Questions and Answers
What happens to the total cost per unit when production decreases while fixed costs remain unchanged?
Which cost driver is most likely associated with the billing function?
What is the total operating income for Arctic, Inc. in September?
If sales double in October, what will be the projected operating income based on the September data?
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Which of the following represents a component of indirect manufacturing costs?
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What is the relationship between variable costs and the number of units produced?
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What number of desktop computers is aligned with the computer support function as a cost driver?
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In terms of personnel costs, which cost driver is most relevant?
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What is the total amount of prime costs added to production during 20X9?
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Which of the following correctly represents the formula for calculating conversion costs?
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What amount was reported for the Finished Goods Inventory at the end of March 31, 20X9?
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What total amount is attributed to Direct Manufacturing Labor?
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How is the Cost of Goods Sold (COGS) determined based on the information provided?
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Which of the following is NOT included in the calculation of Prime Costs?
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What was the amount of Indirect Manufacturing Labor used during the period?
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Which of the following costs is classified as a conversion cost?
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What is the primary purpose of cost accounting?
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How does cost accounting support tax accounting and financial accounting?
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Which of the following is a key focus of cost management?
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What does cost management emphasize during the product lifecycle?
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Which users typically require dis-aggregated quantitative and qualitative non-financial information on a timely basis?
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Who is credited with defining cost management in the given context?
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Which aspect is NOT a focus of cost management according to the provided content?
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What is the primary difference between cost accounting reports and financial statements for plant managers?
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How often do some operating managers need information regarding performance?
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What is NOT a necessary function of cost accounting for management decisions?
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Which of the following best describes one of the four primary functions of cost accounting?
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Why is cost accounting considered foundational for other accounting disciplines?
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In the context of Asian Manufacturing Company, how should costs be categorized to the finished furniture?
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What is the primary focus of job order costing?
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In which costing method are costs accumulated uniformly due to standardized work performed?
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How does activity-based costing differ from traditional costing systems in cost assignment?
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Which of the following is NOT typically associated with job order costing?
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What does cost accumulation refer to?
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Which of the following is a suitable application for process costing?
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What may limit the assignment of certain costs in activity-based costing systems?
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Which of the following best describes a characteristic of job order costing?
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Study Notes
Indirect Manufacturing Costs
- Comprises both fixed and variable components, affecting overall production costs.
- Fixed costs disproportionately increase per unit when fewer units are produced, as total costs remain constant while production decreases.
- Variable costs generally remain unchanged with production fluctuations.
Cost Drivers and Business Functions
- Essential to identify cost drivers for various business functions to accurately calculate costs.
- Functions include Purchasing, Billing, Shipping, Computer Support, Personnel, and Customer Service.
- Corresponding representative cost drivers are mapped as follows:
- Purchasing - F (Number of purchase orders)
- Billing - D (Number of invoices)
- Shipping - B (Number of shipments)
- Computer Support - E (Number of desktop computers)
- Personnel - A (Number of employees)
- Customer Service - C (Number of customers)
Sales and Operating Income
- For September, Arctic, Inc. reported:
- Sales: P15,000
- Variable costs: P3,000
- Fixed costs: P4,000
- Operating income: P8,000
- Projected operating income for October assumes sales will double.
Cost Components in Manufacturing
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Schedule of Cost of Goods Manufactured includes:
- Beginning Work-in-Process Inventory.
- Direct Materials used.
- Direct Manufacturing Labor.
- Indirect costs and other manufacturing expenses.
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Schedule of Cost of Goods Sold factors in:
- Beginning and ending Finished Goods Inventory.
- Total production costs during the period.
Cost Accounting Overview
- Integrates with tax, financial, and managerial accounting for comprehensive cost determination.
- Necessary for tax compliance and external financial reporting.
- Informs management decisions on product pricing, production feasibility, and resource allocation.
Cost Management
- Emphasizes proactive cost reduction and management over mere reporting.
- Focuses on early cost engagement in product design stages for long-term savings.
Cost Accumulation Methods
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Job Order Costing:
- Costs accumulated by specific jobs or orders tailored to customer specifications.
- Used in sectors like construction and bespoke manufacturing.
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Process Costing:
- Costs accumulated by departments or processes, suitable for uniform production processes.
- Common in industries like food, chemicals, and textiles.
Planning and Controlling Costs
- Recognizes the need for detailed information for operational management.
- Requires timely, often real-time, data for effective monitoring and control of production activities.
- Cost reports must align with the needs of plant managers for efficiency and performance evaluation.
Class Exercises
- Focuses on identifying and categorizing costs related to manufacturing furniture.
- Aims to establish a formal cost accounting system through proper classification of direct, indirect, and non-manufacturing costs.
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Description
Explore the intricacies of indirect manufacturing costs, including fixed and variable components that influence production expenses. Understand the importance of cost drivers in various business functions and how they relate to operational efficiency. This quiz will help you grasp key concepts essential for effective business management.
