Flashcards Becker U2 P1

U2 D.1. Measurement Concepts: Part 1, and D.3.
Overhead Answer
The relevant range is the range of volume for which the assumptions of the cost driver (i.
Costs: Part 1
e., linear relationship with the costs incurred) are valid and in which the actual value of
Question the cost driver exists.
Define relevant range.
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U2 D.1. Measurement Concepts: Part 1, and D.3. Overhead Answer
Costs: Part 1
Question
What is the formula for cost of goods manufactured?
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U2 Page 1 of 18
Costs: Part 1
Question
What is the formula for cost of goods sold?
Costs: Part 1 Costs incurred before the split-off point are sunk costs, not relevant to further
processing decisions.
Question
With joint products, what is the treatment of costs incurred before the split-off point? Joint costs are allocated by an arbitrary means such as by unit volume relationships or
relative net realizable values at the split-off point.
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Revenue
Costs: Part 1
Less: Cost of goods sold
Question Gross margin
What is the absorption formula? Less: Operating expenses
Net income
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The difference is the treatment of fixed overhead. Under the absorption approach, fixed
Costs: Part 1
overhead is a product cost. Under the contribution approach, fixed overhead is a period
Question cost.
Explain the difference between the contribution approach and the absorption approach.
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The difference depends on the change in inventory level during the period.
Costs: Part 1
Question No change in Absorption Variable
=
Explain the difference between absorption costing net income and variable costing net inventory: income income
income. Absorption Variable
Increase in inventory: >
income income
Decrease in Absorption Variable
<
inventory: income income

In the short run, some of the economic costs are fixed because the inputs are fixed.
Costs: Part 1
Question In contrast, during the long run, all costs are variable, as inputs used for production are
Explain how production costs (inputs) differ in the short run and the long run. variable.
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U2
Answer
D.1. Measurement Concepts: Part 2
Product Costs
Inventoriable; they become cost of goods sold when sold.
Question
Distinguish between product and period cost. Period Costs
Expensed in the period incurred, as they are not inventoriable.
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U2
Answer
D.1. Measurement Concepts: Part 2
1. Product costing (inventory and cost of goods manufactured and sold).
Question 2. Efficiency measurements (comparison to standards).
Name the three most frequent objectives of an entity’s cost accounting system(s). 3. Income determination (profitability).
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U2
Answer
D.1. Measurement Concepts: Part 2 Budgeted manufacturing overhead costs
Traditional overhead
=
rate
Question Estimated cost driver
Determine the traditional overhead rate.
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U2
Answer
D.1. Measurement Concepts: Part 2 Job Costing
With job costing, each unit/batch is unique and easily identifiable costs are determined
Question by each job.
What is the difference between job and process costing? Example: We print your resume in our print shop.
Process Costing
With process costing, continuous mass-produced identical units are manufactured, and
costs are determined by activity/process/department.
Example: We process crude oil into gasoline.
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U2
Answer
D.1. Measurement Concepts: Part 2 Equivalent units = (Beginning WIP × % to be completed) + Units started and completed +
(Ending WIP × % completed)
Question
How are equivalent units and total cost calculated using the FIFO method? Total costs = Cost incurred during the current period
U2
Answer
D.1. Measurement Concepts: Part 2 Equivalent units = Units completed and transferred out + (Ending WIP × % completed)
Question Total costs = Costs in beginning WIP + Costs incurred during the current period
How are equivalent units and total cost calculated using the weighted average method?
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U2
Answer
D.1. Measurement Concepts: Part 2 ABC is a costing theory that assumes that resource-consuming activities cause costs and
that costs should be assigned to benefiting products based on the activities performed
Question and the resources consumed.
Define activity-based costing (ABC).
ABC systems often divide costs into multiple activity centers and identify the activities
that drive the costs in each cost center. Costs are then assigned based on the volume of
cost drivers at the determined rate per cost driver.
U2 D.1. Measurement Concepts: Part 3, D.2. Costing Answer
Systems: Part 1, and D.3. Overhead Costs: Part 2 Used in process costing, equivalent units are fully completed and partially completed
units during the period.
Question
What is an equivalent unit and how are the costs applied? In applying costs, determine the units, then costs, then apply the cost flow assumption
for cost per unit and allocation of costs.
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U2 Page 8 of 18
U2 D.1. Measurement Concepts: Part 3, D.2. Costing Answer
Abnormal: Charge to income of the current period.
Systems: Part 1, and D.3. Overhead Costs: Part 2
Normal: Increase the cost of the product produced (i.e., inventory).
Question
Name the types of spoilage and indicate the appropriate accounting treatment.
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U2 D.2. Costing Systems: Part 2, and D.3. Overhead Costs: Answer

