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Action Systems Develop Because There Are Hybrid Costing

This document discusses different production and costing systems including operation costing, just-in-time (JIT) production, and backflush costing. It provides review questions on these topics. Specifically: - Operation costing is a hybrid costing system that applies to batches of similar products. It traces direct materials to each batch but allocates conversion costs to units passing through each operation. - Key features of JIT production include streamlining operations, continuous quality improvement, and eliminating storage and handling costs. JIT systems simplify job costing. - Backflush costing does not track costs using traditional accounting methods. It debits work-in-process for direct labor costs incurred and credits costs of

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241 views2 pages

Action Systems Develop Because There Are Hybrid Costing

This document discusses different production and costing systems including operation costing, just-in-time (JIT) production, and backflush costing. It provides review questions on these topics. Specifically: - Operation costing is a hybrid costing system that applies to batches of similar products. It traces direct materials to each batch but allocates conversion costs to units passing through each operation. - Key features of JIT production include streamlining operations, continuous quality improvement, and eliminating storage and handling costs. JIT systems simplify job costing. - Backflush costing does not track costs using traditional accounting methods. It debits work-in-process for direct labor costs incurred and credits costs of

Uploaded by

Andria
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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REVIEW QUESTIONS AND EXERCISES 4.

When backflush costing is used, managers generally do not use


1. Questions which of the following to keep track of operations?
1. “Hybrid production systems develop because there are hybrid a. Complex Costing Method
costing systems." Do you agree? Explain. c. Nonfinancial measures
2. Give three examples of industries that are likely to use operation b. Computer monitoring
costing. d. Personal observations
3. Identify (a) the major job-costing feature of operation costing major 5. Key Features in a just-in-time production system include all of the
process-costing feature of operation costing. following except
4. Explain why JIT production systems simplify job costing. a. Streamlining operations.
5. Distinguish a demand-pull from a push-through system. b. Continuous striving for quality improvement.
6. List five major features of JIT production systems. c. Elimination of storage and handling costs.
7. Describe four financial benefits of implementing a JIT system. d. Prorating manufacturing lead time.
8. Describe how JIT systems affect product costing. 6. All of the following are reasons to use backflush costing, except
9. Describe the essence of backflush costing. a. Managers tend to use their limited resources on developing more
10. Companies adopting backflush costing often meet three accurate product cost data.
conditions. Describe these three conditions and outline different b. Complex ledger systems may be too costly to develop under
versions of backflush costing can differ. traditional cost tracking systems.
c. Accuracy is critical when allocating accurate conversion cost per
II. Multiple Choices unit.
1. Which of the following is a hybrid costing system that applies to d. A fairly rough allocation may be sufficient for external reporting
batches of like or similar products? purposes.
a. Fixed costing system 7. All of the following statements about operation costing systems are
b. Operation costing system true except
c. Process costing system a. Direct materials are traced to each batch of goods.
d. Variable costing system b. Direct materials are not treated in the same manner as in a job
2. In backflush costing, the journal to record direct-labor costs costing system
incurred would include a c. Conversion costs are traced to each process.
a. Debit to work-in-process d. Conversion costs are allocated only to units passing through that
b. Debit to conversion costs operation.
c. Credit to work-in-process
d. Credit to cost of goods sold CHAPTER 9
3. A manager's needs regarding cost man costing, and the underlying 1. Questions
product 1. What three levels of overhead cost application are available to a
a. Costing system company?
b. Manufacturing system 2. Why are new approaches to overhead cost application, such a
c. Operation System based costing, needed in many companies today?
d. Production System
3. Why are departmental overhead rates sometimes not accurate in
assigning overhead cost to products?
4. When designing an activity-based costing system, why should PVA
(process value analysis) always be the starting point?
5. What four general levels of activity can be identified in a company?
6. In what three ways does activity-based costing improve the costing
system of an organization?
7. What four general levels of activity can be identified in a company?
In what three ways does activity-based costing?
8. Can activity-based costing be used in service organizations?
9. What is a resource driver?
10. What is an activity driver?
11. In regard to ABC, what is two-stage allocation?
12. What are two major advantages of activity-based management
(ABM)?
13. Why is direct labor a poor base for allocating overhead in many
companies?
14. Why is top management support crucial when attempting to
implement an activity-based costing system?
15. What are unit-level, batch-level, product-level, customer-level, and
organization-sustaining activities?
16. What types of costs should not be assigned to products in an
activity- based costing system?

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