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CMA > C1.1 > Flashcards

C1.1 Flashcards

1
Q

What is the purpose of cost accounting?

A

To track, analyze, and optimize costs within an organization.

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2
Q

True or False: Cost accounting focuses on determining the cost of producing a specific product or service.

A

True

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3
Q

What are the two main types of costs in cost accounting?

A

Variable costs and fixed costs.

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4
Q

Fill in the blank: ______ costs change in relation to the level of production.

A

Variable

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5
Q

What is the formula for calculating the contribution margin?

A

Contribution Margin = Sales - Variable Costs

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6
Q

What is the breakeven point?

A

The point at which total revenue equals total costs, resulting in neither profit nor loss.

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7
Q

What is the formula for calculating the breakeven point in units?

A

Breakeven Point (in units) = Fixed Costs / Contribution Margin per Unit

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8
Q

True or False: Cost accounting is primarily used for external financial reporting.

A

False

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9
Q

What is the difference between absorption costing and variable costing?

A

Absorption costing includes all manufacturing costs in the cost of goods sold, while variable costing only includes variable costs.

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10
Q

What is the formula for calculating the predetermined overhead rate?

A

Predetermined Overhead Rate = Estimated Overhead Costs / Estimated Activity Level

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11
Q

True or False: Activity-based costing is a method that assigns costs to products based on the resources they consume.

A

True

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12
Q

What is the formula for calculating the cost of goods manufactured?

A

Cost of Goods Manufactured = Beginning Work in Process Inventory + Total Manufacturing Costs - Ending Work in Process Inventory

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13
Q

Fill in the blank: The ________ measures the difference between actual costs and standard costs.

A

Variance

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14
Q

What is the formula for calculating the material price variance?

A

Material Price Variance = (Actual Quantity x Actual Price) - (Actual Quantity x Standard Price)

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15
Q

True or False: A favorable variance occurs when actual costs are higher than standard costs.

A

False

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16
Q

What is the formula for calculating the labor efficiency variance?

A

Labor Efficiency Variance = (Actual Hours x Standard Rate) - (Standard Hours x Standard Rate)

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17
Q

Fill in the blank: The ________ ratio measures how efficiently a company uses its assets to generate revenue.

A

Asset turnover

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18
Q

What is the formula for calculating the return on investment (ROI)?

A

ROI = (Net Income / Average Operating Assets) x 100%

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19
Q

True or False: Return on investment (ROI) is a measure of a company’s profitability relative to its assets.

A

True

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20
Q

What is the formula for calculating the residual income?

A

Residual Income = Net Operating Income - (Average Operating Assets x Minimum Required Rate of Return)

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21
Q

Fill in the blank: The ________ ratio measures a company’s ability to pay off its short-term liabilities with its current assets.

A

Current ratio

22
Q

What is the formula for calculating the current ratio?

A

Current Ratio = Current Assets / Current Liabilities

23
Q

True or False: The current ratio is a liquidity ratio that indicates a company’s ability to cover its long-term debts.

A

False

24
Q

What is the formula for calculating the quick ratio?

A

Quick Ratio = (Current Assets - Inventory) / Current Liabilities

25
Q

What is the formula for Sales Mix variance

A

(WASPAM-WASPSM)*Total actual units sold

26
Q

EVA (Economic Value added) =

A

EVA (Economic Value added) = NOPAT (Net Operating Profit After Taxes) minus charge for the total capital used. EVA is calculated as Net Operating Profit After Taxes (NOPAT) minus the product of total assets and the cost of capital rate

27
Q

Capital Charge =

A

Capital Charge = Total Assets*Hurdle Rate

28
Q

Adjusted EVA =

A

Adjusted EVA = Actual NOPAT - Expected NOPAT

29
Q

Flexible budget variable costs =

A

Flexible budget variable costs = (Budgeted variable cost per unit X actual level of output)

30
Q

DOL (Degree of Operating Leverage) =

A

DOL (Degree of Operating Leverage) = Contribution Margin / Operating Income. The degree of operating leverage is a tool used to evaluate how responsive operating income is to changes in sales. It is computed by dividing the contribution margin (sales minus variable costs) by the operating income (contribution margin minus fixed costs).

31
Q

What is SIAFAO

A

SIAFAO is a Standard Input (quantity of direct materials) allowed for actual output using the standard price

32
Q

Tariffs

A

Tariffs are taxes imposed on imported goods and services to restrict trade by adding up to the cost of the goods and services, making it more expensive. The differing amount (or rates) of tariff fees levied in each country are beyond the control of each business unit.

