UCF-ACG2071 Study Guide Test 3

UCF-ACG2071 Study Guide Test 3 - ACG 2071 Test#3 Study...

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ACG 2071 Test #3 Study Guide (Covers CH 4 Activity Based Costing, CH 8 Special Decisions, CH 9 Budgeting The information provided is intended to be a list of key topics included on the test. More detailed knowledge of the topics listed, including the capability of working problems, is required to answer many of the questions. To successfully prepare for tests you should understand your homework, quizzes, rework the in class examples (available under "Modules”, review lecture notes and read the book. It is important to not just memorize working problems, as on the test you may be presented with a variation of a problem you have memorized and you will have to use your analytical ability to solve the problem. Always try to ask yourselves why you are solving a problem in a certain way. Tests will contain many calculations, not just terminology. You will be provided a piece of scratch paper in the lab and you may bring in a non-graphing calculator or business analyst calculator. Tests have a maximum time of 120 minutes and have approximately 50 questions. Questions may include true/false, multiple choice, matching and fill in the blank. --------------------------------------------------------------------------------------------------------------- Ch 4  Activity Based Costing Difference between  traditional one rate overhead system to allocated indirect costs  (CH3) versus ABC (CH4) versus  departmental overhead rates o Traditional one rate overhead system allocates one predetermined overhead rate to all jobs as opposed to the others  that use multiple rates for different jobs Ensures DM and DL costs traced to each product were correct Doesn’t do good enough job of matching overhead costs to the products that used the overhead resources Can lead to cost distortion which occurs when some products are overcosted while others are undercosted  o Activity-Based Costing  (ABC) is a costing method which attempts to provide a more accurate assessment of the cost  of products or services provided. Not focused on single, predetermined manufacturing overhead rate Helps managers cut costs by highlighting the cost of each activity performed during production Helps identify the costs associated with providing high-quality products to their customers Focuses on activities rather than departments, as the fundamental cost objects Allocates the products based on  Types of activities used by the product  Extent to which the activities are used o Departmental overhead rates increase the accuracy of job costs when… Each department incurs different types and amounts of manufacturing overhead Each product, or job, uses the departments to a different extent o Difference  between ABC and departmental overhead allocation is that ABC have separate cost allocation rates for  each activity identified by the company
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o In Activity-Based Costing
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