BWL - Management Accounting

Question 1

cost volume profit relationship

Answer 1

how many units do we need to sell to avoid making losses?
-> total cost and revenue change with the activity level

Question 2

cost

Answer 2

monetary measure of resources foregone to achieve a specific objective

Question 3

cost object

Answer 3

any activity for which a separate measurement of cost is required
-> cost of something
-> cost of making a product, serving a costumer

Question 4

product cost

Answer 4

-> attached to the products and included in inventory valuation
-> can be inventoried

manufacturing firm -> product cost = manufacturing cost

merchandise firm -> product cost = cost of goods purchased

Question 5

Cost collection system

Answer 5

1. Accumulate cost by classifying into categories
   -> cost of labour, material
   -> fixed and variable cost
2. assign costs to cost objects

Question 6

direct cost

Answer 6

-> can be specifically identified with a certain cost object
-> can be traced to this object
-> is traceable cost

Question 7

indirect costs

Answer 7

-> cannot be identified specifically with a certain cost object
-> cannot be traced to this cost object
-> distinction depends on cost object
-> indirect costs are assigned to cost objects

-> overhead cost need to be allocated

Question 8

profit

Answer 8

revenue - total cost

Question 9

period cost

Answer 9

-> not attached to the products and not included in inventory valuation

Question 10

Period and Product costs

Answer 10

-> unsold product cost is recorded as an asset (inventory)
-> becomes expense when the product is sold

-> sold product cost is recorded in an expense in the current accounting period

Question 11

variable cost

Answer 11

vary in direct proportion with activity

Question 12

fixed cost

Answer 12

remain constant over wide ranged of activity

Question 13

relevant cost

Answer 13

change because of a decision

Question 14

irrelevant cost

Answer 14

do not change because of a decision
-> relevance is relative to the decision

Question 15

avoidable costs

Answer 15

can be saved by not adopting a given alternative
-> is relevant costs

Question 16

unavoidable costs

Answer 16

cannot be saved by not adopting a given alternative
-> is irrelevant cost

Question 17

sunk costs

Answer 17

cost of resources already acquired and are unaffected by the choice between various alternatives
-> irrelevant for decision making

Question 18

opportunity cost

Answer 18

measures the opportunity that is lost when the choice of one course of action requires that an alternative course of action be given up
-> relevant for decision making

Question 19

incremental costs

Answer 19

difference of costs between alternatives

Question 20

marginal cost

Answer 20

additional costs of one additional unit

Question 21

Assignment of direct/indirect cost

Answer 21

-> total costs are measured against a cost object
-> direct costs can be traced to the cost object
-> indirect costs cannot be traced; need to be assigned to the cost object through traditional costing system or ABC

Question 22

Overhead rates

Answer 22

-> assign total overhead using a single overhead rate for the entire organisation
-> one fits all

Question 23

plant-wide overhead rate

Answer 23

-> only justified if all products consume departmental overheads in approximately the same proportions
-> e.g. all products use a proportional amount of machine hours in every department

Question 24

cost center overhead rate

Answer 24

-> required if products do not consume departmental overhead in the same proportion
-> product X is only produced in department X
-> for each cost center a specific overhead rate is used to allocate the overhead

Question 25

actual overhead rate

Answer 25

inappropriate because:
-> product costs can only be calculated after the end of the period
-> product costs will be available with a considerable delay
-> if period are months overhead rates are subject to seasonal fluctuations

Question 26

budgeted overhead rates

Answer 26

based on long-term estimates:
-> estimated normal overhead costs of the year
-> estimated normal activity level

-> often budget is unequal to actual activity at the end of the year
-> overhead is over- or underapplied and closed against COGS at year end

Question 27

job costing system

Answer 27

-> various different products are produced in discrete batches
-> batches are unique, but all products within are identical
-> costs need to be allocated to job/batches

-> each unit consumes different quantities of resources

e.g. plates produced in a pottery, airplanes at Airbus

Question 28

process costing

Answer 28

-> direct costs and factory overhead are not assigned to individual units but processes
-> each unit is identical
-> average unit costs are computed

Question 29

variable costing

Answer 29

-> direct costing or marginal costing
-> traces all variable cost to products
-> all fixed overhead = period cost

Question 30

FIFO vs. weighted average method

Answer 30

FIFO
-> beginning WIP is processed first before new units are started
-> beginning WIP is likely to be finished at the end of the year

weighted average method
-> beginning WIP cannot be identified separately

-> depending on this assumption, different cost per unit may result

Question 31

Wann ist weighted average = FIFO?

