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Accounting 2 > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

describes how costs react to changes in the volume of activity

A

cost behaviors

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2
Q

in total: change in direct proportion
per unit: constant

A

Variable Costs

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3
Q

Examples of Variable Costs

A

direct materials and direct labor

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4
Q

in total: constant
per unit: changes inversely

A

Fixed Costs

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5
Q

Examples of Fix Costs

A

Depreciation, rent, advertising

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6
Q

A variable and fixed element with no constants

A

mixed costs

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7
Q

Examples of mixed costs

A

utilities and overhead

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8
Q

range of activity within which the assumptions made by managers are valid

A

Relevant Range

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9
Q

high-low method equation

A

(change in cost for 2 data points)/(change in activity level 2 data points)

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10
Q

total cost =

A

fixed cost+variable cost

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11
Q

Contribution Margin=

A

Sales Revenue-Variable Costs

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12
Q

Net Income

A

Contribution Margin-Fixed Costs

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13
Q

When revenues increase, variable costs and contribution margin…

A

increase as well

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14
Q

helps managers understand the relationship among cost, volume, profit

A

Cost Volume Profit Analysis

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15
Q

What are the 4 basic elements of a CVP analysis

A

break-even calculations
target profit analysis
margin of safety
operating leverage

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16
Q

contribution margin/unit=

A

selling price/unit - variable cost/unit

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17
Q

CM ratio=

A

CM/SR

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18
Q

when the net income=0; no profit or loss

A

breakeven point

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19
Q

Selling Price per unit x # of units

A

Sales Revenue

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20
Q

Variable Cost Ration

A

VC/SR

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21
Q

trying to come up with the volume of sales that would be necessary to earn a good level of income

A

target profit analysis

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22
Q

measure of firm riskness

A

margin of safety

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23
Q

margin of safety=

A

actual sales revenue-break even sales revenue

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24
Q

degree of operating leverage=

A

contribution margin/net income

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25
Q

the relative combination of products being sold by a firm

A

Sales mix

26
Q

helps push the organization toward its overall goals

A

tactical decision making

27
Q

a cost that differs between alternatives; a cost that is different if we choose A instead of B

A

relevant cost

28
Q

a cost that can be eliminated but always relevant

A

avoidable cost

29
Q

examples of avoidable costs

A

direct materials, direct labor, all variable costs, some fixed costs

30
Q

a cost that exists under all decision alternatives; never relevant

A

unavoidable costs

31
Q

examples of unavoidable costs

A

some fixed costs

32
Q

a cost that cannot be directly linked to a cost object, assigned to a product using an arithmetic process, never relevant

A

Allocated Costs

33
Q

Examples of allocated costs

A

rent & administrative salaries

34
Q

a cost that has been incurred and can not be recovered by some future action; never relevant

A

sunk costs

35
Q

the originial cost of a building when trying to sell it in 5 years is an example of what cost

A

sunk costs

36
Q

a benefit given up by choosing one alternative over another; always relevant

A

opportunity costs

37
Q

make of buy decision

A

should we make the part ourself, or should we buy the part from an outside supplier

38
Q

if the (avoidable costs+opportunity costs) > (outside purchase price) should you buy or make

A

buy

39
Q

if the (avoidable costs+opportunity costs) <(outside purchase price) should you buy or make

A

Make

40
Q

keep or drop decision

A

the company must decide whether a segment of a business should be kept or eliminated

41
Q

if the (avoidable costs+opportunity costs) > (lost contribution margin) should you drop or keep

A

drop

42
Q

if the (avoidable costs+opportunity costs) < (lost contribution margin) should you drop or keep

A

keep

43
Q

one time orders usually requested at a lower selling price than regular sales

A

special order decision

44
Q

if the (actual selling price of special order) > (minimum acceptable selling price of special order) should you accept or reject

A

accept

45
Q

if the (actual selling price of special order) < (minimum acceptable selling price of special order) should you accept or reject

A

reject

46
Q

minimum acceptable selling price of special order equation

A

variable costs per unit of the special order + contribution margin lost from ‘given up’ regular sales

47
Q

contribution margin ‘lost’ is equal to

A

(CM per unit of regular sales x units of regular sales given up)/(units in the special order)

48
Q

one raw material that will generate multiple products

A

joint products

49
Q

able to uniquely identify each joint product

A

split off point

50
Q

costs incurred prior to being able to separately identify products

A

join costs

51
Q

Process further only if the

A

(sales value from further processing - additional processing costs)> sales value at the split off point

52
Q

Joint costs are considered in calculating

A

net income

53
Q

which costs does not have an effect on the decision to sell now or process further

A

joint costs

54
Q

In product mix decision, a company should produce products that have

A

the highest CM per unit of scarce resource

55
Q

CM per unit of scarce resource

A

CM per unit/ Scarce resource needs per unit

56
Q

What happens when a company is faced with more than one resource constraint?

A

used linear programming to determine the optimal mix of products

57
Q

What is the first step of linear programming

A

define your decision variables (label them as x and y)

58
Q

what is the second step of linear programming

A

determine the objective function; which will always to be to maximize the CM

59
Q

what is the third step of linear programming

A

determine the resource constraints

60
Q

what is the fourth step of linear programming

A

solve the linear program to determine the optimal product mix

Accounting 2 (1 decks)

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