ACCT 302 Exam 2: Process Costing, Support-Department Cost Allocation, and CVP Analysis

Comprehensive practice flashcards for ACCT 302 Exam 2 covering Chapter 18 (Process Costing and Transferred-In Costs), Chapter 16 (Support-Department Cost Allocation, Common Costs, and Revenue Allocation), and Chapter 3 (Cost-Volume-Profit Analysis and Operating Leverage).

Job costing is used for __________ units of a product or service.

distinct, identifiable

Process costing is used for masses of __________ units.

identical or similar

Custom-made machines, houses, and jewelry are typical examples of items accounted for using __________.

job costing

Food and chemical processing are typical examples of industries that use __________.

process costing

In job costing, costing every job at the same average would be wrong because each job uses different quantities of __________.

resources

In process costing, the costing approach applies __________ average production cost for all units.

one

The main difference between job costing and process costing is the extent of __________ used to compute unit costs.

averaging

In process costing, unit cost is obtained by assigning total costs to many __________ units of output.

identical or similar

In process costing, unit cost is calculated as total costs incurred divided by __________.

number of units of output

In process costing, each unit receives the same or similar amounts of direct materials, direct manufacturing labor, and __________.

manufacturing overhead

Direct materials are usually added at the __________ of the process.

beginning

Conversion costs are generally added __________ along the production process.

equally (evenly)

Step 1 of the five-step process-costing allocation is to summarize the flow of __________ of output.

physical units

Step 2 of the five-step process-costing allocation is to compute output in terms of __________.

equivalent units

Step 3 of the five-step process-costing allocation is to summarize __________ to account for.

total costs

Step 4 of the five-step process-costing allocation is to compute __________.

cost per equivalent unit

Step 5 of the five-step process-costing allocation is to assign total costs to units completed and to units in __________.

ending work in process (WIP)

An equivalent unit is a derived amount of output units that converts input in completed and unfinished WIP units into the number of completed output units that could be made with that __________.

input

Equivalent units are calculated separately for direct materials, conversion costs, and __________.

transferred-in costs

In step 2 of process costing, one must focus on quantities and ignore __________ until equivalent units are computed.

dollars

If the percentage of completion is estimated incorrectly, the calculated __________ will be wrong.

unit cost

When direct materials are purchased and used in Assembly, the journal entry debits WIP – Assembly and credits __________.

Accounts Payable Control

Conversion costs such as energy, supplies, labor, and plant depreciation are recorded by debiting WIP – Assembly and crediting __________.

Various accounts

When units are completed in Assembly and sent to Testing, the debit is to __________.

WIP – Testing

When units completed in Assembly are transferred to Testing, the credit is to __________.

WIP – Assembly

In Candid, Inc. Case 2, during February 5,000 cameras are placed into production, but only __________ cameras are fully completed at month end.

$$4,000$$

In Candid, Inc. Case 2, the remaining 1,000 cameras at the end of February are __________ complete as to conversion costs.

$$60\%$$

The weighted-average method calculates the cost per equivalent unit of all work done to date, regardless of the __________ in which it was done.

period

In the weighted-average method, the beginning WIP balance is __________ with current-period costs.

blended

Weighted-average cost per EU equals the total of all costs entering the WIP account divided by __________.

total EU of work done to date

The first-in, first-out (FIFO) method assigns the cost of the previous period's equivalent units in beginning WIP to the __________ completed and transferred out.

first units

Under FIFO, work done on beginning inventory before the current period is kept __________ from current-period work.

separate

Under the FIFO method, only __________ costs and units are used to compute the cost per equivalent unit of current work.

current-period

Step 5 of process costing yields two critical figures: the ending WIP balance on the balance sheet and the journal-entry amount transferring completed costs from WIP to __________ inventory.

finished goods

Journal entries under FIFO are the same as weighted-average except for the __________.

amounts

FIFO assumes that ending WIP consists entirely of __________ units.

lower-cost, current-period

Compared to FIFO, the weighted-average method __________ cost per equivalent unit by blending prior and current periods.

smooths

The process-costing method that gives managers explicit information about changes in cost per unit from one period to the next is __________.

FIFO

In a period of rising prices, the weighted-average method decreases taxes because cost of goods sold is higher and operating income is __________.

lower

In Quality Time Pieces, Inc., beginning WIP on May 1 consists of __________ physical units (watches).

$$100$$

For Quality Time Pieces, Inc., the May 1 beginning WIP direct materials cost is __________.

$$\$459,888$$

For Quality Time Pieces, Inc., the May 1 beginning WIP conversion costs are __________.

$$\$142,570$$

In Quality Time Pieces, Inc., beginning WIP degree of completion is 80% for direct materials and __________ for conversion costs.

$$35\%$$

In Quality Time Pieces, Inc., ending WIP on May 31 degree of completion is 80% for direct materials and __________ for conversion costs.

$$40\%$$

In Quality Time Pieces, Inc., the number of watches started in May 20X7 is __________.

$$510$$

In Quality Time Pieces, Inc., the number of watches completed during May 20X7 is __________.

$$450$$

In Quality Time Pieces, Inc., the number of watches in ending WIP on May 31 is __________.

$$160$$

In Quality Time Pieces, Inc., total direct materials costs added during May 20X7 equal __________.

$$\$3,237,000$$

In Quality Time Pieces, Inc., total conversion costs added during May 20X7 equal __________.

