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14 Cards in this Set
- Front
- Back
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What is the single-rate method?
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Allocates costs in each cost pool to cost projects using the same rate per unit of a single allocation base.
- Makes no distinction between fixed and variable costs. |
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What is the dual-rate method?
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Partitions the cost of each support department into two pools: a variable-cost pool and a fixed-cost pool.
- Allocates each pool using a different cost-allocation base. |
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What is the step-down method?
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Allocates support-department costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments.
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What is a joint cost?
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Costs of a production process that yields multiple products simultaneously.
Ex: Distillation of coal: yields coke, natural gas, and other products. - Cost of distillation are joint costs. |
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What is the split-off point?
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The juncture in a joint production process when two or more products become separately identifiable.
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What are separable costs?
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All costs - manufacturing, marketing, distribution, and so on-incurred beyond the split-off point that are assignable to each of the specific products identified at the split-off point.
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What is the physical-measure method?
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Method which allocates joint costs to joint products produced during the accounting period on the basis of a comparable physical measure, such as the relative weight, quantity, or volume at the split-off point.
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What is the net realizable value (NRV) method?
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The net realizable value (NRV) method allocates joint costs to joint products produced during the accounting period on the basis of their relative NRV-final sales value minus separable costs.
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What is the stand-alone cost-allocation method? (Chapter 15)
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Determines the weights for cost allocation by considering each user of the cost as a separate entity.
Example is on P. 557 |
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What is the incremental cost-allocation method?
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Ranks the individual users of a cost object in the order of users most responsible for the common cost and then uses this ranking to allocate cost among those users.
- First-ranked user of the cost object is the primary user. Example is on P. 558 |
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What are relevant costs? Relevant revenues?
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Relevant costs are expected future costs.
Relevant revenues are expected future revenues that differ among the alternative courses of action being considered. These costs and revenues must: 1) Occur in the future 2) Differ among the alternative courses of action |
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What are sunk costs?
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Past costs that are unavoidable and cannot be changed no matter what action is taken.
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When there is a byproduct in a part of three products, how are joint costs allocated?
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Either:
Production method - Joint Costs - NRV of byproducts = Joint costs to be allocated Sales method - Joint cost = joint costs to be allocated. Use this number and multiply it by the weights for each joint product. |
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What's the difference between byproduct (production) method and byproduct (sales) method?
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Byproduct (sales method) -Use regular total joint cost multiply by the proportion weights. Also under this method, the byproduct has an ending inventory balance.
Byproduct (production method) - Use joint cost minus the NRV = joint cost allocated. Then use that number as the new joint cost to allocate the weights. Under this method, the byproduct's ending inventory is 0. |
