Cost Control Exam 2

Front 1

_____ is a business model focusing on the control of production or performance activities so that they improve customer value and enhance profitability.

Back 1

Activity Based Management (ABM)

Front 2

In a business context, an ___ is any repetitive action that is performed in in fulfillment of a business function.

Back 2

Activity

Front 3

_____ includes a variety of concepts that help companies to produce more efficiently, determine product or service costs more accurately, and control and evaluate performance more effectively.

Back 3

Activity Based Management

Front 4

If a black and white perspective is taken, activities are either ____ or ____.

Back 4

Value-added or non-value-added

Front 5

A _____ increases the worth of a product or service to a customer and is one for which the customer is willing to pay. Ex. Processing time and service time.

Back 5

Value-Added Activity (VA)

Front 6

A ____ increases the time spent on a product or service but does not increase its worth and thus is viewed as unnecessary from the customer's perspective. These can be reduced, redesigned, or eliminated without affecting the product's or service's market value or quality. Ex. Inspection time, transfer time, idle time.

Back 6

Non-Value-Added Activity (NVA)

Front 7

Businesses can also engage in some activities that are essential (or appear to be essential) to business operations but for which customers would not willingly choose to pay. These are known as ____. Ex. Companies must prepare invoices for documenting sales and collections. Customers realize invoice prep creates costs that must be covered by product selling prices but since it adds no direct value to products or services customers would prefer not to pay for this activity through a higher selling price.

Back 7

Business-Value-Added Activities (BVA)

Front 8

The easiest way to reduce cost is to minimize or eliminate the ____ that are incurred during the production or performance process. Such reductions will allow the company to obtain a larger profit margin when selling at market price than those companies with higher costs.

Back 8

Non-Value Added Activities (NVA)

Front 9

A____ is a series of activities that when performed together satisfy a specific objective. Companies engage in examples of these such as production, distribution, selling, administration and other Company functions.

Back 9

Process

Front 10

Most processes occur ____ across organizational functions and thus overlap multiple functional areas.

Back 10

Horizontally

Front 11

For each distinct process, a ____ should be prepared to indicate every step in every area that goes into making or doing something.

Back 11

Process Map

Front 12

____ is the actual time spent performing all necessary functions to manufacture the product or to perform the service. This is a value-added activity.

Back 12

Processing (service) time

Front 13

____ is the time required to perform quality control other than what is internal to the process; this time is usually considered NVA unless the consumer would actually be willing to pay for it (such as in the pharmaceutical or food industries).

Back 13

Inspection time

Front 14

____ is the time consumed moving products or components from one place to another, this time is NVA.

Back 14

Transfer time

Front 15

____ is the time goods spend in storage or waiting at a production operation for processing; this time is NVA.

Back 15

Idle time

Front 16

The time from the receipt to the completion of a product or service order is equal to value added time plus non value added time or ____

Back 16

Cycle (lead) time

Front 17

Total Cycle (or Lead) Time equal ______

Back 17

Value added time + Non Value Added Time

Front 18

Combining the process map and the time assessments produces a ____ that traces a process from beginning to end.

Back 18

Value Chart

Front 19

Dividing total value-added processing time by total cycle time results in a measurement referred to as _____.

Back 19

Manufacturing Cycle Efficiency (MCE)

Front 20

Most production processes add value to products only approx ____ percent of the time so about _____ percent of manufacturing cycle time is wasted or NVA time.

Back 20

10 percent - value added

90 percent - NVA

Front 21

A service company computes ____ by dividing total actual service time by total cycle time.

Back 21

Service Cycle Efficiency

Front 22

Non-value added activities are attributable to 3 types of factors: ______, ______, and ______.

Back 22

Systemic, Physical, Human

Front 23

The ____ factor of NVA activities is the need to manufacture products in large batches to minimize setup cost; the need to respond to service jobs in order of urgency.

Back 23

Systemic

Front 24

The ____ factor of NVA activities is the need to move goods because of inefficient plant or machine layout, especially in multi-story buildings in which receiving and shipping are on the ground floor but storage and production are on upper floors.

Back 24

Physical

Front 25

The ____ factor of NVA activities is the need to rework products because of errors made by employees who have improper skills or received inadequate training; delays caused by people who waste time by socializing at work.

