Cost Final Exam Flashcards
1
Q
What are the 3 vital activities performed by managerial accountants?
A
Planning
Controlling
Decision Making
2
Q
What are the 5 skills managers need to be successful?
A
Strategic management skills
Enterprise risk management skills
Process management skills
Measurement skills
Leadership skills
3
Q
What are the 4 principles in the code of conduct for management accountants?
A
honesty
fairness
objectivity
responsibility
4
Q
What are the 4 standards in the code of conduct for management accountants?
A
Competence
Confidentiality
Integrity
Credibility
5
Q
What are the 3 components of the customer value proposition?
A
Customer intimacy
Operational excellence
Product leadership
6
Q
What are the 3 types of manufacturing costs?
A
Direct materials
Direct Labor
Manufacturing overhead
7
Q
What type of manufacturing cost is indirect labor?
A
Manufacturing overhead
8
Q
What are the 2 types of non manufacturing costs?
A
Selling costs
Administrative costs
9
Q
On which financial statement can product costs be found initially?
A
Balance sheet (inventory)
10
Q
When do product costs move from the balance sheet to the income statement?
A
When products are sold
11
Q
What is another term for manufacturing costs?
A
Product costs
12
Q
What is another term for non manufacturing costs?
A
Period costs
13
Q
On which financial statement can period costs be found?
A
Income statement
14
Q
What are the 2 components of prime cost?
A
Direct Materials
Direct Labor
15
Q
What are the 2 components of conversion cost?
A
Direct Labor
Manufacturing Overhead
16
Q
2 other terms for cost driver are
A
Activity base
Allocation base
17
Q
Direct labor-hours and machine-hours are types of cost _____.
A
drivers
18
Q
The relevant range is a range of activity within which the ____ assumption is reasonably valid.
A
linearity
19
Q
What is the equation for a mixed cost?
A
Y = a + bx
20
Q
In the Y = a + bx equation, what does Y represent?
A
The total amount of mixed cost
21
Q
What is the high-low method equation?
A
(Cost at high activity level - cost at low activity level) / (High activity level - low activity level)
22
Q
What does a traditional (absorption) format income statement look like?
A
Sales - COGS = Gross Margin - selling & admin expenses = net operating income
23
Q
What does a contribution (variable) format income statement look like?
A
Sales - variable COGS - variable selling expenses = Contribution Margin - fixed expenses = net operating income
24
Q
The thing for which cost data is desired is called the __ ___.
A
cost object
25
What is the difference between direct and indirect costs?
Direct costs can be easily and conveniently traced to a specific cost object
26
Costs that cannot be traced to individual cost objects because they support a number of cost objects are ____ costs.
common
27
When a product cost includes all manufacturing costs, this is called ____ costing.
absorption
28
When is job-order costing used?
When many different products are produced
29
What is the formula for predetermined overhead rate?
Estimated total manufacturing overhead cost / estimated total amount of allocation base
30
When is a predetermined overhead rate calculated?
Before the period begins
31
What is the formula for applying manufacturing overhead to a job?
Predetermined overhead rate x amount of allocation base actually incurred
32
What are the 3 inventory accounts on the balance sheet?
Raw Materials
Work in Process
Finished Goods
33
When goods are moved from work in process to finished goods, what cost is computed?
Cost of goods manufactured
34
What are the 3 components of work in process?
Direct materials used
Direct labor
Manufacturing overhead
35
Adding something to an inventory account requires a debit or credit?
Debit
36
Removing something from an inventory account requires a debit or credit?
Credit
37
What account is debited as manufacturing costs are incurred?
Manufacturing overhead
38
When is manufacturing overhead moved to work in process?
At the end of a job or period
39
What account is debited when indirect labor or materials are used?
Manufacturing overhead
40
If at the end of a job or period, there is a debit balance in manufacturing overhead, then the overhead must have been under/over applied.
underapplied
41
If manufacturing overhead is under applied, then COGS is over/under stated.
understated
42
A simple way to dispose of the balance in Manufacturing Overhead is to close it out to _____.
COGS
43
An accurate way to dispose of the balance in Manufacturing Overhead is to allocated it between what 3 accounts?
Work in Process
Finished Goods
COGS
44
When is process costing used?
When there is a continuous flow of indistinguishable units
45
Process costing computes unit costs by ____ rather than by job.
department
46
What is the formula for cost per equivalent unit using the weighted-average method?
(cost of beginning WIP inventory + cost added during the period) / equivalent units
47
What is the formula to calculate equivalent units?
Number of partially completed units x % completed
48
Using the FIFO method, units transferred out is divided into what two parts?
Units from beginning inventory that were completed during the period
Units that were both started and completed during the period
49
Using the FIFO method, what 2 inventories are converted to equivalent units?
Beginning WIP
| Ending WIP
50
Which method blends work and costs from prior periods with the current period?
(FIFO, Weighted Average)
Weighted Average
51
What is the formula for cost per equivalent unit using the FIFO method?
cost added during the period / equivalent units
52
How is contribution margin calculated?
Sales revenue - variable expenses
53
Selling price per unit - variable expenses per unit =
Unit Contribution Margin
54
(Unit CM x Quantity Sold) - Fixed Expenses =
Profit
55
The horizontal (x) axis in a CVP graph represents what?
