Ch 19-21 Flashcards
Costs that remain constant in total dollar amount as the level of activity changes are called
fixed costs
Three most common cost behavior classifications
fixed cost, variable cost, mixed cost
Most operating decision of management focus on a narrow range of activity called
the relevant range of production
The systematic examination of the relationships among selling prices volume of sales and production, costs and profits is termed
cost volume profit analysis
The excess of sales revenue over variable cost
Contribution margin
The difference between the current sales revenue and the sales at break even point is called the
margin of safety
Cost volume profit analysis can not be used if costs cannot be properly classified into
fixed and variable costs.
When units manufactured exceed units sold variable costing income is less than
absorption costing income.
The term commonly used to describe concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost and variable factory overhead is
variable costing
Under _________ costing, variable and fixed selling and administrative cwould not be included in finished goods inventory
absorption
Cost that can be influenced by management at a specific level of management are called
controllable costs
Management will use both _______ and ________ costing to control cost, price product and production planning
absorption and variable
the contribution margin ratio is computed as
contribution margin divided by sales
sales territory profitablility analysis can determin profit differences between territoties due to
pricing, selling costs, and type of products sold.
The systematic examination of the differences between planned adn actual contribution margin is
contribution margin analysis
The relative distribution of sales among various products sold is referred to as
the sales mix
Contribution margin reporting can be beneficial for analyzing sales
personnel, products, and sales territory
A formal written statement of managements plan for the future, expressed in financial terms is a
budget
A flexible budget allows for
adjustments in activity levels
The sales budget needs to be completed first when preparing a
master budget
Captial expenditures budget is not directly associated with the
production budget
When preparing the cash budget the _____________, __________, and __________ should all be considered
cash receipts from customers, cash payments to suppliers, and cash payments for equipments
The prudction budget provides the starting point for the preparation of the
direct labor cost budget
____________ supports the planning process by encourages requiring all organizational untis to establish their goals for the upcoming period, increasing the motivation of managers and employees by providing agreed upon expectations, and improving overall decision making by considering all viewpoints, options and cost reduction possibilities.
Budgeting
The ____________ budget is used to prepare the direct materials purchases, direct labor cost, and factory overhead cost budgets.
production
A variant of fiscal-year budgeting whereby a twelve month projection into the future is maintained at all times is termed
continuous budgeting
High Low
Highest $ - Lowest $ = Change in $
Highest Units - Lowest Units = Change in Units
Change$$/ Change U = VC per unit
VCPU(Units)= VC - Cost = FC
Break Even = Sales - (VC+FC)
S$- VC = CM per Unit Break Even Units = FC/CMPU Calculate to Prove BE equation: S$(BEU) - ((VC(BEU) + FC) 2. (FC+DesProfit)/CMPU
Absorption:
Sales
-COGS: (COGM-End Inv)
=Gross Profit
-Selling/Administrative
=Income from Operations
{{End Inv=(COGM/TotalUnits)*End Inv}}Variable: Sales -VCOGS: (VCOGM-End Inv) =Manufacture Margin -VSelling/Admin =CM -FC:(MFC+S/AFC) =Income from operations
Direct Materials Purchase Budget: 3 Columns (Denim,Zipper,Thread) Units Required (Ea Co.) \+Desired End Inventory (Ea Co.) =Total -Beginning Inventory (Ea Co.) =Total *Price Per Unit= Total and add all columns
Units required= Production budget units * Price (Ea Co.)
