Exam 2

Question 1

How to find the contribution margin?

Answer 1

Sales revenue - variable expense

Question 2

Total cost doesn’t change with changes in volume of activity (within the relevant range). the cost per unit will change as volume (number of units) change. the total may be different than expected, however this will not be due to changes in the volume of units made or sold.

Answer 2

Fixed cost

Question 3

cost that will always be fixed?

Answer 3

rent, salaries, property tax

Question 4

changes in total in direct proportion to changes in the level of activity. the total cost increases/decreases as units made increases or decreases

Answer 4

variable cost

Question 5

items that will always be variable cost?

Answer 5

DM, DL, Vmoh, sales commision, shipping

Question 6

it is a ___ cost if it cost you more if you make or sell more?

Answer 6

variable

Question 7

if you sell more it cost you more?

Answer 7

variable cost

Question 8

if you pay a set amount regardless of volume

Answer 8

fixed cost

Question 9

MOH is almost always __ besides __

Answer 9

fixed, utilities

Question 10

cost that are paid monthly/anually. anytime you see “worker or inspector”. remains constant in total

Answer 10

fixed cost

Question 11

__ cost per unit will remain constant

Answer 11

variable cost

Question 12

total __ cost will change with changes in activity but cost per unit doesnt change

Answer 12

varibale

Question 13

As volume increases __ cost will stay the same, and __ cost per unit will stay the same

Answer 13

fixed; variable

Question 14

Break even point in sales units?

Answer 14

Total fixed cost/(price per unit - variable cost per unit)

Question 15

break even point in sales dollars?

Answer 15

price per unit X break even sales units

Question 16

measures the percent of change as a result of a change in percent in the level of output?

Answer 16

Degree of operating leverage

Question 17

Helps in measuring the business risk?

Answer 17

Degree of operating leverage

Question 18

Calculate the degree of operating leverage?

Answer 18

(sales - vc) / (sales - vc - fc)

Question 19

Method that estimates how changes in the following three factors affect a companies profits: cost (both variable and fixed), sales volume, price.

Answer 19

cost volume analysis

Question 20

__ costing is also known as direct or marginal costing

Answer 20

variable

Question 21

using __ costing a unit of product includes DM, DL, Vmoh., Fmoh

Answer 21

absopriton

Question 22

using __ costing a unit of product includes DM, DL, Vmoh

Answer 22

variable

Question 23

product costing under __ costing is characteristically higher than under __ costing

Answer 23

absorption, variable

Question 24

__ costing is attractive to managers as an alternative to __ costing because to generate data for CVP analysis, considerable time would have to be invested to rework income statements constructed under __ costing

Answer 24

variable; absorption; absorption

Question 25

when production is equal to sales, __ change occurs to inventories for either absorption or variable costing methods?

Answer 25

no change

Question 26

Net operating income in not effected by changes in production under __ costing?

Answer 26

variable

Question 27

cost that are common to several products, processes, activities, departments, territiories, etc. often common cost are subsequently allocated to each of the joint products , joint processes, etc. in order to determine the cost of each.

Answer 27

common cost

Question 28

a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each

Answer 28

activity based costing

Question 29

What company should use activity based costing

Answer 29

companies with significant amount of overhead pertaining to diversity of activities in providing goods or services to customers where demands also vary

Question 30

benefits of budgeting?

Answer 30

communicate managers plans forces employees to think about and plan for the future serves as a means for allocating resources helps identify potential bottlenecks coordinates activities establishes benchmarks for evaluating performance

Question 31

order of budgets?

Answer 31

sales, production, DM, DL, MOH, selling and admin, cost of goods manufactured, cash

Question 32

a 12 month budget that rolls forward one month or quarter as the current month is completed, this approach keeps managers focused at least one year ahead so that they do not become to narrowly focused on short term results

Answer 32

continuous budget

Question 33

shows the DL hours required to satisfy the production budget, by knowing in advance how much labor time will be needed through out the budget year, the company can develop plans to adjust the labor force as the situation requires.

Answer 33

DL budget

Question 34

the most effective method of budget preparation. a budget that is prepared with full cooperation and participation of managers at all levels. one important limitation of this method is that lower level managers may allow to much budget slack

Answer 34

self imposed

Question 35

contribution format income statement using variable costing

Answer 35

``` sales VCOGS V sales and admin Contribution margin FMOh F sales and admin Net income ```

Question 36

income statement for absorption costing

Answer 36

``` Sales COGS (DM, DL, VMOH, FMOH) GM Selling and admin expense Net income ```

Question 37

Direct material budget

Answer 37

``` Production Materials per unit production needs add desired ending inv total needed less beginning inv materials to be purchased ```

Question 38

Cash budget

Answer 38

``` Beginning cash balance that month cash sales credit sales total cash received total cash available ``` less discrepancy: expenses finance: borrow repay principle pay interest ending balance

Question 39

three steps to activity based costing

Answer 39

Step 1: find the cost per activity by dividing Step 2: assign the cost by multiplying (gives you MOH) Step 3: find the total cost or margin by (+) or (-) sales dm dl moh