Get This Knowledge 2.0 Flashcards
WHAT is the best method for setting standard costs?
By using an Activity Analysis
WHY? - Because it aids standard cost development by identifying, describing, and evaluating the activities and resources needed to produce a particular output
WHAT is the difference between a flexible budget and a static budget?
THE flexible budget provides cost allowances for different levels of activity
- whereas a static budget provides costs for one level of activity
WHAT is NOT considered an operating budget?
A Capital Budget
WHY? -Because the capital expenditures budget, (which outlines needs for new capital investments) is not a part of normal operations
WHY would a Master Budget be considered a Comprehensive Budget?
Because it is a compilation of all the separate operational and financial budget schedules of the organization
NOTE: The use of the title “master budget” is used interchangeably with “comprehensive budget”
WHAT type of budget can a master budget be compared with IF it is used throughout the year as a constant comparison with actual results?
THE “Static Budget”
WHY? - Because if an unchanged master budget is used continuously throughout the year for comparison with actual results, it must be a static budget
HOW is Quality achieved with regards to total quality management (TQM) and continuous improvement (CI)?
WHEN the company shifts its focus to Prevention Costs
WHY? - Because Prevention is less costly than detection and correction of defective output
WHAT is the Equation for Operating Income in the Capital Budgeting Equation?
Contribution margin minus Fixed costs
Contribution Margin - Based on Calculation from Budgeted (NOT Actual) amounts
WHY would a manufacturer compare results with budgets?
BECAUSE Budgets without evaluation of possibilities and constraints are not achievable goals
i.e. unrealistic budgets, or those that do not recognize constraints, have no value
Fill in the blank.
Practical standards, also called (1), are more likely to be accepted by workers than standards based on an (2).
(1) attainable standards
(2) unachievable ideal
i. e. practical standards serve as a better motivating target for manufacturing personnel when compared with ideal standards
WHAT is the FORMULA to calculate the economic rate of return on common stock?
(Dividends + change in price) divided by beginning price
Broken down: (1) add the dividends received over the period of ownership to the change in the stock price during the period of ownership and (2) divide this amount by the original price paid for the stock
HOW do you calculate the production budget?
USING the desired ending inventory and the sales forecast
i.e. A production budget is based on sales forecasts, in units, with adjustments for beginning and ending inventories. It is used to plan when items will be produced
Fill in the Blank.
Under LIFO (last-in, first-out), the (1) items purchased are considered (2).
(1) Last
(2) Sold first
Fill in the Blank.
FIFO (first-in, first-out) expenses the (1).
(1) first items purchased
Because of this, FIFO provides the lowest expense and highest income
HOW would you calculate the Sales Volume Revenue Variance?
Using the following Formula:
Flexible Budget - The Budgeted Amount
HOW do you calculate the Static Budget Revenue Variance?
Using the following Formula:
Actual Revenue - Budgeted Revenue
