Accounting 231 Exam #1 Study Guide

Accounting 231 Exam #1 Study Guide - Chapter 1 Work...

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Chapter 1  23:09 Work Management (decision making)  Planning  Identify alternatives  Select best alternative  Develop budgets  Directing and motivating  Manage day to day activities  Employee work assignments, problem solving  Communications  Controlling  Regarding  Product cost Include all the costs that are involved in acquiring or making a product Direct materials  Direct labor  Manufacturing overhead  Period Costs  Selling and administrative costs  Prime cost 
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consists of direct materials plus direct labor.  Conversion cost  consists of direct labor plus manufacturing overhead.  Fixed vs. Variable Cost  Total  variable costs  change when activity changes. Total  fixed costs  remain unchanged when activity changes. Behavior of Cost (within the relevant range) Cost In Total Per Unit Variable Total variable cost changes Variable cost per unit remains as activity level changes. the same over wide ranges of activity. Fixed Total fixed cost remains Average fixed cost per unit goes the same even when the down as activity level goes up. activity level changes. Opportunity cost  is the potential benefit that is given up when one alternative is selected over another.  These costs are not usually entered into the accounting records of an organization, but  must be explicitly considered in all decisions.  Sunk Costs  A sunk cost is a cost that has already been incurred and that cannot be changed by any  decision made now or in the future. Since sunk costs cannot be changed, they cannot  be differential costs; therefore, sunk costs should be ignored in decision making.  
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Chapter #2  23:09 Process Costing  A process cost system is best used by companies that produce many units of a single product  and  when  one unit of output is indistinguishable from any other unit of output.  Because the units of output are identical, the company will probably use an average cost system to  determine product cost. Job-order costing
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Accounting 231 Exam #1 Study Guide - Chapter 1 Work...

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