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CMA Exam Part 1 > P1.D.1 Measurement Concepts > Flashcards

P1.D.1 Measurement Concepts Flashcards

1
Q

Fixed Costs & Relevant Range

P1.D.1 Measurement Concepts

A
  1. Total fixed costs = constant

2. Fixed costs per unit decrease as levels of activity increase

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2
Q

Variable Costs & Relevant Range

P1.D.1 Measurement Concepts

A
  1. Total variable costs change with level of activity

2. Variable cost per unit = no change

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3
Q

What two methods are used for separating mixed costs?

P1.D.1 Measurement Concepts

A
  1. Regression Method

2. High-Low Method

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4
Q

What are cost objects?

P1.D.1 Measurement Concepts

A

Is anything to which a cost can be traced or assigned to. Ex: depts., products, services, etc.

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5
Q

What is a cost driver and what types are there?

P1.D.1 Measurement Concepts

A

Cost measures that cause costs to increase.

  1. Activity-based cost drivers
  2. Execution cost drivers
  3. Volume-based cost drivers
  4. Structure-based cost drivers
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6
Q

Actual Costing

P1.D.1 Measurement Concepts

A
  1. Actual direct material
  2. Actual direct labor
  3. Actual manufacturing overhead

Suitable for job order costing systems

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7
Q

Normal Costing

P1.D.1 Measurement Concepts

A
  1. Actual direct material
  2. Actual direct labor
  3. Standard manufacturing overhead

Suitable for job order costing systems

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8
Q

Standard Costing

P1.D.1 Measurement Concepts

A
  1. Standard direct material
  2. Standard direct labor
  3. Standard manufacturing overhead

Suitable for job order and process costing systems

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9
Q

Operating Income with Variable and Absorption Costing

P1.D.1 Measurement Concepts

A
  1. A is greater than V when P is greater than S

2. A is less than V when P is less than S

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10
Q

Variable (Direct) Costing

P1.D.1 Measurement Concepts

A
  1. Classifies fixed manufacturing overhead as period costs.
  2. Does not conform to GAAP
  3. Sales - COGS = Contribution Margin
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11
Q

Absorption (Full) Costing

P1.D.1 Measurement Concepts

A
  1. Classifies fixed manufacturing overhead as product costs
  2. Conforms to GAAP and is used for external and tax reporting
  3. Sales - COGS = Gross Profit
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12
Q

Joint Product Costing

P1.D.1 Measurement Concepts

A

Shares common costs up to split-off point.

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13
Q

By-Product Costing

P1.D.1 Measurement Concepts

A

Part of a common process but has little value after split-off point.

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14
Q

Physical Quantity Method

P1.D.1 Measurement Concepts

A

Allocates joint costs using relative proportion of joint products to the total quantity produced at split-off point.

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15
Q

Physical Quantity Method Benefits & Limitations

P1.D.1 Measurement Concepts

A

Benefits
1. Easy to calculate and measure

Limitations

  1. Physical measure isn’t value based
  2. Joint products have different measures; ie: gallons, kilos, etc.
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16
Q

Gross Market Method

P1.D.1 Measurement Concepts

A

Allocates joint costs using relative proportion to market value of joint product to total market at split-off.

17
Q

Gross Market Method Benefits & Limitations

P1.D.1 Measurement Concepts

A

Benefits

  1. Simple to compute.
  2. Value based

Limitations
1. Market value may be unavailable

18
Q

Net Realized Value Method

P1.D.1 Measurement Concepts

A

Allocates joint costs using relative proportion of market value of joint product to total market value after additional processing.

NRV method is generally used instead of the sales value at split off method when selling prices for one or more products at split off do not exist.

19
Q

Net Realized Value Benefits & Limitations

P1.D.1 Measurement Concepts

A

Benefits
1. Considers probable value of joint product after additional processing rather than at split-off point.

Limitations
1. Other joint products may not be processed further

20
Q

Constant Gross Profit (Gross Margin) Method

P1.D.1 Measurement Concepts

A

Assigns costs by applying overall gross profit margin to market value after split-off of each product

21
Q

Constant Gross Profit (Gross Margin) Method Benefits & Limitations

(P1.D.1 Measurement Concepts)

A

Benefits
1. Allocates costs based on unified gross profit rate

Limitations
1. Actual gross profits may be different

CMA Exam Part 1 (35 decks)

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