Cost Exam 2 (Ch. 5-7) Flashcards
CVP analysis focuses on how profits are affected by what 5 variables?
Selling prices Sales volume Unit variable costs Total fixed costs Product mix
What 3 things does CVP analysis identify?
Break-even points
Profits
Losses
As sales increase, total costs and volume increase. This is the _____ graph.
total revenue
As sales increase, variable costs and volume increase. This is the _____ graph.
total variable cost
As sales increase, fixed costs stay the same and volume increases. This is the _____ graph.
total fixed cost
The total cost graph consists of the ____ graph stacked on top of the _____ graph.
total variable cost, total fixed cost
On the CVP graph, the break-even point is where the ______ graph intersects the _____ graph.
total revenue, total cost
As fixed costs increase, the break-even point increases/decreases.
Increases
As the sales price increases, the break-even point increases/decreases.
Decreases
As the variable cost per unit increases, the break-even point increases/decreases.
increases
What are the components of an absorption costing income statement?
Sales - COGS = GP
GP - Operating Expenses = Operating Income
What are the components of COGS in absorption costing?
DM, DL, FOH
What are the components of a variable costing income statement?
Sales - variable costs = contribution margin
Contribution margin - fixed costs = operating income
What is manufacturing margin?
Sales - variable manufacturing cost
When all products that are produced are sold, how does operating income for absorption costing compare to variable costing?
They are equal
When not all of the products produced are sold, how does operating income for absorption costing compare to variable costing?
Absorption costing income is greater than variable costing
When more products are sold than produced, how does operating income for absorption costing compare to variable costing?
Variable costing income is greater than absorption costing
Why causes the difference in operating income between absorption and variable costing?
Fixed manufacturing overhead costs are tied to inventory in absorption costing, but are treated as an expense in variable costing.
Under the Theory of Constraints, some companies treat ____ as a fixed manufacturing cost rather than a variable cost.
direct labor
____ fixed costs are incurred because of the existence of a segment.
Traceable
____ fixed costs support more than one segment.
common
What is segment margin?
Segment contribution margin - traceable fixed costs
Which costing method is better for heterogeneous products? Traditional or activity-based?
Activity-based
Which costing method could result in inaccurate pricing? Traditional or activity-based?
Traditional
In activity-based costing, organization sustaining products are treated as ____ costs.
period
In activity-based costing, costs not tied to a product are treated as ____ costs.
period
Which costing method assigns all factory overhead to products, even if the costs are not tied to the products? Traditional or activity-based?
Traditional
