Ch. 18 Cost Accounting

Question 1

Why are financial systems not sufficient for internal use

Answer 1

Too rigid , focused on compliance, focuses on past information

Question 2

Cost that do not change no matter the activity

Answer 2

Fixed costs

Question 3

A cost that change relative to the activity

Answer 3

Variable costs

Question 4

Difference between revenue and variable expenses

Answer 4

Contribution Margin

Question 5

Provides a measure of the amount of resources available to cover the fixed costs

Answer 5

Contribution Margin

Question 6

(Fixed costs plus variable costs) /units produced

Answer 6

Average costs

Question 7

What are the two assumptions about using excess capacity

Answer 7

The use of capacity is “free” and if demand for capacity increases new capacity will be built or acquired

Question 8

When does excess capacity exist

Answer 8

When production needs<production capabilities

Question 9

How do we decide our product mix to make

Answer 9

Rank them based on contribution margin

Question 10

Three manufacturing operations

Answer 10

Batch, continuous, and custom

Question 11

What capacity should a company ideally operate at

Answer 11

<100%