EXAM 1 Study guide - he reporting standard for external financial reporting is Generally accepting PDF

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Summary

he reporting standard for external financial reporting is
Generally accepting accounting principles
Industry-Specific
A manufacturing process requires small amounts of glue. The glue used in the production process is classified as a(n)
Indirect material
Direct material...

Description

● The reporting standard for external financial reporting is ○ Generally accepting accounting principles ○ Industry-Specific ● A manufacturing process requires small amounts of glue. The glue used in the production process is classified as a(n) ○ Indirect material ○ Direct materials ○ Period cost ○ Miscellaneous expenses ● For inventoriable costs to become expenses under the matching principle, ○ All accounts payable must be settled ○ The product must be finished and in stock ○ The product must be expensed based on its percentage of-completion ○ The product to which they attach must be sold ● Cost of raw materials is debited to Raw Materials Inventory when the ○ Materials are ordered ○ Bill for the materials is paid ○ Material are received ○ Materials are put into production ● Which one of the following should be equal to the balance of the Work In Process Inventory account at the end of the period? ○ The total manufacturing costs for the period ○ The sum of the costs shown on the job cost sheets of unfinished jobs ○ The total of the amounts transferred from raw materials for the current period ○ The total of manufacturing overhead applied to work in process for the period ● Manufacturing overhead is applied to each job ○ at the end of the year when actual costs are known. ○ only if the overhead costs can be directly traced to that job. ○ at the time when the overhead cost is incurred. ○ by means of a predetermined overhead rate. ● In determining total manufacturing costs on the cost of goods manufactured schedule, ○ actual manufacturing overhead costs appear as a deduction. ○ beginning work in process inventory should have a zero balance. ○ Manufacturing overhead applied is added to direct materials and direct labor. ○ ending work in process inventory is deducted from beginning work in process inventory. ● At the end of the year, any balance in the Manufacturing Overhead account is generally eliminated by adjusting

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○ Cost of Goods Sold. ○ Raw Materials Inventory. ○ Work In Process Inventory. ○ Finished Goods Inventory When manufacturing overhead costs are assigned to production in a process cost system, they are debited to ○ A Manufacturing Overhead account. ○ the Finished Goods Inventory account. ○ A Work in Process account. ○ Cost of Goods Sold. In the production cost report, the total ○ costs charged equals the units to be accounted for ○ costs accounted for equals the costs of the units started into production ○ physical units accounted for equals the costs accounted for. ○ physical units accounted for equals the units to be accounted for. The first step in activity-based costing is to ○ identify and classify the activities involved in the manufacture of specific products, and allocate overhead to cost pools. ○ compute the activity-based overhead rate per cost driver. ○ assign overhead costs to products, using overhead rates determined for each cost pool. ○ identify the cost driver that has a strong correlation to the activity cost pool. Activity-based costing uses ○ one plantwide pool and a single cost driver ○ one plantwide pool and numerous cost drivers. ○ departmental pools and a single cost driver. ○ numerous cost pools and numerous cost drivers. Which of the following is not a facility-level activity? ○ Property taxes ○ Plant depreciation ○ Utilities ○ Engineering changes

● ● Financial accounting traits: ○ Required by GAAP ○ External users ○ Company as a whole ○ Based on past events ● Managerial accounting traits ○ -Not required by GAAP

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○ -Internal Users (management/CFO/CEO) ○ -Segment Oriented ○ -Future Focused 3 Pillars ○ Planning - Create budgets/goals ○ Control - gathering feedback ○ Decision Making Management Processes ○ Lean Production ○ -TOC (Theory of Constraints Lean production ○ JIT (Just in Time) or the theory of producing only what you need. ○ Units produced = Units sold ○ -Inventory levels decrease ○ -reduces waste/defects ○ -cost under control ○ -reduces spoilage TOC(Theory of constraints) ○ Focus (put pressure) on the constraint. Bottleneck Direct cost ○ conveniently/easily traced back to the product. (traceable) Indirect cost ○ cannot be easily traced back to the product Manufacturing costs (Product costs) ○ Inventoriable costs, cling to product ○ -Direct Material ○ -Direct Labor ○ -MOH (Manufacturing Overload) Direct materials ○ generally an integral part of a finished product MOH (Manufacturing Overload) ○ Indirect materials and indirect labor Non-manufacturing costs (Period costs ○ Expensed when incurred ○ -SG+A SG+A (Selling, General, and Administrative) ○ Selling- advertising, shipping, sales commission ○ G+A- legal, accounting, CFO/President Cost Behavior ○ How costs react to changes in level of activity

● Variable costs ○ constant or fixed costs per unit that changes in total in direct proportion to the level of activity. ● Other names for "level of activity" ○ Cost Driver. Activity base ● Fixed cost ○ remains constant in total but reacts inversely to the level of activity ● Mixed costs ○ Contains both fixed and a variable component ● Equation for Mixed costs ○ Y= a + b(x) ○ Y= total mixed costs ○ a= fixed costs ○ b= variable costs ○ x= level of activity ● Differential cost ○ -Differential revenue ○ -Differential cost ● Differential Revenue ○ the difference in revenue between two alternatives ● Differential cost ○ the difference in cost between two alternatives ● Decision making analysis ○ relevant information ○ must have alternatives ● Type of fixed costs ○ Committed and discretionary ● Committed cost ○ Long term, cannot be significantly reduced in the short term. ex. Depreciation on buildings ● Discretionary cost ○ May be altered in the short run by current management discretion ● Traditional I/S ○ Sales + (COGS)/GM + (SG+A) = NOI ● Contribution I/S ○ Sales + (Variable Exp)/CM + (Fixed Exp) = NOI ● Opportunity cost ○ The of selecting one alternative over another ● Sunk cost

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○ costs that have already been incurred and cannot be changed now or in the future. These costs should be ignored. ○ Depr. Exp is a sunk cost Job order costing ○ Cost accumulated by job. Every job is unique MRF (Material Requisition Form)- DM ○ Type and quantity of materials charged to the job Time ticket(DL) ○ Amount and cost of labor on the job POHR (Predetermined overhead rate) ○ Total Estimated MOH/ Total estimated allocation base Raw materials ○ Materials that go into the product itself WIP(Work in process) ○ partially completed units of product. (all direct) FG(Finish good) ○ completed units of product OH Applied ○ POHR * Actual activity COGS method ○ Dirty and quick Allocation Method ○ More precise Actual ○ Left Applied ○ Right Under applied ○ Left Over applied ○ Right...