Back 25

Human

Front 26

Using a single, broad, overall _____ is usually easy and inexpensive but may lead to inaccurate product costs as product diversity and indirect costs increase because it spreads the cost of resources uniformly even when individual products or services actually consume those resources in nonuniform ways.

Back 26

Predetermined OH rate

Front 27

______ is when a product consumes a low level of resources but is allocated high costs per unit.

Back 27

Overcosting

Front 28

_____ is when a product consumes a high level of resources but is allocated low costs per unit.

Back 28

Undercosting

Front 29

If one product is undercosted then at least one other product must be ______.

Back 29

Overcosted

Front 30

The ____ product absorbs too much cost, making it seem less profitable than it really is.

Back 30

Overcosted

Front 31

The ____ product is left with too little cost, making it seem more profitable than it really is.

Back 31

Undercosted

Front 32

____ focuses on activities during production and performance process.

Back 32

Activity Based Management (ABM)

Front 33

___ is the process of classifying activities as VA or NVA and minimizing or eliminating costs that provide little or no customer value.

Back 33

Activity Analysis

Front 34

Reducing _____ will increase Manufacturing Cycle Efficiency (MCE).

Back 34

NVA activities

Front 35

____ is a process that seeks to achieve substantially higher efficiency by producing components and goods at the precise time they are needed by either the next production station or the consumer. Relies on automation and robotic technology. Will increase MCE.

Back 35

Just-In-Time (JIT)

Front 36

____ attempts to more accurately assign overhead costs to the users of OH by focusing on activities that drive OH costs (i.e. cost drivers).

Back 36

Activity Based Costing (ABC)

Front 37

A ____ is an activity (predictor) that has an absolute cause-effect relationship to a cost.

Back 37

Cost Driver

Front 38

These steps allocate costs using ____.

1. Identify activities (cost drivers) and costs that they cause.

2. Accumulate costs into separate cost pools according to the type of activity.

3. Assign OH from the cost pools to specific products/services based on their activity rates of the cost allocation base (e.g. DL hours, machine setups, reports requested, etc.)

Back 38

Activity Based Costing (ABC)

Front 39

Companies use ____ when they have a wide variety of products or services, high OH costs are not proportional to the unit volume of individual products, automation makes it difficult to assign OH to products using DL or MH, profit margins are difficult to explain, and hard-to-make products show big profits and easy to make products show losses.

Back 39

Activity Based Costing (ABC)

Front 40

Criticisms of _____ include that it takes a significant amount of time and cost to implement, must overcome barriers to change, and does not conform to GAP.

Back 40

Activity Based Costing (ABC)

Front 41

____ investigates, quantifies, and explains relationships of drivers to their related costs.

Back 41

ABC Cost Driver Analysis

Front 42

___ vary in terms of how difficult they are to trace to an individual unit of product or service which we think of as a four-tier cost hierarchy.

Back 42

Cost drivers

Front 43

____ are caused by production/delivery of a single unit of a good/service (e.g. direct material and direct labor).

Back 43

Unit-level Costs

Front 44

____ are caused by activities related to a group of units processed at the same time (e.g. a machine setup)

Back 44

Batch-level costs

Front 45

____ are caused by the activities undertaken to support a product/service, irrespective of number of units or number of batches produced (e.g. engineering costs to design a product)

Back 45

Product/process level costs

Front 46

____ support the entire facility (e.g. factory security) or the entire organization (e.g. CEO's salary)

Back 46

Organization/facility level costs

Front 47

Direct material, direct labor, some machine costs if traceable are examples of ____ that are incurred once for each unit produced.

Back 47

Unit-level costs

Front 48

Purchase orders, setup, inspection, movement, scrap (if related to) are ___ that are incurred once for each batch produced.

Back 48

Batch level costs

Front 49

Engineering change orders, equipment maintenance, product development, scrap (if related to product design) are ___ that support a product or type of process.

Back 49

Product/process level costs

Front 50

Building depreciation, plant or division manager's salary, organizational advertising are ____ that support the overall production or services process.

Back 50

Organizational/Facility level costs

Front 51

A ____ is anything for which a measurement of costs is desired.

