Test Bank - Cost Accounting Foundations and Evolutions, 10th Ed.
By Michael R. Kinney, Cecily A. Raiborn, Amie L. Dragoo
(All Chapters, Verified Answers with Explanation and Full Course Outline)
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, Table of Contents
Chapter 1 - Introduction to Cost Accounting ................................. 1
Chapter 2 - Cost Terminology and Cost Behaviors ........................ 24
Chapter 3 - Predetermined Overhead Rates, Flexible Budgets, and Absorption/Variable Costing
Chapter 4 - Activity-Based Management and Activity-Based Costing ... 103
Chapter 5 - Job Order Costing .................................................. 149
Chapter 6 - Process Costing ..................................................... 191
Chapter 7 - Standard Costing and Variance Analysis .................... 243
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Chapter 8 - The Master Budget ................................................. 301
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Chapter 9 - Break-Even Point and Cost-Volume-Profit Analysis ...... 353
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Chapter 10 - Relevant Information for Decision Making ................ 391
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Chapter 11 - Allocation of Joint Costs and Accounting for By-Product/Scrap........................ 433
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Chapter 12 - Introduction to Cost Management Systems .............. 473
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Chapter 13 - Responsibility Accounting, Support Department Cost Allocations, and Transfer Pricing...
Chapter 14 - Performance Measurement, Balanced Scorecards, and Performance Rewards........ 550
Chapter 15 - Capital Budgeting ................................................. 600
Chapter 16 - Managing Costs and Uncertainty ............................. 642
Chapter 17 - Implementing Quality Concepts .............................. 684
Chapter 18 - Inventory and Production Management .................... 727
Chapter 19 - Emerging Management Practices ............................. 772
,Introduction to Cost Accounting
Learning Objectives
After completing this chapter, you should be able to answer the following questions:
1. What are the relationships among financial, management, and cost accounting?
2. What is a mission statement, and why is it important to organizational strategy?
3. What is a value chain, and what are the major value chain functions?
4. How is a balanced scorecard used to implement an organization’s strategy?
5. Why is ethical behavior so important in organizations?
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Terminology er
Authority: The right (usually by virtue of position or rank) to use resources to accomplish a task or achieve an
objective
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Balanced scorecard: A framework that restates an organization’s strategy into clear and objective
performance measures focused on customers, internal business processes, employees, and shareholders
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Competence: Professional ethics standard that requires professionals to develop and maintain the skills
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needed to practice their profession
Confidentiality: Professional ethics standard that requires professionals to refrain from disclosing company
Ex
information to inappropriate parties (such as competitors)
Core competency: Any critical function or activity in which an organization seeks a higher proficiency than its
competitors, making it the root of competitiveness and competitive advantage
Cost accounting: A discipline that addresses the demands of both financial and management accounting by
providing product cost information to (1) external parties (stockholders, creditors, and various regulatory
bodies) for investment and credit decisions and (2) internal managers who are responsible for planning,
controlling, decision making, and evaluation of performance
Cost leadership: A company’s ability to maintain its competitive advantage by undercutting competitor prices
Credibility: Professional ethics standard that requires individuals to provide full, fair, and timely disclosure of
all relevant information in a given situation
Customer value perspective: The balanced scorecard perspective that addresses how well the organization
is doing relative to important customer criteria such as speed (lead time), quality, service, and price (both
purchase and after purchase)
Downstream cost: Costs such as marketing, distribution, and customer service which are typically incurred
after production of the product as opposed to upstream costs of research and development and product
design
Earnings management: The act of using accounting methods or practices to deliberately “adjust” a
company’s profit amount to meet a predetermined internal or external target
Environmental constraint: any limitation caused by external cultural, fiscal (such as taxation structures),
legal/regulatory, or political situations and by the competitive market structures that cannot be directly
, controlled by management
Financial performance perspective: The balanced scorecard perspective that addresses the concerns of
stockholders and other stakeholders about profitability and organizational growth
