Cost Accounting (Midterms)

• PAS 2 - Inventories
• PAS 16 - Property, Plant, and Equipment
• PAS 40 - Investment Property
• PAS 38 - Intangible Assets
• PAS 8 - Accounting Policies, Changes in Accounting Estimates and Error
• A streamlined accounting system - Backflush Costing
• In backflush costing, the journal entry to record direct-labor cost incurred is Debit to Conversion Cost.
• An example of carrying costs are Handling Cost and Spoilage.
• Economic Order Quantity is defined as the point where inventory carrying costs and ordering costs are at their lowest.
• The ordering cost associated with inventory management include: Purchasing costs, shipping costs, setup costs, and quantity discounts lost.
• Material Requisition Slip is use for issuing materials to production departments.
• Spoiled units are the units that do not meet production standards, no further work is performed and sold for their salvage value.
• When there is loss due to spoilage and it is charged to a specific job, cost per unit will increase.
• When there is loss due to spoilage and it is charged to all production, cost per unit will remain the same.
• The amount by which a manufacturer reduces the retail price of a product when it sells to a reseller, rather than to the end customer is trade discount.
• Purchase Discount = Cash Discount
• An intangible asset is initially measured at cost.
• Periodic inventory system records inventory under purchases account.
• Perpetual inventory system records inventory under material inventory account.
• At break even, gross profit equals zero.
• The margin of safety is the difference between budgeted sales and break even sales.
• The amount by which sales can decline before losses occur is known as the margin of safety.
• In contribution income statement, fixed costs are shown separately from variable costs.
• A decrease in selling price would decrease contribution margin the most.
• At breakeven point, the contribution margin equals total fixed costs.
• A decrease in selling price would decrease the contribution margin the most.
• Underapplied factory overhead is a debit balance.
• Overapplied factory overhead is when the applied factory overhead exceeds actual overhead.
• The use of indirect materials previously purchased is recorded as a decrease in raw materials control.
• Cost of goods sold is an expense account.
• Inventoriable costs are expensed on the income statement when the products are sold.
• Management accounting information is generally prepared for managers.
• Period costs are generally expensed in the same period in which they are incurred.
• Cost of goods sold is an expired product cost.
• The indirect cost of converting raw materials into finished goods are called overhead costs.
• Conversion cost does not include direct material.
• COGM = Beg. WIP Inventory + direct labor + direct material used + overhead incurred - Ending WIP Inventory
• Finished goods are inventories that a company ordinarily hold for sale.
• Factory equipment is not a component of manufacturing overhead.
• Costs that can be easily traced to a specific department are called direct costs.