Basic Cost Management Concepts
After studying this chapter, you should be able to:
1. Describe a cost management information system, its objectives and major subsystems,
and indicate how it relates to other operating and info
Scottso Corporation applies overhead using a normal costing approach based upon
machine-hours. Budgeted factory overhead was $232,750, budgeted machine-hours
were 17,500. Actual factory overhead was $227,830, actual machine-hours were
16,150. How m
Which of the following measures is used inplant-wide allocation method to allocate overhead costs to the units produced?
What is the typical effect on the numbers of cost p
Morgan Inc has 5,400 machine hours available each month. The following information on
1 the company's three products is available:
Contribution margin per unit
Machine hours per unit
If market demand exceeds the available capacity, in wh
A manager is trying to estimate the manufacturing costs of a new product. The
company makes several other products that utilize some of the same manufacturing
procedures as the new product. Which cost estimation method would be the best
All other things the same, which of the following would be true of
the contribution margin and variable costs of a company with high
fixed costs and low variable costs as compared to a company with
1 low fixed costs and high variable cos
1. (CMA adapted) Cost drivers are
activities that cause costs to increase as the activity increases.
accounting techniques and practices used to control costs.
accounting reimbursements used to evaluate whether performance is proceeding accordi
1. Beginning inventory in units
Material cost (unit level or
Variable conversion cost used
Facility-level or fixed
Indirect operating costs (fi
Cost of Goods Manufactured
Calculating the Supporting
Supporting Schedule for COGS
Like all merchandisers, a manufacturers COGS is the
single most important item on the income statement.
For a manufacturer, the most important component of
17-1 Industries using process costing in their manufacturing area include chemical processing,
oil refining, pharmaceuticals, plastics, brick and tile manufacturing, semiconductor chips,
beverages, and breakfast cereals.
ACTIVITY-BASED COSTING AND ACTIVITY-BASED MANAGEMENT
Broad averaging (or peanut-butter costing) describes a costing approach that uses broad
averages for assigning (or spreading, as in spreading peanut butter) the cost of resources
Cost poola grouping of individual cost items.
Cost tracingthe assigning of direct costs to the chosen cost object.
Cost allocationthe assigning of indirect costs to the chosen cost object.
Cost-allocation basea factor that links
Which of the following statements is (are) true regarding product costing?
(A) Twenty cans of paint that are 25% full are equivalent to four cans of paint that are completely full.
(B) The equivalent unit concept refers to the actual