Analyzing Costs

Question 1

Use of Managerial Accounting

Answer 1

R&D
Design of products, service, or processes
Production
Marketing
Distribution
Customer Service

Question 2

Cost

Answer 2

Amount of assets given up or liabilities incurred to acquire some goods or services.

Question 3

Unexpired costs are

Answer 3

Assets

Question 4

Expired costs are

Answer 4

Expenses

Question 5

Is the cost incurred in the manufacturing of product for the customer?

Answer 5

If yes  product cost

If no  period cost

Question 6

Product costs are

Answer 6

“Inventoried”

Question 7

Period costs are

Answer 7

Not inventoried.

Question 8

Fixed Costs

Answer 8

Not immediately affected by changes in the cost-driver level.

Question 9

Variable Costs

Answer 9

Changes in direct proportion to changes in the cost-driver level.

Question 10

High-Low Method

Answer 10

Uses the highest volume activity level and the lowest volume activity level to determine the intercept and slope.

Question 11

Discretionary Costs

Answer 11

Amount and timing of these costs are at the discretion of the management.
Eg: R&D costs, Advertising costs, training costs.

Question 12

Opportunity Cost

Answer 12

The potential benefit that is given up when one alternative is selected over another.

Question 13

Sunk Costs

Answer 13

All costs incurred in the past that cannot be changed by any decision made now or in the future.
Sunk costs should not be considered in decisions.

Question 14

Cost Classifications

Answer 14

Direct Materials
Direct Labor
Manufacturing Overhead
Indirect Materials
Indirect Labor

Question 15

Direct Materials

Answer 15

Direct materials are those materials that become an integral part of the finished product and whose cost can be conveniently traced to the finished product. An example is a radio installed in an automobile.

Question 16

Direct Labor

Answer 16

Those labor costs that can be easily traced to individual units of products. An example are the wages paid to automobile assembly

Question 17

Manufacturing Overhead

Answer 17

Includes all manufacturing costs except direct materials and direct labor. Examples are indirect materials, indirect labor, maintenance and repairs on production equipment, heating-cooling and lighting, property taxes, depreciation and insurance on manufacturing facilities.

Question 18

Indirect Materials

Answer 18

Those materials used to support the production process. Examples: lubricants and cleaning supplies used in automobile assembly plant.

Question 19

Indirect Labor

Answer 19

Those wages paid to employees who are not directly involved in production work. Examples: Maintenance employees, janitors and security guards.

Question 20

Breakeven Analysis

Answer 20

The break-even point is the of sales at which revenue equals expenses and net income is zero.

Question 21

Components of breakeven analysis

Answer 21

Fixed costs
Variable costs
Contribution margin

Question 22

Break-Even Point Basic Methods:

Answer 22

Contribution Margin Method

Equation Method

Question 23

Contribution Margin

Answer 23

Selling Price - Variable Costs

Question 24

Equation Method

Answer 24

Net income equals zero at the break-even point.

Question 25

Assumptions

Answer 25

Expenses can be classified into
variable and fixed categories.
The behavior of revenues and expenses
is linear over the relevant range.
Expect no changes in efficiency
and productivity.
There is only one product.

Question 26

Target Net Profit

Answer 26

Managers can also use
CVP analysis to determine
the total sales, in units
and dollars, needed to
reach a target net profit.

Question 27

If BEV ↑

Answer 27

Fixed costs ↑
CM ↑
Unit variable cost ↑
Selling price per unit ↑

Question 28

Sales Mix Analysis

Answer 28

Sales mix is the relative proportions or
combinations of quantities of products
that comprise total sales.