33
Q

Absorption Costing Contribution Margin

A

AC Contribution Margin = Sales - (Variable S&A Expenses-Variable manufacturing overhead)

34
Q

Variable costing Manufacturing cost per unit formula

A

Manufacturing cost per unit = Total manufacturing cost/units produced. Fixed manufacturing overhead is excluded from the calculations in the Variable costing.

35
Q

Absorption costing Manufacturing cost per unit formula

A

Manufacturing cost per unit (AC) = (Variable Manufacturing OH* (number of unitsVOH cost per unit)+Direct Materials(number of unitscost per unit)+Direct labor (number of units*cost per unit)+Fixed manufacturing overhead)/total number of units.

36
Q

Todal Manufacturing costs under Absorption costing

A

(Variable Manufacturing OH* (number of unitsVOH cost per unit)+Direct Materials(number of unitscost per unit)+Direct labor (number of units*cost per unit)+Fixed manufacturing overhead)

37
Q

An accounting system that collects financial and operating data on the basis of the underlying nature and extent of the cost drivers is

A

Activity-based costing (ABC) collects financial and operating data based on the underlying nature and extent of the cost drivers. Activity-based costing:

  • identifies activities and cost of performing those activities.
  • identifies appropriate cost drivers for all activities.
  • develops activity costs per unit of cost driver.
  • assigns costs to products/services based on consumption of activity costs.

The cost drivers are clearly very important in the process of collecting financial and operating data

38
Q

ABC will result in a greater number of allocation bases and more accurate costing results

A

The underlying concept behind activity-based costing is that activities cause costs to be incurred.
There may be unit level, batch level, product level, or other types of cost drivers.
Under activity-based costing, there will be many different allocation bases as the organization tries to identify those activities that cause costs to increase.
Because the emphasis is on what causes the costs to occur, this system provides more accurate costing results in a multiproduct production environment.

39
Q

The method of allocating the costs of the support departments that best recognizes the mutual services rendered by support departments to other support departments is the

A

The reciprocal allocation method uses simultaneous equations to allocate service department costs to all service departments that use their services.
In direct allocation, service department costs are not allocated to other service departments.
In the step-down method, service department costs are allocated sequentially so that those service departments allocated first do not receive allocations from other service departments.

40
Q

Manufacturing overhead includes all costs except for direct materials and direct labor costs

A

Manufacturing overhead includes all costs except for direct materials and direct labor costs. According to GAAP, manufacturing overhead, direct materials, and direct labor costs are included in inventory

41
Q

Dual pricing

A

Dual pricing promotes goal congruence, e.g., the selling division receives full cost-plus markup price which allows the division to earn a profit while the buying division pays the market price and is no worse off than if purchasing from an outside vendor. The organization as a whole is unaffected by the internal transfers.

42
Q

Common costs

A

Common costs are not controllable by managers, and are imposed costs. Common costs cannot be applied to any user using the cause-and-effect relationship.

43
Q

If the transfer has no effect on fixed costs, then from the selling division’s standpoint, the transfer price must cover both the variable costs of producing transferred units and any opportunity costs.

A

Transfer price>Variable cost + (Total contribution margin of lost sales / Number of units transferred)

44
Q

A market-based transfer price

A

A market-based transfer price will motivate the manager of the selling division to be efficient in order to earn the greatest profit or contribution margin.

45
Q

The variable cost is a transfer price based on the selling division’s variable costs. The variable cost method is preferably used when the selling division has excess capacity.

A

The variable cost method is preferably used when the selling division has excess capacity. The variable cost is a transfer price based on the selling division’s variable costs.

46
Q

Direct labor yield variance

A

Direct labor yield variance = (23,700 Total actual direct labor hours – 21,900 Total standard direct labor hours) X $26 Weighted average standard cost for standard mix = $46,800 unfavorable (Outfield used more than standard quantity)

47
Q

Adjusted EVA

A

Adjusted EVA = Actual NOPAT - Expected NOPAT. EVA = Operating Income - Capital Charge. Capital Charge = Total Assest*Cost of Capital.

48
Q

RETURN ON INVESTMENT (ROI) IS THE FUNDAMENTAL PERFORMANCE MEASURE OF AN INVESTMENT CENTER.IT IS ALSO USED IN EVALUATING CAPITAL INVESTMENTS.

A
49
Q

Implementing a JIT system has several operational benefits, including:

A

Minimize or eliminate inventory and its accompanying carrying costs
Increased productivity and faster manufacturing cycle time
Reduced risk of defects, obsolescence, write-downs and inventory loss
Higher quality of products
Minimal machine downtimes and reduced setups

50
Q

Direct labor yield variance

A

Direct labor yield variance = ( Total actual direct labor hours –Total standard direct labor hours) X $Weighted average standard cost for standard mix.

CMA (2 decks)

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