTITY 2) FORM AN INTEGRAL OR NECESSARY PART OF THE RECEIVING ENTITY'S OUTPUT 3) CAN BE IDENTIFIED OR MATCHED TO THE RECEIVING ENTITY WITH REASONABLE PRECISION *THESE ARE CALLED "IMPUTED COSTS" |
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THE COST ASSIGNMENTS SHOULD BE PERFORMED USING THE FOLLOWING METHODS LISTED IN THE ORDER OF PREFERENCE:
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A) DIRECTLY TRACING COSTS WHEREVER FEASIBLE AND ECONOMICALLY PRACTICAL
B) ASSIGNING COSTS ON A CAUSE-AND-EFFECT BASIS C) ALLOCATING COSTS ON A REASONABLE CONSISTENT BASIS |
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REFERS TO IDENTIFYING COSTS WITH TIME PERIODS AND COST OBJECTIVES
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COST ASSIGNMENTS
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REFERS TO AN ACTIVITY OR ITEM WHOSE COST IS BEING MEASURES
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COST OBJECT
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WHAT ARE THE MOST COMMON COSTING METHOLOGYIES
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1) ACTIVITY-BASED COSTING
2) JOB-ORDER COSTING 3) PROCESS COSTING 4) STANDARD COSTING |
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MANY GOVERNMENTS ARE SUPPLEMENTING GENERAL TAX REVENUES WITH?
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USER FEES
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BREAK-EVEN FEE FORMULA?
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VOLUME X UNIT PRICE = FIXED COSTS + (VOLUME x UNIT VARIABLE COSTS)
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WHAT ARE THE REASONS FOR SETTING FEES LOWER OR HIGHER THAN COSTS ARE:
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1) THE GOVT MAY DECIDE IT IS POLITICALLY OR SOCIALLY WISE TO CHARGE LESS THAN THE COST ( BUS FARE TO HELP PROTECT AGAINST CAR EMISSIONS OR ENABLE THE POOR TO USE A SERVICE)
2) COMPETITION MIGHT NECESSITATE CHARGING LESS THAN COST (UDERCUTTING RIVAL CITIES CONVENTION CENTERS) 3) UNFAIR COMPETITION WITH THE PRIVATE SECTOR 4) ENCOURAGING USE AT SLOW TIMES 5) LIMITING USE OF A SERVICE OR FACILITY BY CHARGING MORE THAN COST FOR MOVIES IN THE PUBLIC LIBRARY |
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IS AN IMPORTANT MANAGEMENT TOOL FOR DETERMINING THE EFFICIENCY AND EFFECTIVENESS OF PROGRAMS
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COST ACCOUNTING INFORMATION
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STATE AND LOCAL GOVERNMENTS HAVE THE ABILITY TO RECOVER INDIRECT COSTS RELATED TO PROJECTS SUPPORTED BY FEDERAL GRANTS USING?
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THE PROVISIONS OF OMB CIRCULAR A-87.
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WHICH OF THE FOLLOWING IS NOT A USE OF COST ACCOUNTING INFORMATION?
A) MAKING A DECISION TO OUTSOURCE A PROGRAM OR ACTIVITY B) MAKING AN INVESTMENT OF GOVERNMENT FUNDS C) ESTABLISHING USER FEES FOR A FUNCTION OR SERVICE D) DETERMINING EFFECTIVENESS OR EFFICIENCY OF A PROGRAM OR SERVICE |
B) COST ACCOUNTING INFO IS NOT USEFUL FOR MAKING INVESTMENT DECISIONS. INVESTMENT DECISIONS ARE BASED ON THE ENTITY'S INVESTMENT OBJECTIVES AND RISK TOLERANCE
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DESCRIBE THE TYPES OF COSTS
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COSTS CAN BE DIRECT OR INDIRECT.
DIRECT COSTS ARE THOSE THAT CAN BE DIRECTLY ATTRIBUTED TO A COST OBJECTIVE INDIRECT COSTS ARE USED BY TWO OR MORE COST OBJECTIVES AND CANNOT BE PRACTICALLY OR ECONOMICALLY BE ATTRIBUTED TO AN OBJECTIVE |
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TRUE OR FALSE: COSTS SHOULD BE ASSIGNED ON A DIRECT BASIS AT ALL TIMES
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FALSE- ALTHOUGH DIRECT BASIS IS PREFERRED, IN MANY INSTANCES, IT IS NEITHER PRACTICAL NOR ECONOMICAL
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WHAT IS THE PREFERRED SEQUENCE FOR ASSIGNING COSTS?
