Cost Accounting Concepts Quiz

Product Costs

• Period Costs: Costs not directly tied to production, incurred throughout the period.
• Prime Costs: Direct materials plus direct labor.
• Conversion Costs: Direct labor plus manufacturing overhead.
• Direct Costs: Costs directly traceable to the product, including Direct Labor and Direct Materials.
• Indirect Costs: Costs not directly traceable to the product, including Indirect Materials and Indirect Labor.
• Overhead Costs: Indirect costs of production.
• Mixed Costs: Costs with both fixed and variable components.
• Cost Drivers: Factors that influence costs.
• Sunk Costs: Irrecoverable costs.
• Opportunity Costs: Potential benefits lost from choosing one alternative over another.
• Contribution Margin: Sales revenue minus variable expenses.
• Gross Margin: Sales revenue minus cost of goods sold (COGS).
• Traditional Income Statement: Categorizes costs by function (e.g., COGS, selling, administrative).
• Contribution Income Statement: Categorizes costs by their behavior (variable versus fixed).

Cost Accounting

• Calculating Overhead Costs: involves estimating variable and fixed overhead, then summing the total.
• POHR (Predetermined Overhead Rate): Rate used to apply overhead to jobs or products.
• Plantwide POHR: A single overhead rate for the entire factory.
• Departmental POHR: Separate overhead rates for different departments.
• Allocation Base: The measure used to assign overhead costs (e.g., direct labor hours, machine hours).
• Normal Costing Systems: Cost systems that use predetermined overhead rates.
• Job-Order Costing: Assigning costs to specific jobs or projects.
• Absorption Costing: Includes all manufacturing costs (direct materials, direct labor, and both variable and fixed overhead).
• Overhead Application: Process of assigning overhead to jobs based on predetermined rates.
• Job Cost Sheet: Document to track costs for a specific job.
• Activity-Based Costing (ABC): System that identifies activities and assigns overhead based on activity consumption.
• Markups Calculation: Total cost multiplied by the desired markup percentage.
• Finding Selling Price: Total costs plus desired markup.

Cost Accounting Applications

• Underapplied Overhead: Occurs when the actual overhead is higher than the applied overhead.
• Overapplied Overhead: Occurs when the actual overhead is lower than the applied overhead.
• Accounting Formula: Assets = Liabilities + Equity
• T-Accounts: Visual representation of account transactions, showing debits and credits.
• Normal Debit/Credit Balances of Accounts: Important for understanding T-Accounts.
• Reading T-Accounts: Interpreting debits and credits for accounting entries.
• Journal Entries: Records of transactions affecting a business.
• Effect of Overapplied/Underapplied Overhead on Net Income: Adjustment to net income to correct for the difference between actual and applied overheads.
• Schedule of Cost of Goods Manufactured: Summarizes costs involved in production, including raw materials, work-in-process and finished goods.
  • Raw Materials: The unprocessed materials used to make a product.
  • Work in Process: Products that are partially completed.
  • Finished Goods: Completed products ready for sale.
• Schedule of Cost of Goods Sold: Tracks costs of goods sold during a given period.

Test your knowledge on essential cost accounting concepts, including period costs, prime costs, and contribution margins. This quiz covers various types of costs and their implications in financial statements. Perfect for students and professionals seeking to clarify their understanding of cost classifications.