Cost Accounting Flashcards
6 cards from real Accounting Online Program practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Cost Accounting flashcards as text
Which method of inventory costing assigns the most recent costs to cost of goods sold in a period of rising prices?
Answer: LIFO
LIFO (Last-In, First-Out) assigns the most recently purchased (highest) costs to COGS first, resulting in higher COGS and lower net income during inflationary periods.
In cost-volume-profit (CVP) analysis, what does the contribution margin ratio represent?
Answer: The percentage of each sales dollar remaining after variable costs are covered
The contribution margin ratio (CMR) is contribution margin divided by sales revenue, showing what fraction of each revenue dollar contributes to covering fixed costs and profit.
Kaizen costing focuses on:
Answer: Continuous incremental cost reductions during the production phase
Kaizen costing targets ongoing, incremental cost improvements during the manufacturing process, encouraging employees to continuously find ways to reduce costs.
Target costing begins with:
Answer: Determining the market selling price and subtracting desired profit to arrive at an allowable cost
Target costing works backward from a competitive market price: target cost = target selling price − desired profit margin, and the product must be designed to meet that cost.
Which of the following best describes a 'by-product' in cost accounting?
Answer: A minor output of a joint production process with relatively low sales value
By-products are minor outputs of a joint production process that have small sales values relative to the main products, and their accounting treatment differs from that of joint products.
The high-low method in cost accounting is used to:
Answer: Separate mixed costs into fixed and variable components using the highest and lowest activity data points
The high-low method uses the highest and lowest activity levels and their associated costs to estimate the variable cost per unit and total fixed cost component of a mixed cost.