Service Department & Joint Cost Allocation Flashcards

Service Department & Joint Cost Allocation Flashcards
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Cost-Plus Pricing: Formula
Break-even price x profit margin goal
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Cost-Plus Pricing
A method for setting a product's sales price. You add on to the break-even cost of a product in this kind of pricing.
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Liabilities
Things that are owed by a company.
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Assets
Items owned by a company, such as inventory.
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Depreciation
Businesses use this process to note the cost of using an item and reducing its value. On financial statements, this is where you record value lost due to wear and tear.
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Cost Driver
Any process that causes the cost of an activity to change.
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Cost Object
A product that has costs assigned to it.
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Cost Pool
A grouping of costs that are associated with the production of a good.
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Cost Allocation Base
Companies use this as a system to allocate the placement of their overhead costs.
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18 cards in set

Flashcard Content Overview

You can use these flashcards as a study tool to review the following methods of cost allocation:

  • Step-down
  • Reciprocal distribution
  • Direct

You'll also be able to consider different types of inventory costs and the accounting rate of return (ARR). Cost objects, cost pools, cost drivers and cost allocation are also covered by these cards. Finally, you can focus on assets, liabilities and depreciation.

Front
Back
Cost Allocation Base
Companies use this as a system to allocate the placement of their overhead costs.
Cost Pool
A grouping of costs that are associated with the production of a good.
Cost Object
A product that has costs assigned to it.
Cost Driver
Any process that causes the cost of an activity to change.
Depreciation
Businesses use this process to note the cost of using an item and reducing its value. On financial statements, this is where you record value lost due to wear and tear.
Assets
Items owned by a company, such as inventory.
Liabilities
Things that are owed by a company.
Cost-Plus Pricing
A method for setting a product's sales price. You add on to the break-even cost of a product in this kind of pricing.
Cost-Plus Pricing: Formula
Break-even price x profit margin goal
Accounting Rate of Return (ARR)
The percent of return a company makes off of a specific investment on an annual basis.
Accounting Rate of Return (ARR): Formula
Total profit / initial product cost x 100 = total rate of return. Total rate of return / years of investment = annual rate of return.
Direct Method of Cost Allocation
This method of cost allocation divides service department costs between production departments. It can be inaccurate because it doesn't consider overlapping departments.
Inventory Costs: Carrying
Companies pay these inventory costs in order to maintain a stock of products. The fees paid for warehousing are an example of this type of cost.
Inventory Costs: Shortage
Businesses have to pay this kind of inventory cost if they don't have enough products in stock to meet customer demand.
Inventory Costs: Ordering
The inventory costs a company pays to make purchases and ensure that what they buy is correct when it arrives.
Cost of Goods Sold (COGS)
The total amount of cost associated with a product that a business sold.
Reciprocal Distribution Method of Cost Allocation
A method of cost allocation that gives service departments the ability to assign costs to one another. This is a big advantage for this method and increases its accuracy.
Step-Down Method of Cost Allocation
This cost allocation method allows businesses to move costs between service departments, but only into a department that is generating money. Costs can't be moved back again.

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