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1ST- DIRECT TRACING
2ND- CAUSE-AND-EFFECT 3RD- ALLOCATION |
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WAS ESTABLISHED TO ALLOW STATE AND LOCAL GOVERNMENTS TO DETERMINE INDIRECT COSTS THAT COULD BE RECOVERED UNDER FEDERAL AWARDS
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OMB CIRCULAR A-87
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WHAT ARE THE FACTORS IN DETERMINING IF A COST IS REASONABLE UNDER OMB CIRCULAR A-87
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A COST IS REASONABLE IF IT DOES NOT EXCEED THAT WHICH WOULD BE INCURRED BY A PRUDENT PERSON UNDER THE CIRCUMSTANCES PREVAILING AT THE TIME THE DECISION WAS MADE TO INCUR THE COST
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WHICH OF THE FOLLOWING ARE FRINGE BENEFITS FOR REIMBURSEMENT UNDER A FEDERAL GRANT GIVEN THE FOLLOWING
* DIRECT SALARIES * PAYMENT TO RETIREES * CONTRIBUTION TO RETIREMENT SYSTEM * TRAVEL REIMBURSEMENT * HEALTH CARE CONTRIBUTION FOR EMPLOYEES * RENT * LIFE INSURANCE CONTRIBUTIONS * SUPPLIES & MATERIALS |
* DIRECT SALARIES- OPERATING COSTS
* PAYMENT TO RETIREES- *** NOT B/C THE PYMTS ARE BASED ON PAST CONTRIBUTIONS * CONTRIBUTION TO RETIREMENT SYSTEM yes * TRAVEL REIMBURSEMENT - OPERATING COSTS * HEALTH CARE CONTRIBUTION FOR EMPLOYEES- yes * RENT - OPERATING COSTS * LIFE INSURANCE CONTRIBUTIONS- yes * SUPPLIES & MATERIALS - OPERATING COSTS |
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WHAT ARE THE TWO CRITERIA FOR DETERMINING WHETHER A COST IS AN INDIRECT COST?
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INDIRECT COSTS ARE THOSE INCURRED FOR A COMMON PURPOSE, BENEFITING MORE THAN ONE COST OBJECTIVE OR NOT READILY ASSIGNABLE ITO AN OBJECTIVE WITHOUT CONSIDERABLE EFFORT
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TRUE OR FALSE: THE AMOUNT CHARGED FOR A USER FEE CAN BE DIFFERENT BASED ON THE COST RECOVERY OBJECTIVE
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TRUE. DEPENDING ON THE COST RECOVERY OBJECTIVE, DIFFERENT COSTS WOULD BE INCLUDED IN CALCULATING THE USER FEE. IF THE GOVERNMENT WANT TO RECOVER EXPENDITURES (OUTLAYS), THEN CAPITAL PURCHASES WOULD BE INCLUDED, EVEN THOUGH THEY BENEFIT FUTURE PERIODS. IF THE GOVERNMENTS WANTS TO RECOVER EXPENSES, AN ALLOCATION FOR DEPRECIATION WOULD BE INCLUDED. IF A GOVERNMENT WANTS TO RECOVER EXPENSES PLUS DEBT SERVICE, PAYMENTS FOR PRINCIPAL RETIREMENT WOULD BE INCLUDED
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GIVEN THE FOLLOWING INFO, HOW MANY UNITS MUST BE SOLD TO BREAK-EVEN AT A PRICE OF $25 PER UNIT?
FIXED COSTS $1 MILLION LABOR COSTS $15.00 PER UNIT MATERIAL COSTS $7.50 PER UNIT |
X= $1,000,000/($25.00-($15+7.50))
X= $1,000,000/$2.50 X= 400,000 UNITS |
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DESCRIBE THE COST RECOVERY OBJECTIVES
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1) THE USER FEE WILL RECOVER ONLY DIRECT COSTS
2) THE USER FEE WILL RECOVER ALL EXPENDITURES, INCLUDING CAPITAL ASSETS 3) THE USER FEE WILL RECOVER EXPENSES (COSTS USING THE ACCRUAL BASIS OF ACCOUNTING, INCLUDING DEPRECIATION) 4) USER FEE WILL RECOVER EXPENSES (INCLUDING DEPRECIATION) PLUS AN ALLOWANCE FOR REPLACING EQUIPMENT AT A COST GREATER THAN THE COST OF EQUIPMENT CURRENTLY USED 5) THE USER FEE WILL RECOVER EXPENSES, PLUS THE AMOUNT REQUIRED TO PAY PRINCIPAL OUTSTANDING BONDS, IN LIEU OF DEPRECIATION |
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TRUE OR FALSE: A MAJOR DISADVANTAGE OF A USER FEE IS THAT ONLY THOSE WHO USE THE SERVICE ARE CHARGED
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FALSE. THAT IS THE MAJOR ADVANTAGE OF USER FEES- ONLY THOSE WHO USE THE SERVICE HAVE TO PAY FOR IT
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