Under the direct method, each service department’s total costs are directly allocated to
Part 3
the production departments without recognizing that the service departments
Question themselves may use the services from other service departments.
Compare and contrast the direct method and step-down method for allocating service
costs in activity-based costing. Under the step-down method, a sequential approach is used to allocate service
department costs to production departments as well as to other service departments.
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U2 Page 9 of 18
U2 D.2. Costing Systems: Part 2, and D.3. Overhead Costs: Answer
The high-low method is a technique that is used to estimate the fixed and variable
Part 3
portions of total costs.
Question
Describe the high-low method and how it is applied. To apply the high-low method:
1. Divide the difference between the high and low dollar total costs by the difference
in high and low volumes to obtain the variable cost per unit.
2. Use either the high volume or the low volume to calculate the variable costs by
multiplying the volume times the variable cost per unit.
3. Subtract the total calculated variable cost from total costs to obtain fixed costs.
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U2
Answer
D.4. Supply Chain Management A control chart is used to plot a comparison of actual results by batch or other suitable
constant interval to an acceptable range.
Question
What is a control chart and how is it used as a statistical quality-control tool? Control charts effectively indicate whether there is a trend toward improved quality
conformance or deteriorating quality conformance.
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U2 Page 10 of 18
U2
Answer
D.4. Supply Chain Management A Pareto diagram identifies the frequency (highest to lowest) of defects or problems
that demand management attention.
Question
How are Pareto diagrams and fishbone diagrams used to identify quality-control issues Once initially identified in the Pareto diagram, the individual defects/problems are
(defects)? further analyzed by cause and effect in a fishbone diagram.
U2
Answer
D.4. Supply Chain Management The costs associated with maintaining existing quality standards are termed
conformance costs, and include both prevention and appraisal costs.
Question
Differentiate between conformance costs and nonconformance costs as they pertain to The costs associated with correcting nonconformance with existing quality standards
achieving quality standards. are called nonconformance costs, and include both internal failure and external failure
costs.
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Answer
D.4. Supply Chain Management Contribution margin ratio = Contribution margin / Revenue
Question
What is the contribution margin ratio formula?
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U2
Answer
D.4. Supply Chain Management Supply chain management is concerned with:
Question What: Goods received should match goods ordered.

Supply chain management is concerned with what four characteristics of every sale? When: Goods should be delivered by the date promised.
Where: Goods should be delivered to the location requested.
How much: The goods' cost should be the lowest possible.
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U2
Answer
D.4. Supply Chain Management
Outsourcing is defined as the contracting of services to external providers.
Question
Define outsourcing.
U2
Answer
Just-in-time (JIT) management anticipates achievement of efficiency by scheduling the
deployment of resources just in time to meet customer or production requirements.
Question
Define JIT and the underlying concept of JIT.
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U2 Page 13 of 18
U2
Answer
D.4. Supply Chain Management The four key management processes of SCM (SCOR model):
Question Plan
What are the four key management processes of supply chain management (SCM)? Source
Make
Deliver
U2
Answer
D.4. Supply Chain Management Theory of constraints anticipates that organizations are impeded from achieving
objectives by the existence of one or more constraints. The organization or project must
Question be consistently operated in a manner that either works around or leverages the
Define theory of constraints. constraint.
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U2 Page 14 of 18
U2
Answer
1. Identification of the constraint.
Question 2. Exploitation of the constraint.
What are the five steps in the theory of constraints? 3. Subordinate everything else to the above decisions.
4. Elevate the constraint.
5. Return to the first step.
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U2
Answer
D.5. Business Process Improvement Value chain analysis (VCA) is a strategic tool that helps an entity determine the
importance of its value (as perceived by buyers) with respect to the market in which it
Question operates. The steps in VCA are:
Describe value chain analysis, including the four general steps used to implement it.
Identify value activities.
Determine cost drivers associated with each activity.
Develop a competitive advantage by reducing cost or adding value.
Exploit linkages among activities in the value chain.
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U2
Answer
D.5. Business Process Improvement
Business process management (BPM) seeks to coordinate the functions of a business to
achieve customer satisfaction as efficiently as possible.
Question
Define and describe the purpose of business process management.
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U2
Answer
D.5. Business Process Improvement BPR represents the techniques used by an organization to help rethink how work
should be done to significantly improve customer satisfaction and service, reduce
Question operating costs, and enhance competitiveness.
Describe business process reengineering (BPR) and explain how it is different from
business process management (BPM). BPR seeks radical change, while BPM seeks incremental change.
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U2
Answer
D.5. Business Process Improvement Total quality management (TQM) represents an organization's commitment to a
customer-focused performance that emphasizes both quality and continuous
Question improvement.
Define TQM.
U2
Answer
D.5. Business Process Improvement Kaizen is a term for continuous improvement efforts that improve the efficiency and
effectiveness of organizations through greater operational control. Kaizen occurs during
Question the manufacturing stage.
Define Kaizen.
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U2 Page 17 of 18
U2
Answer
1. Design
Question 2. Modeling
List the five business process management activities. 3. Execution
4. Monitoring
5. Optimization
U2
Answer
1. Plan
Question 2. Do
List the elements of PDCA. 3. Check
4. Act
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U2 D.1. Measurement Concepts: Part 1, and D.3.

U2 D.1. Measurement Concepts: Part 1, and D.3. Overhead Answer

U2 D.1. Measurement Concepts: Part 1, and D.3. Overhead Answer

U2 D.1. Measurement Concepts: Part 1, and D.3. Overhead Answer

U2 D.1. Measurement Concepts: Part 1, and D.3. Overhead Answer

U2 D.1. Measurement Concepts: Part 3, D.2. Costing Answer

U2 D.2. Costing Systems: Part 2, and D.3. Overhead Costs: Answer

Question What: Goods received should match goods ordered.

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