MCA

Question 1

Cost

Answer 1

Cost is a resource sacrificed or forgone to achieve a

specific objective

Question 2

Actual cost

Answer 2

is the cost incurred (a historical cost)

Question 3

Cost Object

Answer 3

is anything for which a separate measurement of costs is desired

Question 4

Direct Costs

Answer 4

are related to a given cost object (product, department, etc.) and can be traced to it in an economically feasible way

Question 5

Indirect Costs

Answer 5

are related to the particular cost object but cannot be traced
to it in an economically feasible way

Question 6

Cost Driver

Answer 6

any factor that affects total cost.

Question 7

Fixed Costs

Answer 7

do not change for a given time period despite wide

changes in the related level of total activity or volume

Question 8

Variable Costs

Answer 8

change proportionally to changes in the related level

of total activity or volume

Question 9

Total Costs

Answer 9

include all fixed and variable cost to produce the total

number of a specific product

Question 10

Unit Costs

Answer 10

is calculated by dividing the total cost by the relevant

number of units

Question 11

Common Costs

Answer 11

a common cost is a cost of operating a facility, activity, or like cost object that is shared by two or more users

Question 12

Allocating Common Costs

Answer 12

• Stand-alone cost allocation method

- Incremental cost allocation method

Question 13

Overcosting

Answer 13

a product consumes a low level of resources but is allocated high costs per unit

Question 14

Undercosting

Answer 14

a product consumes a high level of resources but is allocated low costs per unit

Question 15

ABC

Answer 15

• Focus on individual activities as cost object
• Calculate cost of single activities and assign them to cost object
• Requires intensive analysis ->expensive

Question 16

ABC most useful when:

Answer 16

• Profit differences within a product range vary

- Indirect costs are allocated to only one or 2 cost pools

Question 17

Influences on pricing decision

Answer 17

1 Customers
2 Competitors
3 Costs

Question 18

Cost Plus Approach

Answer 18

Which price covers our costs completely?

Question 19

Market Based Approach

Answer 19

What is the market willing to pay?

Question 20

Cost allocation purposes

Answer 20

1 To provide information for economic decisions
2 To motivate managers and other employees
3 To justify costs or compute reimbursement
4 To measure income and assets for reporting to external parties

Question 21

Long vs short run pricing

Answer 21

Long run all costs need to be covered

Profit margins set to earn good ROI

Question 22

life cycle budgeting

Answer 22

• Non-production costs
• Development period for R&D and design
• Other predicted costs

Question 23

Break even methods

Answer 23

– equation method,
– the contribution margin method
– or the graph method

Question 24

Operating leverage

Answer 24

Operating leverage measures the relationship between a company’s variable and fixed expenses

Question 25

logical steps in cost allocation

Answer 25

- identify all indirect costs - quantify the cost - determine suitable allocation basis - build cost pools - calculate respective proportions - assign costs accordingly

Question 26

Definition of Cost Accounting

Answer 26

Measuring and reporting all financial and non financial data that are related to costs

Question 27

Relevant Range

Answer 27

The Range in which fixed costs for a specific amount of production stay the same. if the range is exceeded, fixed costs need to be increased

Question 28

cause and effect

Answer 28

managers identify the variable or variables that cause resources to be consumed

Question 29

Refining a costing system

Answer 29

identify more cost drivers to split up indirect cost pools into more cost pools

Question 30

value added cost

Answer 30

a cost that customers perceive as adding value to a product or service

Question 31

non value added cost

Answer 31

a cost that customers do not perceive as adding value to a product or service

Question 32

Cost Volume Profit Analysis

Answer 32

Examines the behavior of Total Revenues, Total Costs and Operating profit to answer how revenue and cost will change with output or due to a change in selling price

Question 33

Break even sales

Answer 33

(USPxQ)-(UCxQ)-Fixed Cost=O.P

Question 34

types of budgets

Answer 34

Master - all phases for a time Capital - a plan for buying/selling capital assets FInancial - how the company makes money

Question 35

Cost Management

Answer 35

Set of Actions that managers take to satisfy customers while continuously reducing and controlling costs

Question 36

Cost Pool

Answer 36

All costs have the same allocation basis & cause and effect

Question 37

Revenue Costs

Answer 37

Recorded as an expense for a period ( salaries,rent)

Question 38

Capitalized Costs

Answer 38

Recorded as an asset. Costs that benefit the company (Machines, IT)

Question 39

Budgeted Costs

Answer 39

Costs that are known for a period of time

Question 40

Single Rate allocation

Answer 40

Pools together all costs. No distinction between fixed and variable costs

Question 41

Dual Rate allocation

Answer 41

Separates fixed and Variable costs.

Question 42

Activity Based Management

Answer 42

Satisfy customers and improve profits 1. Product/pricing mix decision 2. Cost reduction and process improvement 3. Design Decisions

Question 43

short run pricing

Answer 43

fixed costs are irrelevant except when new fixed costs arise with a special offer.

Question 44

Value Engineering

Answer 44

Systematic Evaluation of Value chain with the objective of reducing costs and still satisfying customers

Question 45

What is a Budget?

Answer 45

A quantitative expression of a proposed plan of action for the future

Question 46

Budgeting Purposes

Answer 46

1. PLanning 2. Facilitate 3. Allocate Resources 4. Manage financial/operational performance 5. Evaluate performance

Question 47

Static budget

Answer 47

Prepared for only one level of output (master budget)

Question 48

Flexible budget

Answer 48

Calculated during a budgeted period when actual data is available