Back 51

Cost object

Front 52

____ of a cost object are costs that can be traced to that cost object in an economically feasible way.

Back 52

Direct costs

Front 53

____ of a cost object are costs that cannot be traced in an economically feasible way.

Back 53

Indirect costs

Front 54

A _____ is a grouping of individual indirect cost items.

Back 54

Cost pool

Front 55

A _____ base is a systemic way to link an indirect cost or group of indirect costs to cost objects.

Back 55

Cost allocation

Front 56

Two common types of cost accumulation systems are ___ and ____.

Back 56

Job costing system and process costing system

Front 57

In a ____ the cost object is a unit or multiple units of a distinct product or service which we call a job. Each job generally uses different amounts of resources.

Back 57

Job Costing System

Front 58

In a _____ the cost object is masses of identical or similar units of a product or service. In this type of system, we divide the total cost of producing an identical or similar product or service by the total number of units produced to obtain a per-unit cost.

Back 58

Process Costing System

Front 59

Three common types of cost valuation methods are ____, ____, and ____.

Back 59

Actual, normal, and standard valuation.

Front 60

Using ____ valuation, DM, DL, and OH are ALL recorded at actual dollar amounts as incurred.

Back 60

Actual

Front 61

Using ___ valuation, DM and DL are recorded at actual dollar amounts as incurred but OH is applied using a predetermined OH rate.

Back 61

Normal

Front 62

Using ___ valuation, unit norms/benchmarks, called "standards" are developed for DM and DL and OH is applied using a standard predetermined rate.

Back 62

Standard

Front 63

Under ____, each job is a cost object and costs are accumulated for each job. A job can consist of one or more units of output.

Back 63

Job Order Costing

Front 64

Under job order costing there is a ____ for each job.

Back 64

Subsidiary Ledger

Front 65

Under job order costing the ___ includes all financial info about a job, DM (from material requisitions), DL (from time sheets or labor tickets), applied OH, budgeted cost information,

Back 65

Job Order Cost Sheet

Front 66

When job is complete, use the job order cost sheet to analyze ____ compared with budgeted costs.

Back 66

Actual Costs

Front 67

The set of all job order cost sheets for uncompleted jobs composes the _____ subsidiary ledger and thus the total costs contained in all the job cost sheets for uncompleted jobs should reconcile to the WIP inventory control account balance in the general ledger.

Back 67

WIP Inventory

Front 68

A ____ is a source document that indicates the types and quantities of materials to be placed into production or used in performing a service. Causes materials and their costs to be released from the Raw Materials Inventory warehouse.

Back 68

Materials Requisition Form

Front 69

Completed ____ provide the ability to verify the flow of materials from the warehouse to the dept and job that received the materials.

Back 69

Material Requisition Forms

Front 70

___ may be used if total actual labor costs differ significantly from the original estimate, the manger responsible for labor cost control will have to explain the difference.

Back 70

Time sheets

Front 71

______ may also be used if the number of hours worked on a cost plus contract may also be audited by the buyer as with government contracts or other buyers.

Back 71

Time sheets

Front 72

When production of a job is complete, its job cost sheet is removed from the WIP inventory subsidiary ledger and transferred to the ____ inventory file where it will now serve as a subsidiary ledger for that account.

Back 72

Finished Goods Inventory

Front 73

Job cost sheets for sold jobs are kept in a company's permanent files, providing management with a historical summary about total costs and if appropriate, the cost per ____ for a given job. This may be helpful for planning and control purposes as well as for bidding on future contracts.

Back 73

finished unit

Front 74

Managers are interested in controlling costs of each ___ as well as for each job.

Back 74

department

Front 75

____ are periodically compared to budgets so managers can respond to significant variances.

Back 75

Actual costs

Front 76

The primary difference in ____ for a service org and a manufacturing firm is that a service org may use an insignificant amount of DM on each job, so that DM may be accounted for as part of OH rather than being accounted for separately.

Back 76

Job Order Costing

Front 77

____ is beneficial to managers in planning, controlling decision making, and evaluating performance. Managers can effectively estimate future job costs and establish realistic bids and selling prices if they know the costs of individual jobs. Budgets and standards can be used to provide info against which actual costs can be compared at reasonable time intervals for control and performance evaluation purposes.

