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Name the three components of product cost
- Direct Materials (DM)
- Direct Labor (DL)
- Manufacturing Overhead (MOH)
- Prime Cost = DM + DL
- Conversion Costs = DL + MOH
Distinguish between product and period cost
Product Costs: Inventoriable, they become cost of goods sold when sold
Period Costs: Expensed in the period incurred
Define the Traditional Overhead rate
Define relevant range
The relevant range is the range of volume for which the assumptions of the cost driver (i.e., linear relationship with the costs incurred) are valid and in which the actual value of the cost driver exists
With joint products, what is the treatment of costs incurred before the split-off point?
Costs incurred before the split-off point are sunk costs, not relevant to further processing decisions.
Joint costs are allocated using one of the following methods.
- Use % of product to total based on a ratio of
- 1) Relative Sales Value
- 2) Net Realizable Value
- 3) Physical Units
What is the formula for cost of goods manufactured
- WIP (beginning)
- Add: Product Costs
- Less: WIP (ending)
- Equals: Cost of Goods Manufactured
What is the formula for cost of goods sold?
- Manufacturing Entity
- Finished Goods (beginning)
- Add: Cost of Goods Manufactured
- Less: Finished Goods (ending)
- Equals: Cost of Goods Sold
- OtherBeginning Inventory
- Add: Purchases
- Less: Ending Inventory
- Equals: Cost of Goods Sold
What is the difference between job and process costing
Job costing: each unit/batch is unique and easily identifiable costs are determined by each job
Process costing: continuous mass-produced identical units are manufactured, and costs are determined by activity/process/department
What is an equivalent unit?
Used in process costing, equivalent units are fully completed and partially completed units during the period
How are equivalent units and total costs calculated using the FIFO method?
Equivalent Units = (Beginning WIP * % to be completed) + units started and Completed + (Ending WIP * % completed)
Total costs = Cost incurred during the current period
How are equivalent units and total cost calculated using the weighted average method?
Equivalent Units = Units completed + (Ending WIP * % completed)
Total costs = Costs in beginning WIP + Costs incurred during the current period
Name the types of spoilage and indicate the appropriate accounting treatment
- Abnormal: Charge to income of the current period
- Normal: Increase the cost of the product produced
Define Transaction Marketing
Customers are attracted for the sake of a single sale
Define Interaction-based relationship marketing
When customers are attracted for the purpose of a sale that serves as the basis for an ongoing relationship
Define database marketing
Information is gathered on customers and the information from that database is used to segment customers into target markets for a more effective selling effort
Identify three types of compensation generally available
- 1) Fixed Salary
- 2) Bonuses
- 3) Perks
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