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managerial accounting > exam 2 > Flashcards

exam 2 Flashcards

1
Q

Actual Sales - Break-Even Sales =

A

Margin of Safety in dollars

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2
Q

Margin of safety in dollars / actual sales =

A

Mragin of safety ratio

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3
Q

Fixed Costs / Unit Contribution Margin =

A

Break-Even point in units

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4
Q

Fixed Costs / Unit Contribution Margin Ratio =

A

Break-Even point in dollars

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5
Q

(Fixed costs + target income) / unit contribution margin =

A

required sales in units

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6
Q

(Fixed costs + target net income)/ Contribution margin ratio =

A

required sales in dollars

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7
Q

unit contibution margin x sales mix percentage =

A

weighted average unit contribution margin

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8
Q

contribution margin per unit of limited resource

A

unit contribution margin/ limited resource consumed per unit

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9
Q

cost structure

A

refers to the relative proportion of fixed versus variable costs that a company incurs

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10
Q

operating leverage

A

the extent to which a comapny’s net income reacts to a given change in sales

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11
Q

degree of operating leverage

A

refers to the extent to which a company’s net income reacts to a given chance in sales.

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12
Q

generally accepted accounting principles require that absorption costing be used for the costing of inventory for external reporting purposes

A

true

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13
Q

sales mix

A

relative percentage in which a company sells its multiple products

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14
Q

the extent to which a company’s net income reacts to a change in sales.

A

operating leverage

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15
Q

cvp analysis

A

study of effects of changes in costs and volume on a company’s profit

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16
Q

target net income

A

fixed costs + target net income / unit contribution margin

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17
Q

margin of safety

A

actual sales - break even sales

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18
Q

Croc Catchers calculates its contribution margin to be less than zero. Which statement is true?

A

Its selling price is less than its variable costs.

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19
Q

why is sales mix important

A

different products have different cms

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20
Q

net income will be

A

Greater if more higher-contribution margin units are sold than lower-contribution margin units.

21
Q

approach used to identify and manage constraints so as to achieve company goals

A

theory of constrainits

22
Q

If the contribution margin per unit is $15 and it takes 3.0 machine hours to produce the unit, the contribution margin per unit of limited resource is:

A

5$

23
Q

relative proportion of fixed versus variable costs

A

cost structure

24
Q

operating leverage

A

When sales revenues are increasing, high operating leverage means that profits will increase rapidly

25
Q

When sales revenues are declining, too much operating leverage can have devastating consequences.

A

OPERATING LEVERAGE

26
Q

CAN BE COMPUTED BY DIVIDING TOTAL CM BY NET INCOME
PROVIDES MEASURE OF COMAPANYS EARNINGS
AFFECTS A COMPANYS BREAK EEN POINT

A

THE DEGREE OF OPERATING LEVERAGE

27
Q

THE DEGREE OF OPERATING LEVERAGE MEASURES THE COMAPNYS SENSITIIVITY TO CHANGES IN SALES

A

TRUE

28
Q

PRODUCT COSTS UNDER VARIALE COSTING

A

DIRECT MATERIALS
DIRECT LABOR
VARIABLE MANUFACTURING OVERHEAD

29
Q

DIFFERENCE BETWEEN ABSORPTION AND VARIABLE COSTING

A

Under both costing methods, selling and administrative expenses are treated as period costs.
Companies may not use variable costing for external financial reports because GAAP requires that fixed manufacturing overhead be treated as a product cost.

30
Q

FIXED MANUFACTURING OVERHEAD COSTS ARE RECOGNIZED AS

A

PRODUCT COSTS UDER ABSORPTION COSTING

31
Q

COST BEHAVIOR ANALYSIS

A

STUDY OF SPECIFIC COSTS RESPOND TO CHANGES IN LEVEL OF BUSINESS ACTIVITY

32
Q

CHANGES IN LEVEL OR VOLUME OF ACTIVITY SHOULD BE CORRELATED WITH CHANGES IN COSTS

A

T

33
Q

ACTIVITY LEVEL SELECTED IS CALLED ACTIVITY OR VOLUME INDEX

A

T

34
Q

IF ACTIVITY LEVEL INCREASES BY 5 PERCENT, TOTAL VARIABLE COSTS WILL INCREASE 10 PERCENT

A

T

35
Q

IF THE ACTIVITY LEVEL DECREASES BY 25 PERCENT, TOTAL VARIABLE COSTS DECREASE Y 25 PERCENT

A

T

36
Q

VARIABLE COSTS REMAIN TH ESAME PER UNIT AT EERY LEVEL OF ACTIVITY

A

T

37
Q

EXAMPLES OF FIXED COSTS

A

PROPERTY TAXES
INSURANCE
RENT
DEPRECIATION

38
Q

VARIABLE COSTS ARE COSTS THAT

A

VARY IN TOTAL DIRECTLY WITH CHANGES IN ACTIVITY LEVEL

AND REMAIN THE SAME PER UNIT AT EVERY ACTIITY LEVEL

39
Q

CURVILENEAR

A

RELATIONSHIP BETWEEN VARIABLE COSTS AND CHANGES IN ACTIVITY LEVEL

40
Q

RELEVANT RANGE

A

THE RANGE OVE RWHICH THE COMPANYE XPECTS TO OPERATE DURING A YEAR

41
Q

HIGH-LOW METHOD

A

USES TOTAL COSTS INCCURRED AT HIGH AND LOW LEVELS OF ACTIVITY TO CLASSIFY MIXED COSTS TO FIXED AND VARIALE

42
Q

CHANGES IN TOTAL COSTS / HIGH MINUS LOW ACTIVITY LEVEL

A

VARIABLE COST PER UNIT

43
Q

WHICH OF THE FOLOWING IS NOT INVOLVED IN CVP ANALYSIS

A

FIXED COSTS PER UNIT

44
Q

CONTRIUTION MARGIN

A

IS REVENUE REMAING AFTER DEDUCTING VARIABLE COSTS

45
Q

CONTRIBUTION MARGIN MAY BE EXPRESSSED AS CM PER UNIT

A

T

46
Q

GOSSEN COMPANY IS PLANNING TO SELL 200,000 PLIERS FOR 4$ PER UNIT. THE CONTRIUION MARGIN RATIO IS 25%. iF GOSSEN WILL BREAK EVEN AT THIS LEVEL OF SALES, WHAT ARE THE FIXED COSTS?

A

200,000

47
Q

TARGET NET INCOME

A

VARIABLE COSTS + FIXED COSTS + TARGET NET INCOME

48
Q

MARSHALL COMPANY HAD ACTUAL SALES OF 600K WHEN BREAKEVEN SALES WERE 420K. WHAT IS MARGIN OF SAFETY RATIO

A

30&

managerial accounting (2 decks)

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