D101 Cost and Managerial Accounting UPDATED ACTUAL
Questions and CORRECT Answers
Manufacturing Organizations Any organization whose main economic activity involves using components or
raw materials to make finished goods for sale to customers.
Service Organizations Any organization whose main economic activity involves producing a nonphysical
product that provides value to a customer.
Merchandising Organizations Any organization whose main economic activity involves purchasing finished
goods and reselling them to customers.
Price-Taker A company that competes in a market by providing goods or services.
Job Order Costing The process of tracking the costs of an individual product
Price-Maker A company that determines the price of a product based on costs and markup.
Direct Materials Raw materials that are used directly in a product. EX: wood for a bookcase, rubber
for making tires.
Direct Labor Wages and other payroll-related expenses of factory employees who work
directly on products.
Manufacturing Overhead All manufacturing costs that are not classified as direct materials or direct labor.
EX: misc materials like glue, supervisors, custodians, etc.
Raw Materials Inventory Inventory of raw materials that have not yet begun the production process.
Work-in-Process Inventory Inventory that is partly completed in the production process, but not yet ready for
sale to customers.
Finished Goods Inventory Inventory that has completed the production process and is ready for sale to
customers.
Period Costs Costs associated with activities or facilities outside the factory. An expense in the
period in which they occur. EX: Admin office costs, advertising, interest.
Product Costs Cost incurred inside the production facility. Expensed when product is sold
(COGS). EX: wages of factory employees, cost of raw materials, utility bills for
factory buildings.
Cost of Goods Sold Cost of products sold in a company, including costs of materials used to create
product and labor costs.
, Manufacturing Overhead Rate rate at which manufacturing overhead costs are assigned to products; equals
estimated manufacturing overhead costs for the period divided by the number of
units of the activity base being used
Predetermined Overhead Rate A rate used to charge manufacturing overhead cost to jobs that is established in
advance for each period. It is computed by dividing the estimated total
manufacturing overhead cost for the period by the estimated total amount of the
allocation base for the period.
Estimated Manufacturing Overhead Budgeted manufacturing overhead costs that are used to establish the
predetermined overhead rate.
Actual Manufacturing Overhead Manufacturing costs other than direct materials and direct labor.
Applied Manufacturing Overhead The amount of the manufacturing overhead that is assigned to the goods
produced. This is usually done by using a predetermined annual overhead rate.
Under-Applied Manufacturing Overhead The excess of actual manufacturing overhead costs over the applied overhead
costs for a period (based on a predetermined application rate).
Over-Applied Manufacturing Overhead The excess of applied manufacturing overhead (based on a predetermined
application rate) over the actual manufacturing overhead costs for a period.
Cost of Goods Manufactured Schedule A schedule supporting the income statement that summarizes the total cost of
goods manufactured and transferred out of the work-in-process inventory
account during a period. These costs include direct materials, direct labor, and
applied manufacturing overhead.
Gross Margin Sales - COGS
Process Costing A method of product costing whereby production costs for a period are
accumulated and then averaged over all units manufactured during that period;
processes to produce and the finished units are all the same.
Ending Work-in-Process Inventory The cost of partially completed work at the end of an accounting period.
Beginning Work-in-Process The ending work-in-process inventory that is carried over from the last
accounting period to the current accounting period.
Conversion Costs All product costs necessary to convert raw materials into finished goods; direct
labor + manufacturing overhead.
Equivalent Units of Production The amount of work actually done during any particular period of time in terms of
units of output.
Costing Methods All about allocating overhead.
Activity-Based Costing (ABC) An overhead cost-allocation system that allocates overhead to multiple activity
cost pools and assigns the activity cost pools to products or services by means of
cost drivers that represent the activities used.
Questions and CORRECT Answers
Manufacturing Organizations Any organization whose main economic activity involves using components or
raw materials to make finished goods for sale to customers.
Service Organizations Any organization whose main economic activity involves producing a nonphysical
product that provides value to a customer.
Merchandising Organizations Any organization whose main economic activity involves purchasing finished
goods and reselling them to customers.
Price-Taker A company that competes in a market by providing goods or services.
Job Order Costing The process of tracking the costs of an individual product
Price-Maker A company that determines the price of a product based on costs and markup.
Direct Materials Raw materials that are used directly in a product. EX: wood for a bookcase, rubber
for making tires.
Direct Labor Wages and other payroll-related expenses of factory employees who work
directly on products.
Manufacturing Overhead All manufacturing costs that are not classified as direct materials or direct labor.
EX: misc materials like glue, supervisors, custodians, etc.
Raw Materials Inventory Inventory of raw materials that have not yet begun the production process.
Work-in-Process Inventory Inventory that is partly completed in the production process, but not yet ready for
sale to customers.
Finished Goods Inventory Inventory that has completed the production process and is ready for sale to
customers.
Period Costs Costs associated with activities or facilities outside the factory. An expense in the
period in which they occur. EX: Admin office costs, advertising, interest.
Product Costs Cost incurred inside the production facility. Expensed when product is sold
(COGS). EX: wages of factory employees, cost of raw materials, utility bills for
factory buildings.
Cost of Goods Sold Cost of products sold in a company, including costs of materials used to create
product and labor costs.
, Manufacturing Overhead Rate rate at which manufacturing overhead costs are assigned to products; equals
estimated manufacturing overhead costs for the period divided by the number of
units of the activity base being used
Predetermined Overhead Rate A rate used to charge manufacturing overhead cost to jobs that is established in
advance for each period. It is computed by dividing the estimated total
manufacturing overhead cost for the period by the estimated total amount of the
allocation base for the period.
Estimated Manufacturing Overhead Budgeted manufacturing overhead costs that are used to establish the
predetermined overhead rate.
Actual Manufacturing Overhead Manufacturing costs other than direct materials and direct labor.
Applied Manufacturing Overhead The amount of the manufacturing overhead that is assigned to the goods
produced. This is usually done by using a predetermined annual overhead rate.
Under-Applied Manufacturing Overhead The excess of actual manufacturing overhead costs over the applied overhead
costs for a period (based on a predetermined application rate).
Over-Applied Manufacturing Overhead The excess of applied manufacturing overhead (based on a predetermined
application rate) over the actual manufacturing overhead costs for a period.
Cost of Goods Manufactured Schedule A schedule supporting the income statement that summarizes the total cost of
goods manufactured and transferred out of the work-in-process inventory
account during a period. These costs include direct materials, direct labor, and
applied manufacturing overhead.
Gross Margin Sales - COGS
Process Costing A method of product costing whereby production costs for a period are
accumulated and then averaged over all units manufactured during that period;
processes to produce and the finished units are all the same.
Ending Work-in-Process Inventory The cost of partially completed work at the end of an accounting period.
Beginning Work-in-Process The ending work-in-process inventory that is carried over from the last
accounting period to the current accounting period.
Conversion Costs All product costs necessary to convert raw materials into finished goods; direct
labor + manufacturing overhead.
Equivalent Units of Production The amount of work actually done during any particular period of time in terms of
units of output.
Costing Methods All about allocating overhead.
Activity-Based Costing (ABC) An overhead cost-allocation system that allocates overhead to multiple activity
cost pools and assigns the activity cost pools to products or services by means of
cost drivers that represent the activities used.
