ACC 312 EXAM 2 QUESTIONS AND ANSWERS
100% CORRECT
Product costing - ANSWER is the assignment of production costs to all output of the
organization, whether items manufactured, goods merchandised (resold), or services
delivered
product-costing system - ANSWER accumulates the costs incurred in a production process
and assigns those costs to the organization's outputs
- accumulated and assigns COGS, production costs to inventory, and costs of services
delivered
Use of product costing in financial accounting - ANSWER - value inventory on the b.s. and to
compute COGS ( inv is valued at its cost until it is sold)
- accumulate costs of services delivered, which are recoreded on the i.c.
Use of product costing in managerial - ANSWER - help managers w planning and to provide
high-quality data for decision making
- how are profits earned
Job-order costing - ANSWER - used by companies with job-shop (manufacture low volumes
at a time) or batch-production manufacturing processes (produce batches of products)
- each distinct batch of production is called a job or job order
,- custom orders/ service industries
process-costing system - ANSWER accumulates all the production costs for a large number of
units of output, and then these costs are averaged over all of the units. Process costing is used
by companies that produce large numbers of identical units in a continuous-flow
manufacturing process
- some batch production environments use process costing: when process requires that the
product be produced in discrete batches rather than continuous flow, but batch after batch of
identical products are produced
job-cost record - ANSWER document that records the cost of direct material, direct labor, and
MOH for a particular job production or batch; it's a subsidiary ledger for the WIP account for
the general ledger
Material requisition form - ANSWER document used by production department to request the
release of raw materials for production
Source document - ANSWER A document that is used as the basis for an accounting entry; ex:
material requisition form and direct-labor time tickets
Supply chain - ANSWER The flow of all goods, services, and info into and out of an
organization
Bill of materials - ANSWER A list of all the materials needed to manufacture a product or
,product component (for things produced routinely bc we know the materials needed in
advance)
Material requirements planning systems - ANSWER operations management tool that assists
managers in scheduling production in each stage of the manufacturing process
Time record - ANSWER form that records the amount of time an employee spends on each
production job
Overhead application (overhead absorption) - ANSWER The third step in assigning MOH
costs. All costs associated with each production department are assigned to the product units
on which a department has worked
Two challenges in applying overhead costs effectively - ANSWER 1. suppose the
cost-accounting department waited until the end of an accounting period so that the actual
costs of manufacturing overhead could be determined before applying overhead costs to the
firm's products. The result would be very accurate overhead application. However, the
information might be useless because it was not available to managers for planning, control,
and decision making during the period.
2. Problem of trying to match up the way assign expenses to when we think they should be
assigned??
Full cycle approach allows for - ANSWER 1. allows a timely but reasonable approximation to
substitute for actual costs
2. combines costs that are only incurred sporadically (like the quarterly lease payments) and
, applies them to all production throughout the year
3. dampens the effects of cyclicality that are associated with causes unrelated to production
(like the weather), instead applying the costs in a way that reflects the annual average.
Volume-based cost driver (activity based) - ANSWER cost driver that is closely associated with
production volume, such as direct labor hours or machine hours
estimates are made of - ANSWER - the amount of manufacturing overhead that will be
incurred during the year
- the amount of the cost driver that will be used or incurred during the same year
predetermined overhead rate - ANSWER rate used to apply MOH to WIP inventory,
calculated: estimated MOH cost/ estimated amount of cost driver
Why is some product cost information frequently required to be disclosed outside of the
company? - ANSWER - rate changes that require regulatory approval
- reimbursement programs
- cost-plus contracts
Formula to apply overhead cost - ANSWER predetermined overhead rate x quantity of activity
required
Actual Manufacturing Overhead - ANSWER The actual costs incurred for indirect material,
100% CORRECT
Product costing - ANSWER is the assignment of production costs to all output of the
organization, whether items manufactured, goods merchandised (resold), or services
delivered
product-costing system - ANSWER accumulates the costs incurred in a production process
and assigns those costs to the organization's outputs
- accumulated and assigns COGS, production costs to inventory, and costs of services
delivered
Use of product costing in financial accounting - ANSWER - value inventory on the b.s. and to
compute COGS ( inv is valued at its cost until it is sold)
- accumulate costs of services delivered, which are recoreded on the i.c.
Use of product costing in managerial - ANSWER - help managers w planning and to provide
high-quality data for decision making
- how are profits earned
Job-order costing - ANSWER - used by companies with job-shop (manufacture low volumes
at a time) or batch-production manufacturing processes (produce batches of products)
- each distinct batch of production is called a job or job order
,- custom orders/ service industries
process-costing system - ANSWER accumulates all the production costs for a large number of
units of output, and then these costs are averaged over all of the units. Process costing is used
by companies that produce large numbers of identical units in a continuous-flow
manufacturing process
- some batch production environments use process costing: when process requires that the
product be produced in discrete batches rather than continuous flow, but batch after batch of
identical products are produced
job-cost record - ANSWER document that records the cost of direct material, direct labor, and
MOH for a particular job production or batch; it's a subsidiary ledger for the WIP account for
the general ledger
Material requisition form - ANSWER document used by production department to request the
release of raw materials for production
Source document - ANSWER A document that is used as the basis for an accounting entry; ex:
material requisition form and direct-labor time tickets
Supply chain - ANSWER The flow of all goods, services, and info into and out of an
organization
Bill of materials - ANSWER A list of all the materials needed to manufacture a product or
,product component (for things produced routinely bc we know the materials needed in
advance)
Material requirements planning systems - ANSWER operations management tool that assists
managers in scheduling production in each stage of the manufacturing process
Time record - ANSWER form that records the amount of time an employee spends on each
production job
Overhead application (overhead absorption) - ANSWER The third step in assigning MOH
costs. All costs associated with each production department are assigned to the product units
on which a department has worked
Two challenges in applying overhead costs effectively - ANSWER 1. suppose the
cost-accounting department waited until the end of an accounting period so that the actual
costs of manufacturing overhead could be determined before applying overhead costs to the
firm's products. The result would be very accurate overhead application. However, the
information might be useless because it was not available to managers for planning, control,
and decision making during the period.
2. Problem of trying to match up the way assign expenses to when we think they should be
assigned??
Full cycle approach allows for - ANSWER 1. allows a timely but reasonable approximation to
substitute for actual costs
2. combines costs that are only incurred sporadically (like the quarterly lease payments) and
, applies them to all production throughout the year
3. dampens the effects of cyclicality that are associated with causes unrelated to production
(like the weather), instead applying the costs in a way that reflects the annual average.
Volume-based cost driver (activity based) - ANSWER cost driver that is closely associated with
production volume, such as direct labor hours or machine hours
estimates are made of - ANSWER - the amount of manufacturing overhead that will be
incurred during the year
- the amount of the cost driver that will be used or incurred during the same year
predetermined overhead rate - ANSWER rate used to apply MOH to WIP inventory,
calculated: estimated MOH cost/ estimated amount of cost driver
Why is some product cost information frequently required to be disclosed outside of the
company? - ANSWER - rate changes that require regulatory approval
- reimbursement programs
- cost-plus contracts
Formula to apply overhead cost - ANSWER predetermined overhead rate x quantity of activity
required
Actual Manufacturing Overhead - ANSWER The actual costs incurred for indirect material,
