WGU Managerial Accounting UFC1 questions with
verified answers
3 Types of industry Ans✓✓✓ 1. Manufacturing
2. Merchandising
3. Service
ABC per unit method Ans✓✓✓ See image - add up all costs allocated to a product
Total ABC COSTS/Units produced = ABC Overhead
Accounting Formula Ans✓✓✓ Assets = Liabilities + Owner's Equity
Activity based management (ABM) Ans✓✓✓ Extends ABC from product costing
to a comprehensive management tool that focuses on reducing costs and
improving processes and decision-making.
Helps establish - performance standards within the company & benchmark
performance against other companies
Activity Ans✓✓✓ Any event, action, transaction, or work sequence that incurs
costs when producing a product or performing a service.
Activity cost pool Ans✓✓✓ The overhead cost attributed to a distinct type of
activity or related activities. (ordering materials, setting up machines)
,Step 1 allocation the activities in ABC system is assigning functionality organized
OH costs to cost pools
Cost Pool Activity Rate
OH Costs assigned to pool/# of Activities
Activity Flowchart Ans✓✓✓ Identifies the ABC activities, and sorts them into
value add, vs non VA and the estimated and actual time spent on each activity.
This is to help managers concentrate on continuous improvement by reducing the
number of non-value add activities.
Activity Index Ans✓✓✓ The activity that causes changes in the behavior of costs.
Activity-based costing (ABC) Ans✓✓✓ A costing system method of allocating
overhead based on each product's use of activities in making the product.
MORE ACCURATE
by multiplying activity cost pools and assigns the activity cost pools to products or
services by means of cost drivers
Estimated overhead per activity/ Expected use of cost drivers per activity
Adjusting Cost of Goods Sold (under and over applied overhead) Ans✓✓✓ COGS -
overapplied overhead
COGS + underapplied overhead
,Balanced at the end of the year -debits underapplied, credits overapplied to
COSTS OF GOODS SOLD
Advantages and Disadvantages of ABC method Ans✓✓✓ Advantages
*it recognizes that OH costs are much more complex than seen in Plantwide and
Departmental OH methods
More accurate, more effective cost control, focuses on relevant factors, allows for
better management of activities.
*Managers increase their awareness of the activities performed by the company
in its production and supporting process
*Companies can trace many overhead costs directly to activities, allowing some
costs previously considered to be identified as direct costs
Disadvantages
Costs to implement and maintain ABC, uncertainty with decisions still remains
(accuracy), Product lines differ greatly in volume and manufacturing complexity,
diverse
Overhead costs constitute a significant portion of total costs
Allocating Overhead Costs to Products Ans✓✓✓ Determine what amount of each
cost driver was used for each product
Assigning Costs of Finished Goods Ans✓✓✓ When a job is finished.
, Finished goods Inventory is a control account. It controls individual finished goods
records in a finished goods ledger
Assigning Costs to Cost of Goods Sold Ans✓✓✓ Only recognized once a sale of
goods occurs
Balanced Scorecard Ans✓✓✓ A performance-measurement approach that uses
both financial and nonfinancial measures, tied to company objectives, to evaluate
all aspects of a company's operations in an integrated fashion. It links
performance measurement and a company's strategic goals. (to maximize what's
best for the company)
Four perspectives:
1. Customer: what do customers think of us?
2. Internal processes: which of our ops are critical to meeting customer needs?
3. Innovation and learning: how can we improve?
4. Financial: what do our owners think of us?
Batch-level activities Ans✓✓✓ Activities performed for each batch of products
rather than for each unit. Costs vary with # of batches not units (ex. setting up
machines, purchase ordering, inspection, materials handling)
break-even point Ans✓✓✓ The level of activity at which total revenue equals
total costs.
In units
fixed costs/contribution margin per unit
verified answers
3 Types of industry Ans✓✓✓ 1. Manufacturing
2. Merchandising
3. Service
ABC per unit method Ans✓✓✓ See image - add up all costs allocated to a product
Total ABC COSTS/Units produced = ABC Overhead
Accounting Formula Ans✓✓✓ Assets = Liabilities + Owner's Equity
Activity based management (ABM) Ans✓✓✓ Extends ABC from product costing
to a comprehensive management tool that focuses on reducing costs and
improving processes and decision-making.
Helps establish - performance standards within the company & benchmark
performance against other companies
Activity Ans✓✓✓ Any event, action, transaction, or work sequence that incurs
costs when producing a product or performing a service.
Activity cost pool Ans✓✓✓ The overhead cost attributed to a distinct type of
activity or related activities. (ordering materials, setting up machines)
,Step 1 allocation the activities in ABC system is assigning functionality organized
OH costs to cost pools
Cost Pool Activity Rate
OH Costs assigned to pool/# of Activities
Activity Flowchart Ans✓✓✓ Identifies the ABC activities, and sorts them into
value add, vs non VA and the estimated and actual time spent on each activity.
This is to help managers concentrate on continuous improvement by reducing the
number of non-value add activities.
Activity Index Ans✓✓✓ The activity that causes changes in the behavior of costs.
Activity-based costing (ABC) Ans✓✓✓ A costing system method of allocating
overhead based on each product's use of activities in making the product.
MORE ACCURATE
by multiplying activity cost pools and assigns the activity cost pools to products or
services by means of cost drivers
Estimated overhead per activity/ Expected use of cost drivers per activity
Adjusting Cost of Goods Sold (under and over applied overhead) Ans✓✓✓ COGS -
overapplied overhead
COGS + underapplied overhead
,Balanced at the end of the year -debits underapplied, credits overapplied to
COSTS OF GOODS SOLD
Advantages and Disadvantages of ABC method Ans✓✓✓ Advantages
*it recognizes that OH costs are much more complex than seen in Plantwide and
Departmental OH methods
More accurate, more effective cost control, focuses on relevant factors, allows for
better management of activities.
*Managers increase their awareness of the activities performed by the company
in its production and supporting process
*Companies can trace many overhead costs directly to activities, allowing some
costs previously considered to be identified as direct costs
Disadvantages
Costs to implement and maintain ABC, uncertainty with decisions still remains
(accuracy), Product lines differ greatly in volume and manufacturing complexity,
diverse
Overhead costs constitute a significant portion of total costs
Allocating Overhead Costs to Products Ans✓✓✓ Determine what amount of each
cost driver was used for each product
Assigning Costs of Finished Goods Ans✓✓✓ When a job is finished.
, Finished goods Inventory is a control account. It controls individual finished goods
records in a finished goods ledger
Assigning Costs to Cost of Goods Sold Ans✓✓✓ Only recognized once a sale of
goods occurs
Balanced Scorecard Ans✓✓✓ A performance-measurement approach that uses
both financial and nonfinancial measures, tied to company objectives, to evaluate
all aspects of a company's operations in an integrated fashion. It links
performance measurement and a company's strategic goals. (to maximize what's
best for the company)
Four perspectives:
1. Customer: what do customers think of us?
2. Internal processes: which of our ops are critical to meeting customer needs?
3. Innovation and learning: how can we improve?
4. Financial: what do our owners think of us?
Batch-level activities Ans✓✓✓ Activities performed for each batch of products
rather than for each unit. Costs vary with # of batches not units (ex. setting up
machines, purchase ordering, inspection, materials handling)
break-even point Ans✓✓✓ The level of activity at which total revenue equals
total costs.
In units
fixed costs/contribution margin per unit