Integrity: Professional ethics standard that prohibits individuals from participating in activities that would
discredit their company or profession
Intellectual capital: All of the intangible assets contained in an organization, including knowledge, skills, and
information that are used to create ideas for products and services, to train and develop employees, and to
attract and retain customers
Internal business perspective: The balanced scorecard perspective that addresses those things that the
organization needs to do well to meet customer needs and expectations
Lag indicator: Historical financial data or other outcomes resulting from past actions, such as installing a new
production process or implementing a new software system
Lead indicator: Future financial and non-financial outcomes including opportunities and problems that help
an organization assess strategic progress and guide decision making before lag indicators are known
Learning and growth perspective: The balanced scorecard perspective that focuses on using the
organization’s intellectual capital to adapt to changing customer needs or to influence new customer needs
and expectations through product or service innovations
Line personnel: Employees who work directly toward attaining organizational goals. Line personnel are
often held responsible for achieving targeted balanced scorecard measures or budgeted operating income for
their divisions or geographic regions; examples would include managers in production, sales, and distribution
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Management accounting: That part of accounting that is concerned with providing information to parties
inside an organization so that they can plan, control operations, make decisions, and evaluate performance
er
Mission statement: A written expression of organizational purpose that describes how the organization
M
uniquely meets its targeted customers’ needs with its products or services
Organizational structure: Reflects the way in which authority and responsibility for making decisions is
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distributed in an organization
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Product Cost: The sum of the costs incurred within the factory to make one unit of product
Product differentiation: A company’s ability to offer superior quality products or more unique services than
competitors; such products and services, generally, are sold at a premium price
Ex
Responsibility: The obligation to accomplish a task or achieve an objective
Return on investment (ROI): A measure calculated as net income divided by total assets which was used
historically to allocate resources and evaluate divisional performance
Service Cost: The sum of the direct costs incurred within a nonmanufacturing company or nonprofit
organization to provide a given service
Staff personnel: Employees who give assistance and advice to line personnel; examples include employees
in marketing, engineering, accounting, and finance
Strategy: The link between an organization’s goals and objectives and the activities actually conducted by
the organization
Upstream cost: Costs such as research and development and product design which are typically incurred
before production of the product as opposed to downstream costs of marketing, distribution, and customer
service
Value chain: The set of value-adding functions or processes that convert inputs into products and services
for the firm’s customers
By Michael R. Kinney, Cecily A. Raiborn, Amie L. Dragoo
(All Chapters, Verified Answers with Explanation and Full Course Outline)
cy
er
M
rt
pe
Ex
, Table of Contents
Chapter 1 - Introduction to Cost Accounting ................................. 1
Chapter 2 - Cost Terminology and Cost Behaviors ........................ 24
Chapter 3 - Predetermined Overhead Rates, Flexible Budgets, and Absorption/Variable Costing
Chapter 4 - Activity-Based Management and Activity-Based Costing ... 103
Chapter 5 - Job Order Costing .................................................. 149
Chapter 6 - Process Costing ..................................................... 191
Chapter 7 - Standard Costing and Variance Analysis .................... 243
cy
Chapter 8 - The Master Budget ................................................. 301
er
Chapter 9 - Break-Even Point and Cost-Volume-Profit Analysis ...... 353
M
Chapter 10 - Relevant Information for Decision Making ................ 391
rt
Chapter 11 - Allocation of Joint Costs and Accounting for By-Product/Scrap........................ 433
pe
Chapter 12 - Introduction to Cost Management Systems .............. 473
Ex
Chapter 13 - Responsibility Accounting, Support Department Cost Allocations, and Transfer Pricing...
Chapter 14 - Performance Measurement, Balanced Scorecards, and Performance Rewards........ 550
Chapter 15 - Capital Budgeting ................................................. 600
Chapter 16 - Managing Costs and Uncertainty ............................. 642
Chapter 17 - Implementing Quality Concepts .............................. 684
Chapter 18 - Inventory and Production Management .................... 727
Chapter 19 - Emerging Management Practices ............................. 772
,Introduction to Cost Accounting
Learning Objectives
After completing this chapter, you should be able to answer the following questions:
1. What are the relationships among financial, management, and cost accounting?
2. What is a mission statement, and why is it important to organizational strategy?
3. What is a value chain, and what are the major value chain functions?
4. How is a balanced scorecard used to implement an organization’s strategy?
5. Why is ethical behavior so important in organizations?
cy
Terminology er
Authority: The right (usually by virtue of position or rank) to use resources to accomplish a task or achieve an
objective
M
Balanced scorecard: A framework that restates an organization’s strategy into clear and objective
performance measures focused on customers, internal business processes, employees, and shareholders
rt
Competence: Professional ethics standard that requires professionals to develop and maintain the skills
pe
needed to practice their profession
Confidentiality: Professional ethics standard that requires professionals to refrain from disclosing company
Ex
information to inappropriate parties (such as competitors)
Core competency: Any critical function or activity in which an organization seeks a higher proficiency than its
competitors, making it the root of competitiveness and competitive advantage
Cost accounting: A discipline that addresses the demands of both financial and management accounting by
providing product cost information to (1) external parties (stockholders, creditors, and various regulatory
bodies) for investment and credit decisions and (2) internal managers who are responsible for planning,
controlling, decision making, and evaluation of performance
Cost leadership: A company’s ability to maintain its competitive advantage by undercutting competitor prices
Credibility: Professional ethics standard that requires individuals to provide full, fair, and timely disclosure of
all relevant information in a given situation
Customer value perspective: The balanced scorecard perspective that addresses how well the organization
is doing relative to important customer criteria such as speed (lead time), quality, service, and price (both
purchase and after purchase)
Downstream cost: Costs such as marketing, distribution, and customer service which are typically incurred
after production of the product as opposed to upstream costs of research and development and product
design
Earnings management: The act of using accounting methods or practices to deliberately “adjust” a
company’s profit amount to meet a predetermined internal or external target
Environmental constraint: any limitation caused by external cultural, fiscal (such as taxation structures),
legal/regulatory, or political situations and by the competitive market structures that cannot be directly
, controlled by management
Financial performance perspective: The balanced scorecard perspective that addresses the concerns of
stockholders and other stakeholders about profitability and organizational growth
Integrity: Professional ethics standard that prohibits individuals from participating in activities that would
discredit their company or profession
Intellectual capital: All of the intangible assets contained in an organization, including knowledge, skills, and
information that are used to create ideas for products and services, to train and develop employees, and to
attract and retain customers
Internal business perspective: The balanced scorecard perspective that addresses those things that the
organization needs to do well to meet customer needs and expectations
Lag indicator: Historical financial data or other outcomes resulting from past actions, such as installing a new
production process or implementing a new software system
Lead indicator: Future financial and non-financial outcomes including opportunities and problems that help
an organization assess strategic progress and guide decision making before lag indicators are known
Learning and growth perspective: The balanced scorecard perspective that focuses on using the
organization’s intellectual capital to adapt to changing customer needs or to influence new customer needs
and expectations through product or service innovations
Line personnel: Employees who work directly toward attaining organizational goals. Line personnel are
often held responsible for achieving targeted balanced scorecard measures or budgeted operating income for
their divisions or geographic regions; examples would include managers in production, sales, and distribution
cy
Management accounting: That part of accounting that is concerned with providing information to parties
inside an organization so that they can plan, control operations, make decisions, and evaluate performance
er
Mission statement: A written expression of organizational purpose that describes how the organization
M
uniquely meets its targeted customers’ needs with its products or services
Organizational structure: Reflects the way in which authority and responsibility for making decisions is
rt
distributed in an organization
pe
Product Cost: The sum of the costs incurred within the factory to make one unit of product
Product differentiation: A company’s ability to offer superior quality products or more unique services than
competitors; such products and services, generally, are sold at a premium price
Ex
Responsibility: The obligation to accomplish a task or achieve an objective
Return on investment (ROI): A measure calculated as net income divided by total assets which was used
historically to allocate resources and evaluate divisional performance
Service Cost: The sum of the direct costs incurred within a nonmanufacturing company or nonprofit
organization to provide a given service
Staff personnel: Employees who give assistance and advice to line personnel; examples include employees
in marketing, engineering, accounting, and finance
Strategy: The link between an organization’s goals and objectives and the activities actually conducted by
the organization
Upstream cost: Costs such as research and development and product design which are typically incurred
before production of the product as opposed to downstream costs of marketing, distribution, and customer
service
Value chain: The set of value-adding functions or processes that convert inputs into products and services
for the firm’s customers