Back 77

Job Order Costing

Front 78

Job order costing can help determine which jobs are really ____ and can assist managers in monitoring costs.

Back 78

Profitable

Front 79

The _____ may result in losses of materials or partially completed products.

Back 79

Production processes

Front 80

Evaporation, leakage, or oxidation are inherent in the manufacturing process; such reductions are called ____. Eliminating this may be difficult, impossible, or simply not cost beneficial.

Back 80

Shrinkage

Front 81

Production process errors either by ____ or ____ can cause a loss of units.

Back 81

Humans or machines

Front 82

___ are units lost through rejection at inspection for failure to meet appropriate quality standards or designated product specifications but which CAN be economically reworked and later sold.

Back 82

Defects

Front 83

____ occurs when units are lost through rejection at inspection for failure to meet appropriate quality standards or designated product specs and such units CANNOT be economically reworked or sold. This is expected by managers and is typically budgeted for.

Back 83

Spoilage

Front 84

___ is a loss of units that falls within a tolerance level that is expected during production. These are part of the cost of the job.

Back 84

Normal Loss

Front 85

____ is a loss that is written off as a period cost. It is a loss of units in excess of expected levels during production. These are typically broken out and tracked to prevent future occurrences.

Back 85

Abonormal losses

Front 86

What is the formula for Cost of Goods Manufactured?

Back 86

Beginning WIP

+ Cost of Direct Materials Added

+ Cost of DL Added

+ Cost of OH

=Total Cost to Account For

-- Ending WIP

= Cost of Goods Manufactured (CGM)

Front 87

What is the cost of Goods Sold in Cost Accounting for a manufacturing firm?

Back 87

Beginning Finished Goods

+ CGM

=Goods available for sale

-- Ending Finished Goods

= Cost of Goods Sold (CGS)

Front 88

_____ is a system where the unit cost of a product or service is obtained by assigning total costs to many identical or similar units of output.

Back 88

Process Costing

Front 89

____ are computed by dividing total costs incurred by the number of units of output from the production process.

Back 89

Unit Costs

Front 90

Under _____ costing, each unit receives the same or similar amounts of DM costs, DL costs and manufacturing OH.

Back 90

Process

Front 91

In a _____ system, individual jobs use different quantities of resources so it would be incorrect to cost each job at the same average production cost.

Back 91

Job-costing

Front 92

When identical or similar units of products or services are mass-produced, ____ is used to calculate an average production cost for all units produced.

Back 92

Process-costing

Front 93

Process costing accumulates costs by ____ or ____. Ex. the cost moves off processing departments books onto packaging departments books (from one departments WIP to the next)

Back 93

department or product

Front 94

____ costs are added at the very beginning under process costing. Conversion costs are added throughout the process.

Back 94

Direct Material

Front 95

____ plus ____ equals conversion costs

Back 95

Direct Labor plus Overhead

Front 96

Process costing systems separate costs into cost categories according to when costs are _____.

Back 96

Introduced into the process.

Front 97

_____ are usually added at the beginning of the production process or at the start of work in a subsequent department down the assembly line.

Back 97

Direct Materials

Front 98

The hard part with process costing is determining the production quantity when ___ units are present in WIP at the beginning or end of the period. Ex. Units started last period and completed this period and units started this period that are not yet completed.

Back 98

Partially Completed

Front 99

____ approximate the number of whole units that could have been produced by the effort expended. This is an estimate of how many are complete. It includes units started last period and finish this period (beginning WIP), started and finish this period (started and completed), and started this period and not finished (ending WIP)

Back 99

Equivalent Units of Production (EUP)

Front 100

Two methods for assigning costs to production are ____ and _____.

Back 100

Weighted Average and First in First Out (FIFO)

Front 101

____ combines beginning WIP with started and completed.

Back 101

Weighted Average

Front 102

____ separates beginning WIP from started and completed.

Back 102

First in First Out (FIFO)

Front 103

What are the 5 steps in the process costing system?