Answer 31

wenn man in zwei Jahren hintereinander gleich effizient war
wenn der Preis nicht flakutiert
wenn es kein beginning WIP gibt

Question 32

Absorption costing

Answer 32

-> full costing
-> trace all manufacturing costs to products
-> all non manufacturing overhead is period cost

Question 33

Impact on profit

Answer 33

profits are the same if production = sales
if production > sales -> profit absorption costing > profit variable costing
-> Inventory wird wegen der fixen Kosten höher bewertet

if sales > production -> profit absorption costing < profit variable costing

-> under variable costing profit follows sales more closely

Question 35

contribution

Answer 35

revenue - variable cost

Question 36

break even point

Answer 36

total fixed cost/contribution per unit
-> activity level where profit = 0

Question 37

target profit

Answer 37

fixed cost + target profit/contribution per unit
-> activity level to obtain a profit of x

Question 38

profit at a particular activity level

Answer 38

total contribution - fixed cost per unit
-> profit at the activity level of x

Question 39

determine selling price

Answer 39

(profit + fixed cost)/units + variable cost per unit
-> selling price to determine a profit of x on sales of x

Question 40

additional sales to cover additional fixed cost

Answer 40

additional fixed cost/contribution per unit
-> additional sales needed to cover additional fixed cost

Question 41

percentage margin of safety

Answer 41

(expected sales - break even sales)/expected sales
-> how much can the sales drop from x units until losses occur?

Question 42

relevant cost

Answer 42

-> future cash flows that will differ between various alternatives
-> only incremental/marginal cost are relevant
-> cost that will be affected by the decision

Question 43

Relevant cost are required for:

Answer 43

1. Special pricing decisions
2. Product mix decisions when capacity constraints exist
3. Decisions on replacement of equipment
4. outsourcing decisions
5. discontinuation decisions

Question 44

Relevance of opportunity cost in decision making

Answer 44

-> OC represent the lost contribution of profits arising from the best use of alternative forgone
-> these costs are affected by the decision
-> therefore should be considered as relevant costs

Question 45

Special pricing decision

Answer 45

-> typically only one time orders or orders below market price
-> only differential cost is relevant
-> revenue for the one alternative is opportunity cost for the other

Question 46

Product mix decisions

Answer 46

-> limiting factor exists
-> focus on products that provide the largest contribution per limiting factor

Question 47

Replacement of equipment

Answer 47

-> past cost is irrelevant
-> depreciation

Question 48

discontinuation decision

Answer 48

-> periodic analysis of profits

Question 49

Activity based costing

Answer 49

-> measures the cost of using resources, not of supplying them
cost of supplied resources = cost of used resources + cost of idle capacity
-> unused capacity arises with commited resources
-> cash flows consequences only arise if supply of (idle) capacity reduces
-> ABC is more complex than traditional costing
-> results dont really differ from traditional costing if the percentage of indirect cost is low

Question 50

Motivation (Activity based costing)

Answer 50

-> many decisions considerably affect the demand for support functions (indirect cost)
-> indirect cost cant be traced to cost objects
-> indirect cost are larger than direct cost for many firms
-> allocation of indirect cost is inappropriate using traditional cost accounting methods

Question 51

Types of costing systems

Answer 51

1. Direct costing system
   -> indirect cost arent assigned to cost objects
   -> no profit, but a contribution to cover total fixed cost is reported per cost object
2. Traditional costing system
   -> use unsophisticated methods to allocate indirect cost to cost objects
   -> e.g. per machine hour, labor hour
3. Activity based costing system
   -> use sophisticated methods to allocate the indirect costs to cost objects
   -> based on activities that require certain support functions

Question 52

Designing ABC Systems

Answer 52

First stage allocations
-> resource cost drivers
-> activities/support units

Second stage allocations
-> activity cost drivers
-> large number of cost drivers

1. Identify major activities
   -> choose reasonable aggregation level for activities
   -> a single cost driver should determine the cost of activity
   -> many firms use 20 to 30 main activities
2. Assign costs to activity cost centers
   -> assign direct and indirect cost to each activity
   -> no arbitrary allocation should be used but cause and effect allocations
3. Determine the cost driver for each major activity
   -> drivers provide a good explanation of cost for the respective activity
   -> driver is equally measurable
   transaction drivers = number of times an activity is performed
   duration drivers = amount of time an activity is performed
4. Assign the cost of activities to products
   -> measure cost driver for the respective cost object

Question 53

Wie kann man Kostenstellen beeinflussen?

Answer 53

durch budgets
-> Managers bekommen Budgets zugeordnet

Question 54

Funktionen eines Budgets?

Answer 54

planning
coordination
communication
motivation
control
performance evaluation

Question 55

variable Gemeinkosten

Answer 55

-> ja, gibt es
-> z.B. Stromkosten für eine Maschine, da sich da die Produktionsmenge und damit Strommenge ändern kann
(Stromkosten für ein Gebäude wären fixe Gemeinkosten)

Question 56

fixe Einzelkosten

Answer 56

-> z.B. Anschaffungskosten für eine Maschine, die genau für ein spezifischen Zweck angeschafft wurde

Question 57

Einfluss non-financial Informationen?

Answer 57

->

Question 58

unechte Gemeinkosten

Answer 58

-> wenn von einer vorhandenen Möglichkeiten der Einzelkostenerfassung kein Gebrauch gemacht wird