Premium Essay

Aacounting

In: Other Topics

Submitted By nmp28shital
Words 10315
Pages 42
CHAPTER 3
Product Costing and Cost Accumulation in a Batch Production Environment

ANSWERS TO REVIEW QUESTIONS

3-1 (a) Use in financial accounting: In financial accounting, product costs are needed to determine the value of inventory on the balance sheet and to compute the cost-of-goods-sold expense on the income statement.

b) Use in managerial accounting: In managerial accounting, product costs are needed for planning, for cost control, and for decision making.

c) Use in cost management: In order to manage, control, or reduce the costs of manufacturing products or providing services, management needs a clear idea of what those costs are.

(d) Use in reporting to interested organizations: Product cost information is used in reporting on relationships between firms and various outside organizations. For example, public utilities such as electric and gas companies record product costs to justify rate increases that must be approved by state regulatory agencies.

3-2 In a job-order costing system, costs are assigned to batches or job orders of production. Job-order costing systems are used by firms that produce relatively small numbers of dissimilar products. In a process-costing system, production costs are averaged over a large number of product units. Process-costing systems are used by firms that produce large numbers of nearly identical products.

3-3 Concepts of product costing are applied in service industry firms to inform management of the costs of producing services. For example, banks record the costs of producing financial services for the purposes of planning, cost control, and decision making.

3-4 a. Material requisition form: A document upon which the production department supervisor requests the release of raw materials for production.

b. Labor time record: A document upon which employees…...

Similar Documents

Premium Essay

Questions for Aacounting

...1. What does the income statement reflect? A) The cash that has flowed into and out of the company over an accounting period B) Revenues minus expenses over an accounting period C) Both of the above D) None of the above * * 2. Which of the following equations is correct? A) Assets = Liabilities + Equity B) Assets + Liabilities = Equity C) Assets = Liabilities - Equity 3. An increase in an asset must always be balanced by an increase in a liability. A) True B) False * * 4. What effect does revenue in the income statement have on balance sheet assets? A) Revenue serves to increase assets B) Revenue serves to reduce assets C) Revenue has no effect on assets 5. The cash flow statement sometimes reflects transactions that appear neither on the income statement nor on the balance sheet. A) True B) False 6. Which of the following statements is true? A) Increases in fixed assets represent a source of cash for a company B) In the income statement, revenue will increase retained earnings, while expenses will serve to reduce retained earnings. C) All transactions that impact the balance sheet also affect the income statement 7. Which of the following statements about the accounting matrix is true? A) Each column in the accounting matrix must balance to zero B) Each row in the accounting matrix must balance C) The final row in the accounting matrix must......

Words: 289 - Pages: 2