Back 103

1. Summarize the flow of physical units of output (where are they in the system).

2. Compute output in terms of equivalent units.

3. Summarize total costs to account for.

4. Compute cost per equivalent unit.

5. Assign total costs to units completed and to units in ending WIP.

Front 104

To account for always has to equal _____

Back 104

Accounted for

Front 105

Activity-based management (ABM) focuses on improving customer value and enhancing profitability. Which of the following is an impact of implementing ABM to control production processes?

1.More effective performance evaluation 2.More accurate cost determination and control 3.More efficient production processes 4.All of the above

Back 105

All of the above

Front 106

Total Value-Added Time / Total Cycle Time =

Back 106

MCE

Front 107

The need to rework products because of a poorly designed training program is an example of a non-value-added activity caused by______

Back 107

Human factors

Front 108

Calculation of overhead rate =

Back 108

OH Costs/DL Costs x 100%

Front 109

Overhead costs =

Back 109

Activity base X Calculated OH rate

Front 110

The use of activity-based costing normally results in:

Back 110

substantially greater unit costs for low-volume products than is reported by traditional product costing.

Front 111

Activity-Based Costing is appropriate for which of the following organizations?

Back 111

One that produces and sells a wide variety of products

Front 112

The right side of the Finished Goods T account is ______

Back 112

What we Sold (COGS)

Front 113

Beginning Raw Materials

+ Purchases

-DM Used

= _________

Back 113

Ending Raw Materials

Front 114

OH Rate = Budged OH divided by _____-

Back 114

Budged activity (DL, DM, MH etc)

Front 115

The steps in process costing are listed below:

1. Calculate the physical units to be accounted for.

2. Calculate physical units accounted for

3. Calculate equivalent units of production (EUP)

4. Calculate total costs to be accounted for

5. Calculate the cost per EUP

6.??

Back 115

6. Assign costs to units transferred out and units in ending inventory

Front 116

A ____ is any part of the production or service process for which management wants a separate reporting of costs.

Back 116

Activity Center

Front 117

A ____ measures the demands placed on activities and thus, the resources consumed by products and services.

Back 117

Activity Driver

Front 118

In the quest for product variety, many companies are striving for ____ of products. Such personalized production can often be conducted at a relatively low cost.

Back 118

Mass customization

Front 119

____ suggests that in many situations it is common to observe that approximately 20 percent of inputs (choices) are responsible for 80 percent of outputs (selections)

Back 119

Pareto Principle

Front 120

A ____ allows producers to cover all direct costs and some indirect costs and to generate an acceptable profit margin.

Back 120

Cost-plus Contract

Front 121

A ___ is a restricted network for sharing info and delivering data from corporate databases to LAN desktops.

Back 121

Intranet

Front 122

the ____ is the source document that provides virtually all financial information about a particular job. The set of these for all incomplete jobs composes the WIP Inventory Subsidiary Ledger

Back 122

Job Order Cost sheet

Front 123

A difference between the actual quantity, price, or rate and its related standard is called _____

Back 123

Variance

Front 124

Unit cost = ______ / _________

Back 124

Unit cost = Production costs/Production quantity

Front 125

_____ are approximations of the number of whole units of output that could have been produced during a period from the actual resources expended during that period.

Back 125

Equivalent Units of Production (EUP)

Front 126

The two methods for accounting for cost flows in process costing are ____ and ____.

Back 126

Weighted Average (WA) and First in First Out (FIFO)

Front 127

the ____ computes a single average cost per unit of the combined beginning WIP inventory and current period production.

Back 127

Weighted Average Method

Front 128

the ____ separates beginning WIP Inventory and current period production as well as their costs so that a current period cost per unit can be calculated. The denominator in the EUP cost formua differs depending on which of the two methods is used.

Back 128

FIFO

Front 129

BI + Current period production and costs. This is the average costs for all EUP worked on during the period.

Back 129

Weighted Average

Front 130

BI separated from current period production and costs. Separate costs for BI units and units started during the period.

Back 130

First in First Out

Front 131

The ____ is the sum of the physical units in the beginning inventory plus the physical units started during the current period.

Back 131

Total Units to Account for

Front 132

The ____ during a period equal the units completed during the period minus the units in the beginning inventory.

Back 132

Units started and completed

Front 133

The ____ details all manufacturing quantities and costs, shows the computation of the cost per EUP.

Back 133

Cost of Production Report