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9 Cards in this Set

  • Front
  • Back
Cost Measurement Concepts:
Typically associated with internal reporting / managerial accounting (not GAAP / external). Financial accounting statements are typified by ______ and ______, managerial reports are typified by _______ and ______. Managerial reports directed towards internal users.

Types of theoretical cost drivers:
1. ________ - dynamic factors that are helpful in managing short term costs (______, involvement of staff)
2. _______ - dynamic factors that are helpful in managing longterm costs (______, available technology)

Types of Operational Cost Drivers:
1. _______ - based on a aggregate level of output (DL hours). Used in more _____ cost accounting systems
2. ______ - based on an activity that adds value to output (packing, inspection, etc). Used in more _____ cost accounting systems
conservatism; historical cost

usefulness; future orientation

1. Executional; relationships with suppliers
2. Structural; experience

1. Volume based; traditional
2. Activity based; contemporary;
OH allocation:
While direct costs and cost drivers (DL hours, etc.) are obvious, OH costs are indirect and must be applied on some basis. OH can be allocated based on certain _______ (called _______) or with different cost drivers for different ______ (ABC).

Cost objects - activities that serve as basis for management's decision making. First want to ______ the product/inventory. Then _____ to budget/standards (known as cost ____)

Prime Costs = _____
Conversion Costs = ____
Product Costs = All Costs associated with manufacture. Not expensed until sold (______ cost). Components are: DM, DL & _______
Period Costs: _______ - these are expensed (______, ______). The rent on the office building, NOT the factory.
cost drivers; allocation bases;

production departments;

inventoriable cost; OH applied;

non-manufacturing; SG&A; interest costs

Value; compare; control;

Objectives of Cost Accounting Systems:
a. _______
b. _______ (compared to standards)
c. _______ (profitability)

Tracing Costs to Cost Objects:

Direct Costs - _____ Traceable (DM - materials purchased less freight-in, scrap, etc. DL - salary plus reasonable down time)

Indirect Costs: ______ Traceable. (Indirect M - replacement machine parts, cleaning supplies. Indirect L - Engineers, Janitors, etc - supports the manufacturing process. OTHER Indirect Costs - Insurance, Depreciation, Property Taxes, etc related to the FACTORY). These Indirect Costs - as long as related to factory - are applied to OHD, not period costs

Indirect Costs are allocated to cost objects (final product) using cost drivers that are considered to have strong relationship.
a. Product Costing
b. Efficiency Measurements
c. Income determination;


Not Easily;
Direct relationship b/w prime costs and _____ (ie these are ______). Manufacturing OH - the Indirect Costs and both _____ and ______ costs

_______ costs - 'step' costs - variable with incremental changes in capacity.
volume; variable costs;

fixed; variable;

Standard Costs - should be based on attainable performance
A. Stand. Cost unit - as ____ as possible.
B. # of units - as ____ as possible (get average FC/unit down)

Standard Direct Costs = Standard Price x Standard Q

Standard Indirect Costs = Standard Application Rate x Standard Q

Purposes for Standard Costing
A. Cost Control
B. Performance Evaluation
low; high;

C. Improve Processes
Joint Product Costing (start off the same for 2 products then differentiate).

__________ - point in which the products can be recognized as individual.
_________ - costs incurred up to the split off point
_______ - minor products of small value that result from main products (generally only allocated joint product costs to main products)
_______ - Costs after the split off point

How to allocate joint costs?
1. Unit Volume method. Based on number of each product made - simple
2. _______ method. ___ is sales price less ______ & ______. Allocate based on this. If prices not available, work backwards to find the NRV at split off. (do examples)

By-product revenue accounting can take 1 of 2 forms:
1. Decrease __________ (either at time of production or sale)
2. Increase __________
split off point

joint product costs;


separable costs;

2. NRV method; NRV; costs to completion; disposal costs;

1. Joint Product Costs
2. Misc. Income;
Cost Accumulation Systems:
1. _______ - custom products - cost allocated to each specific job ('sequential'). Use docs that show materials requested (______) and timecards. Requires limited WIP accounts
2. _______ - homogeneous products

SEE PAGE 20 for examples + know 5 steps!

3. _______ - uses both 1&2
4. _______ - accounts for costs at the end of the process
1. job costing; materials requisition;
2. process costing
3. operations costing
4. back-flush costing
I. Raw Mat. BI
+ _______
= _______
- ________
= _______

+ ____
+ ____
= Total Manufacturing Costs

III. Begin Inv - WIP
+ _________
= Total Manufacturing Costs Available
- _______
= _______

V. Finished Goods - BI
+ _______
= _________
- ________
= _______

*Retailers add net purchases on last one
Raw Materials Purchases
=RM Available for use
- EI - Raw Materials
= DM Used

OHD applied

Total Manufacturing Costs

Goods available for sale
Application of OHD:
Step 1. _______ = _______ / Estimated ________
Step 2. _______ = ________ x _______
1. Calculate OHD rate = Budgeted OHD Costs / Est. Cost Driver
2. Apply OHD = OHD rate x Actual Cost Driver