ACCT 3224 Final Exam Flashcards
What is Variable Costing?
A costing method where only variable manufacturing costs are treated as product costs; fixed MOH is treated as a period cost.
What is Absorption Costing?
A costing method that includes all manufacturing costs (variable and fixed) as part of the cost of a finished product.
How is Fixed Manufacturing Overhead (MOH) treated under variable costing?
Under variable costing, it is expensed in the period incurred; under absorption costing, it is included in inventory until sold.
What are Product Costs under variable costing?
DM, DL, variable MOH.
What are Product Costs under absorption costing?
DM, DL, variable MOH, and fixed MOH.
What are Period Costs?
Costs that are expensed in the period incurred, including selling & admin costs.
What is Cost-Volume-Profit (CVP) Analysis?
A tool for analyzing the relationship between sales volume, costs, and profit.
What is the Matching Principle?
A GAAP principle requiring revenues and related expenses to be matched in the same period.
What is the Reconciliation of Operating Income?
Explains differences in operating income under absorption and variable costing due to the treatment of fixed MOH.
What is a Budget?
A detailed quantitative plan for acquiring and using financial and other resources over a specified time period.
What is a Master Budget?
Summarizes a company’s plans, setting specific targets for sales, production, distribution, administrative, and financing activities.
What is Budgetary Control?
The use of budgets to control an organization’s activities by comparing actual results to budgeted amounts.
What is Participative Budgeting?
A budgeting process that involves managers from across the organization in developing budget estimates for their areas.
What is Budgetary Slack?
The difference between the revenues and expenses a manager expects can be achieved and the amounts included in the budget.
What is a Sales Budget?
A detailed schedule showing the expected sales for the budget period, expressed in both dollars and units.
What is a Production Budget?
Determines the production level needed to meet budgeted sales and desired ending inventory.
What is a Direct Materials Budget?
Details the raw materials that must be purchased to fulfill the production budget and provide for adequate inventories.
What is a Direct Labour Budget?
A detailed plan showing labour requirements over a specific time period.
What is a Cash Budget?
Combines receipts, disbursements, cash excess or deficiency, and financing to project cash flow.
What is a Standard Cost?
A benchmark for measuring performance, including quantity and cost standards.
What is Variance Analysis?
The process of evaluating differences between standard costs and actual costs.
What is Direct Material Price Variance?
The difference between the actual price paid for materials and the standard price, multiplied by the quantity purchased.
What is Direct Material Quantity Variance?
The difference between the actual quantity of materials used and the standard quantity, multiplied by the standard price.
What is Labour Rate Variance?
The difference between the actual hourly rate paid to workers and the standard rate, multiplied by hours worked.
What is Labour Efficiency Variance?
The difference between the actual hours worked and the standard hours, multiplied by the standard hourly rate.
What is a Segment?
A part of an organization about which a manager seeks cost, revenue, or profit data.
What are Traceable Fixed Costs?
Costs that exist solely because of a specific segment.
What are Common Fixed Costs?
Costs that relate to the overall operation and would not disappear if a segment were eliminated.
What is Segment Margin?
The segment’s contribution margin minus its traceable fixed costs.
What is a Responsibility Centre?
Any part of an organization whose manager has control over and is accountable for cost, profit, or investment.
What is Return on Investment (ROI)?
ROI = Operating Income / Average Operating Assets.
What is Residual Income?
Measures the excess of operating income over the minimum required return on average operating assets.
What is a Relevant Cost?
A cost that differs between alternatives and is considered in decision-making.
What is an Avoidable Cost?
A cost that can be eliminated by choosing one alternative over another.
What is a Sunk Cost?
A cost that has already been incurred and cannot be recovered.
What is a Make or Buy Decision?
Compare the cost of making internally (including opportunity costs) to the cost of buying externally.
What is an Opportunity Cost?
The benefit foregone as a result of choosing one alternative over another.
What is a Special Order?
A one-time order not part of the company’s normal business that requires incremental cost analysis.
What are Joint Costs?
Costs incurred up to the split-off point where joint products can be separately identified.
What is a Constrained Resource?
A limited resource that restricts a company’s ability to meet demand.
