Module 4

Question 1

What is intercept value on the regression output.

Answer 1

Y is a value when X is zero.

Question 2

Regression analysis

Answer 2

seperates costs in to fixed and variable components

Question 3

Absorption Approach equation

Answer 3

revenues less COGS = Gross Margin Less Operating Expenses = Net income

Question 4

Contribution Approach Equation

Answer 4

revenue less variable costs = contribution margin less fixed costs = net income

Question 5

Contribution margin ratio

Answer 5

contribution margin/revenue

Question 6

Treatment of Fixed MOH with Absorption vs Variable Costing

Answer 6

Included in product cost with absorption and excluded from product cost with variable

Question 7

Breakeven points in units

Answer 7

total fixed costs/contribution margin per unit

Question 8

Breakeven point in dollars 1) Contribution margin per unit

Answer 8

unit price x breakeven points in units

Question 9

Breakeven point in dollars 2)Contribution Margin ratio

Answer 9

Total fixed costs/contribution margin ratio

Question 10

Margin of safety

Answer 10

excess sales over breakeven sales, expressed in dollar or as a %.

Question 11

Margin of safety (in dollars)

Answer 11

Total sales (in dollars) - Breakeven sales (in dollars)

Question 12

Margin of safety percentage

Answer 12

Margin of safety in dollars/ Total Sales

Question 13

Coefficient of correlation (r)

Answer 13

measures strength of linear relationship between the dependent variable and independent variable. between -1 and 1

Question 14

Coefficient of Determination (r squared)

Answer 14

proportion of dependent variable explained by the independent variable. Value between 0 and 1

Question 15

What happens to ratio when numerator increases

Answer 15

resulting ratio increases

Question 16

What happens to ratio when denominator increases

Answer 16

resulting ratio decreases

Question 17

Operating cash flow ratio

Answer 17

cash flow from operations/ending current liabilities

Question 18

Working capital turnover

Answer 18

Sales/Average working capital

Question 19

Total debt ratio

Answer 19

total liabilities/total assets

Question 20

Times interest earned ratio

Answer 20

EBIT/Interest Expense

Question 21

Gross Margin Ratio

Answer 21

Sales (net) - COGS/ Sales (net)

Question 22

Profit Margin

Answer 22

Net income/Sales (net)

Question 23

how mgmt should approach sell or process further decision?

Answer 23

compare incremental revenue vs incremental cost after split off point. If incremental revenue is great, process further, if not, sell after split off point

Question 24

how mgmt approach a make or buy decision?

Answer 24

similar to special order decisions, should consider only relevant costs and select lowest cost alternative.

Question 25

how mgmt approach keep or drop decision.

Answer 25

compare fixed costs that can be avoided if the segment is dropped with contribution margin that will be lost if segment is dropped. keep if lost contribution margin exceeds avoidable fixed costs

Question 26

how mgmt approach a special order decision?

Answer 26

if excess capacity, accept is selling price per unit exceeds variable cost per unit. if operating at full capacity, consider opportunity cost of producing special order

Question 27

DM price variance

Answer 27

Actual Q purchased x (actual price - standard price)

Question 28

DM quantity usage variance

Answer 28

standard price x (actual Q used - standard Q allowed)

Question 29

DL rate variance

Answer 29

actual hours worked x (actual rate - standard rate)

Question 30

DL efficiency variance

Answer 30

Standard rate x (actual hours worked - standard hour allowed)

Question 31

VOH rate (spending) variance

Answer 31

Actual hours x (actual rate - standard rate)

Question 32

VOH efficiency variance

Answer 32

standard rate x (actual hours - standard hours allowed for actual production volume)

Question 33

FOH budget (spending) variance

Answer 33

actual fixed overhead - budgeted fixed overhead

Question 34

FOH volume variance

Answer 34

budgeted fixed overhead - standard fixed overhead cost allocated to production

Question 35

Sales price variance

Answer 35

(actual SP/unit - budgeted SP/unit) x actual sold units

Question 36

Sales volume variance

Answer 36

(actual sold units - budgeted sales units) x standard contribution margin per unit