MOre Know HoW Flashcards
WHAT is a reason why firms’ limit their activities?
Because of a Lack of space, time, and expertise
These are reason(s) a firm limits its activities to those most profitable to the firm
HOW are Inventoriable Costs treated in Cost Accounting?
AS assets before the products are sold
Thus, Product (inventoriable) costs are capitalized as part of inventory
WHAT are considered inventoriable costs under an absorption costing system?
Variable and Fixed Costs of production
WHAT are considered inventoriable costs under an variable costing system?
Variable production costs
WHAT qualitative factors are usually considered in an insourcing vs. outsourcing situation?
- Special Technology
- Skilled Labor
- Special Materials Requirements
- Assurance of quality control
WHAT are Conversion costs? HOW is it Calculated?
THEY are incurred in transforming direct materials into finished products and include; direct labor and manufacturing overhead
Unit conversion costs = Direct labor + Variable overhead + Fixed overhead
NOTE: Because indirect labor is a component of factory overhead, indirect labor is a conversion cost
WHAT is an effect of a decrease in production levels within a relevant range?
Total Costs will Decrease
WHAT is considered a Direct Labor cost?
Wages paid to the Factory Machine Operator
WHY? - Because Direct labor costs are wages paid to labor that can be specifically identified with the production of finished goods
NOTE: Wages for the Supervisor Operator in a Factory is NOT considered a Direct Labor cost because it is NOT identifiable with the production of finished goods
WHAT is an assumption made regarding Breakeven Analysis over the relevant range?
Unit Variable Costs and Total Fixed Costs are “Unchanged”
WHY? - Because Unit Variable Costs assumes that costs and revenues are linear. Thus, total variable costs vary directly with output
Breakeven analysis assumes that unit selling price and unit variable costs are constant within the relevant range
In what order are the components of the operating budget prepared?
(1) sales (revenue) budget
(2) production budget
(3) direct materials budget
(4) direct labor budget
(5) manufacturing overhead budget
(6) ending finished goods inventory budget
(7) cost of goods sold budget
(8) nonmanufacturing budget
WHAT are some components of the Financial Budget?
Cash Budget
Budgeted Balance Sheet
Capital Budget
WHAT item(s) should be considered by a manufacturing firm in going from a sales quantity budget to a production budget?
Expected change in the quantity of finished goods and work-in-process inventories
WHY? - Because both finished goods and work-in-process inventories may change during a period, necessitating an analysis of both inventory levels before the production budget can be set
WHAT are the four categories of costs associated with product quality costs?
(1) External failure
(2) Internal failure
(3) Prevention
(4) Appraisal
WHAT are considered some key characteristics of Business intelligence (BI)?
(1) Focusing on strategic objectives
(2) Giving immediate information about an organization’s critical (strategic) success factors
(3) Displaying information in graphical format
Fill in the Blank.
At the breakeven point, the contribution margin equals total ________.
Fixed Costs
i.e. No profit or loss occurs at the breakeven point
Thus, operating income equals zero, and fixed cost must equal the contribution margin (total revenue – total variable cost)
WHAT type of cost is deducted from revenues of a manufacturing company in order to determine gross margin
- but not deducted from revenues to determine contribution margin?
Fixed Manufacturing Costs
WHY? - Because Gross (profit) margin is the excess of sales over cost of goods sold that consists of variable and fixed manufacturing costs. Contribution margin is the excess of sales over the sum of variable manufacturing and selling and administrative costs
Thus, Fixed manufacturing costs are deducted from revenues in calculating gross margin, but not deducted from revenues in calculating contribution margin
HOW would you calculate the Contribution Margin per Unit?
(Total Sales - Total Variable Costs) ÷ Total Units
HOW can you find your Break Even Point in Units?
By using the following Equation:
Fixed Costs ÷ Contribution Margin Ratio
NOTE: Your Contribution Margin Ratio is calculated as:
(Total Fixed Costs - Total Variable Costs) ÷ Total Fixed Costs