Units
56
The vertical (y) axis in a CVP graph represents what?
Dollars
57
The first step to make a CVP graph is to draw a horizontal line to represent ___ ___.
fixed expenses
58
The second step to make a CVP graph is to plot a point that represents ____ ___ at a selected ___ ___.
total expense
| sales volume
59
The third step to make a CVP graph is to draw a line through the point plotted in the previous step back to where the fixed expense line intersects the vertical axis. This is the ___ ___ line.
total expense
60
The fourth step to make a CVP graph is to plot a second point, then draw a line through that point back to the origin. This is the ___ ___ line.
total revenue
61
In a CVP graph, the vertical distance between the total revenue line and the total expense line is the anticipated ____ or ____ at any given level of sales.
profit
| loss
62
In a CVP graph, the ___ ___ ___ is where the total revenue and total expense lines cross.
break-even point
63
Contribution margin / sales =
CM ratio
64
Unit contribution margin / unit selling price =
CM ratio
65
CM ratio x change in sales =
Change in CM
66
(CM ratio x sales) - fixed expenses =
Profit
67
(Sales - Variable Expenses) / Sales =
CM ratio
68
1 - variable expense ratio =
CM ratio
69
Variable expenses / sales =
variable expense ratio
70
Unit CM x Quantity Sold - Fixed Expenses =
Profit
71
(Target profit + fixed expenses) / unit CM =
Unit sales to attain target profit
72
(Target profit + fixed expenses) / CM ratio =
Dollar sales to attain target profit
73
Fixed expenses / Unit CM =
Unit sales to break even
74
Fixed expenses / CM ratio =
Dollar sales to break even
75
Total sales - Break Even Sales =
Margin of safety in dollars
76
Margin of safety in dollars / selling price per unit =
Margin of safety in units
77
Margin of safety in dollars / total sales in dollars =
Margin of safety percentage
78
The relative proportion of fixed and variable costs in an organization is its ___ ___.
cost structure
79
A measure of how sensitive net operating income is to a given percentage change in dollar sales is ___ ____.
Operating leverage
80
Contribution margin / net operating income =
Degree of operating leverage
81
degree of operating leverage x percentage change in sales =
percentage change in net operating income
82
Net income varies from variable costing to absorption costing because of the treatment of what?
fixed manufacturing overhead
83
Should selling and admin expenses ever be treated as product costs, even if variable?
No
84
Fixed manufacturing overhead is expensed as incurred in variable/absorption costing
variable
85
Fixed manufacturing overhead is allocated to each unit of product in variable/absorption costing
absorption
86
When inventories increase, net operating income is higher under variable/absorption costing.
absorption
87
When inventories decrease, net operating income is higher under variable/absorption costing.
variable
88
When is net operating income the same under both variable and absorption costing?
When units processed = units sold
89
The theory of constraints treats direct labor as a ___ cost.
fixed
90
A fixed cost that is incurred because of the existence of a segment is a ____ fixed cost.
traceable
91
A fixed cost that supports the operations of more than one segment is a ____ fixed cost.
common
92
How is segment contribution margin calculated?
Sales - variable expenses
93
How is segment margin calculated?
Segment contribution margin - traceable fixed costs
94
What is the best gauge of the long-run profitability of a segment?
Segment contribution margin
95
GAAP requires absorption/variable costing
Absorption
96
Any event that causes the consumption of overhead resources is an ____.
Activity
97
A bucket in which costs are accumulated that relate to a single activity is an ___ ___ ____.
Activity cost pool
98
What are the 5 levels of activity?
```
Unit-level
Batch-level
Product-level
Customer-level
Organization-sustaining
```
99
Assigning organized costs to activity cost pools is known as ___ ____ _____.
first stage allocation
100
Applying overhead costs and activity costs to products and customers is known as ___ ___ ____.
second stage allocation
101
Holding a manager responsible for only the items that he or she can actually control is called ____ ____.
Responsibility accounting
102
What are the 4 sections of a cash budget?
Receipts
Disbursements
Cash excess or deficiency
Financing
103
An estimate of what revenues and costs should have been, given the actual level of activity is a ___ ___.
Flexible budget
104
The differences between the planning budget and the flexible budget are ____ variances.
Activity
105
The differences between the flexible budget and actual results are ___ and ____ variances.
Revenue and spending
106
Investigating discrepancies in cost or quantity that depart significantly from standards is known as ____ ___ _____.
Management by exception
107
Materials Quantity Variance =
SP (AQU - (SQ x output))
108
Materials Price Variance =
AQP (AP - SP)
109
Labor Efficiency Variance and Variable Overhead Efficiency Variance =
SR ( AH - (SH x output))
110
Labor Rate Variance and Variable Overhead Rate Variance =
AH (AR - SR)
111
What is the formula for budget variance?
Actual fixed overhead - budgeted fixed overhead
112
What is the formula for volume variance?
Budgeted fixed overhead - fixed overhead applied to WIP
113
Avoidable costs are relevant/irrelevant costs
Relevant
114
Sunk costs are relevant/irrelevant costs
irrelevant
115
IRR factor =
investment required / annual net cash inflow
116
Payback period =
investment required / annual net cash inflow
117
Project profitability index =
NPV / Investment required
118
Simple rate of return =
Annual incremental net operating income / initial investment
