IndietroFinancial Accounting Exam 1 Review Flashcards
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Manufacturing companies have work in process inventory because they produce goods in stages.
Design, Marketing, Customer Service are value chain activities; Administration is not.
A direct cost is a cost that can be traced directly to a cost object.
Operating expenses are often referred to as period costs.
Direct labor and manufacturing overhead together form conversion costs.
Period costs like depreciation on office computers are not manufacturing overhead.
Merchandising and manufacturing companies always have Cost of Goods Sold accounts.
Service companies have no inventory; merchandisers have merchandise inventory; manufacturers have raw materials, work in process, and finished goods inventory.
It is a marketing cost in the value chain.
Costs directly traceable to Juniors (e.g., sales clerks, clothing) are direct costs; shared costs (e.g., electricity, store manager salary) are indirect costs.
The cost of sugar is a product cost because it is a direct material.
Staffing costs for the Visitors Center are period costs because they are not related to manufacturing.
Product costs include materials, factory utilities, and depreciation on plants; period costs include CEO life insurance, advertising, and executive salaries.
30% is a period cost; 70% is a product cost (manufacturing overhead).
COGS = Beginning Inventory + Purchases + Freight-in + Import duties - Ending Inventory.
Direct materials used = Beginning raw materials + Purchases + Freight-in + Import duties - Ending raw materials.
COGM = Beginning WIP + Direct materials used + Direct labor + Manufacturing overhead - Ending WIP.
Job costing is appropriate for custom or unique products/services, not for mass-produced items.
The job cost record accumulates all manufacturing costs for a job.
Manufacturing overhead is allocated to jobs using a predetermined overhead rate.
Overallocated overhead means jobs are undercosted, and Cost of Goods Sold is adjusted downward.
Raw materials inventory decreases; work in process inventory increases.
Predetermined overhead rate = \(\frac{Estimated\ MOH}{Estimated\ Allocation\ Base}\)
Process costing is suitable because Smarties are produced in continuous, homogeneous batches.
ABC assigns manufacturing overhead to products based on activities that drive costs, improving accuracy.
Prevention, Appraisal, Internal failure, and External failure costs.
Costs incurred to avoid poor-quality goods or services, such as training employees.
Costs incurred after delivery due to defects, such as warranty repairs and legal fees.