$$\$1,916,000$$

Transferred-in costs are also called __________ costs.

previous department

Transferred-in costs are treated in process costing as if they were a separate type of direct material added at the __________ of the process.

beginning

Unit costs transferred to the next department are transferred at __________ average unit cost.

one

Under FIFO, transferred units may contain batches accumulated at different costs because unit costs may __________ between periods.

fluctuate

When units are measured differently in different departments (such as feet vs. yards), they must be __________ to the correct measure.

converted

Trendy Clothing, Inc. manufactures winter clothes using two departments: knitting and __________.

finishing

In the finishing department of Trendy Clothing, Inc., direct materials are added at the __________ of the process.

end

On June 1, Trendy Clothing's beginning WIP has a degree of completion of 100% for transferred-in, 0% for direct materials, and __________ for conversion costs.

$$50\%$$

In Trendy Clothing, Inc., physical units transferred in during June equal __________ tons.

$$100$$

In Trendy Clothing, Inc., tons of clothing completed and transferred out during June equal __________.

$$120$$

In Trendy Clothing, Inc., ending WIP on June 30 has a degree of completion of __________ for conversion costs.

$$75\%$$

A department that directly adds value to a product or service is known as an __________ department.

operating (production)

A department that provides services to other internal departments is known as a __________ department.

support (service)

The cost allocation method that does not distinguish fixed from variable costs is the __________ method.

single-rate

In the single-rate method, costs in each cost pool are allocated using the same rate per unit of a __________ allocation base.

single

The dual-rate method splits each support department's cost into a fixed-cost pool and a __________ pool.

variable-cost

In the dual-rate method, each cost pool is allocated using a __________ allocation base.

different

Cost allocations can be based on demand (usage) or on supply, which refers to __________.

practical capacity

Between budgeted and actual overhead rates, __________ overhead rates are neither preferred nor widely used.

actual

In Eastern Mountain Engineering, the Cincinnati power plant services four manufacturing departments: Loretta, Bently, Melboum, and __________.

Eastmoreland

In Eastern Mountain Engineering, the total power needed at practical capacity across all manufacturing departments is __________ kWh.

$$80,000$$

In Eastern Mountain Engineering, the total average expected monthly usage is __________ kWh.

$$40,000$$

Operating costs for the Cincinnati power plant total $20,000 per month, consisting of $8,000 variable costs and __________ fixed costs.

$$\$12,000$$

In Eastern Mountain Engineering, the practical capacity needed for Bently is __________ kWh.

$$21,000$$

In Eastern Mountain Engineering, the average expected monthly usage for Loretta is __________ kWh.

$$10,000$$

An advantage of the single-rate method is that it is less __________ to implement.

costly

The single-rate method provides operational control to user departments over charges by basing final allocations on __________ usage of support services.

actual

A major disadvantage of the single-rate method is that allocated fixed costs of the support department look like __________ costs to the operating departments.

variable

The single-rate method may lead operating managers to make __________ decisions that benefit their department but are inefficient for the firm.

suboptimal

An advantage of the dual-rate method is that it signals to managers how variable and fixed costs behave differently, benefiting both the department and the __________.

organization

Allocating fixed costs on budgeted usage helps user departments with short-run and long-run planning because they know allocated costs in __________.

advance

A disadvantage of the dual-rate method is that it requires distinguishing variable from fixed costs, which is often __________.

challenging

Under the dual-rate method, allocating fixed costs on budgeted long-run usage may tempt operating managers to __________ their planned usage.

underestimate

Using actual rates for support department allocations imposes a high level of __________ on user departments.

uncertainty

Using budgeted rates motivates the support department's manager to improve efficiency and decide whether to use internal resources or an __________ vendor.

external

For variable cost allocation, allocating on __________ usage is best because variable costs are causally linked to usage.

actual

Allocating variable costs based on budgeted usage gives user departments no incentive to control __________.

consumption

When fixed costs are allocated using a budgeted rate and budgeted usage, user departments receive a preset __________ charge.

lump-sum

If fixed costs are allocated using a budgeted rate and actual usage, and actual usage equals budgeted usage below practical capacity, __________ of the department's costs are allocated despite idle capacity.

$$100\%$$

When budgeted fixed costs are allocated on actual usage, user departments do not know their allocation until the __________ of the period.

end

Step 1 in allocating costs of multiple support departments is to trace or allocate each cost to the various support and __________ departments.

operating

Step 2 in allocating multiple support department costs is to allocate plant administration costs to other support departments and __________ departments.

operating

The support department allocation method that allocates costs to operating departments only is the __________ method.

direct

Under the direct allocation method, support-to-support services are __________.

ignored

The step-down method of support department cost allocation is also referred to as the __________ method.

sequential

The step-down method typically begins allocation with the support department that renders the __________ percentage (or dollar amount) of its services to other support departments.

highest

Under the step-down method, support-to-support services are __________ recognized.

partially

The reciprocal allocation method is also known as the __________ method.

matrix

The method that fully recognizes mutual interdepartmental services among all support departments is the __________ method.

reciprocal

In reciprocal allocation, Step 1 of using linear equations is to express budgeted costs and reciprocal relationships as __________.

linear equations

Step 2 of the reciprocal linear equation method is to solve the equations to obtain the complete __________ budgeted costs of each support department.

reciprocated