Full Costing is the sames as what costing?
Absorption costing
What does full costing consider?
fixed manufacturing overhead as part of the inventory and often does not provide the info needed for cost volume profit analysis
Variable costing is the most consistent with?
cost volume analysis
Variable costing income is a function of?
units sold only
Direct labor is treated as what in variable costing?
product costing
What are period costs?
administrative salaries, fixed manufacturing overhead and sales commissions
security at the factory are treated as what kind of costing?
product costs
cost allocation
the process of assigning indirect costs
When will net income under full costing equal net income under variable costing?
when the # of units sold are equal to the number of units produced.
From a decision making standpoint the allocated cost should measure the?
opporunity cost of using a company resource
What is a cost plus contract?
a contract which specifies that the supplier will be paid for the cost of production as well as some fixed amount or percentage of cost
Costs that occured in the past and are never incremental
sunk costs
incremental revenues are not relevant in what
make or buy decision
fixed costs that will be eliminated if a particular action is undertake are called
avoidable costs
the value of benefits foregone
opportunity costs
when a department or product line is dropped the common fixed costs which have been allocated to that department are allocated where?
to the remaining departments or product lines
two or more products that result from common inputs are called
joint products
the stage of production at which the individual joint products are identified as the
split off point
the cost objective is
the product, service, or department that is to receive the allocation
a cost pool is allocated
using a single allocation
criterion used to allocate fixed costs can be either
ability to bear costs, equity, or relative benefits.
feasible outcomes are or are not a criteria for allocating fixed costs
are not
lump sum allocations are not impacted by
the usage of the allocated resource by other departments
indirect costs occur when?
resources are shared by more then one product or service, costs cannot be directly traced to products or services or multiple departments share a piece of equipment
if managers are not charged for centrally administered services
they are likely to consider the service free
steps in the cost allocation process are
select an allocation base/ form costs pools/and identify the cost objectives
what is the overriding concern in forming a cost pool
to ensure that the costs in the pool are homogenous or similar
an allocation base relates the cost pool to the cost objectives
is a characteristic that is common to all of the cost objectives and ideally uses a cause and effect relationship
Definition of direct method
the method of allocation which allocates service departments to production departments but to no other service departments
the major differences between ABC and ABM are what?
the goal of ABC is to accurately measure costs while the goal of ABM is to manage the activites which cause the costs
at the split off point what can be identified>?
individual joint products
Definition of relative sales values
the method of allocation of joint costs that is based on the proportional sales values at the split off point