Exam 2

Question 1

Cost Volume Profit analysis

Answer 1

the relationships between sales volume, expenses, revenue, and profit

Question 2

Cost Volume profit equation

Answer 2

E = (P - UVC) *q - FC

Question 3

Break even

Answer 3

level of activity where profit = 0

Question 4

Target profit

Answer 4

the volume of sales required to earn a particular target profit

Question 5

Safety Margin

Answer 5

the difference between actual sales and break even sales revenue

Question 6

Cost Structure

Answer 6

the relative proportion of fixed and variable costs in an organization

Question 7

Operating Leverage

Answer 7

the extent to which an organization uses fixed costs in its cost structure ( contribution margin / net operating inocme)

Question 8

CVP Analysis

Answer 8

total revenue and expenses are lineaer

Question 9

Break even quantity in units

Answer 9

FC / Unit Contribution Margin

Question 10

Break even sales (in dollars)

Answer 10

FC / Contribution Margin Ratio

Question 11

Sales Quantity in units

Answer 11

FC + TP / UCM

Question 12

Sales amount in dollars

Answer 12

FC + TP / CMR

Question 13

Contribution Margin Ratio

Answer 13

(Price - Unit Variable Cost) / P

Question 14

Budget

Answer 14

a detailed plan that specifies how resources will be acquired and used during a specified future time period

Question 15

capital budget

Answer 15

acquisition and disposal of capital assets such as buildings and equipment

Question 16

financing budget

Answer 16

how the organization will acquire financial resources, such as through the issuance of stock or incurrence of debt

Question 17

rolling budget

Answer 17

continually updated by periodically adding new incremental time period and dropping the period just completed

Question 18

master budget

Answer 18

a comprehensive set of budgets that cover all phases of an organizations operations for a specified time period.

Question 19

planning

Answer 19

forces organizations to look ahead, define strategies and action plans

Question 20

communication and coordination

Answer 20

helps managers throughout the organization become aware of the plans made by other managers

Question 21

allocating resources

Answer 21

defines resources needed and what identifies priority

Question 22

controlling

Answer 22

serves as a useful benchmark with which actual results can be compared

Question 23

evaluation and incentives

Answer 23

primary input for performance evaluation and motivates employees and departments to meet the budget

Question 24

Budget order

Answer 24

sales budget, production budget, direct labor/materials budget, cash budget, then balance sheet

Question 25

budgetary slack/ padding the budget

Answer 25

overestimate costs and underestimate revenues during the budgeting process to make the numbers easier to hit during the period

Question 26

participative budgeting

Answer 26

involves employees at all levels of the organization and increases feeling of “our” budget verses a budget imposed on them.

Question 27

standard price

Answer 27

prices that should be paid for resources

Question 28

standard quantity

Answer 28

quantity that should be used

Question 29

price variance

Answer 29

the difference between the actual price and the standard price (also: AQ(AP-SP) or AH(AR-SR)

Question 30

Quantity variance

Answer 30

the difference between the actual quantity and the standard quantity (also: SP(AQ-SQ) or SR(AH-SH)