question

When providing goods and/or services to a customer.

answer

When is revenue recognized?

question

The company's assets exceed liabilities by $100,000.

answer

If a company has stockholders equity of $100,000 at the end of the year, which of the following statement is always true?

question

$42

answer

Allen company has had a net income of $15, $8, $19, $6 over the past four years and paid an average dividend of $1.5 per year what is the ending RE balance.

question

Increase assets by $20 and increases stockholders equity by $20.

answer

In Oct. Allen Corp received $20 in advance for management fees to be completed in the future. How does this transaction affect the accounting equation?

question

Increase assets by $30 and increase liabilities by $30.

answer

On Sept. 1st, Morgan Lab Supplies purchased $30 in inventory on account. How does this transaction affect the accounting equation.

question

Debit unearned revenues, credit revenue.

answer

Willis Corp makes a sale in year 1 but provides the services in year two, what adjusting entry is required in year 2 when services are rendered?

question

Balance sheet

answer

The financial statement that represents the accounting equation is

question

Specialized certification, comprehensive examination to ensure technical competence and has 2 years experience

answer

Certified Internal Auditor

question

four areas are emphasized:economics, finance, and management, financial accounting and reporting, management reporting, analysis, and behavioral issues, decision analysis and information systems

answer

Certified Management Accountant

question

permitted (by law) to serve as an external auditor.

answer

Certified Public Accountant

question

the continual search for ways to increase the overall efficiency and productivity of activities by reducing waste, increasing quality, and managing costs.

answer

Continuous improvement

question

supervises all accounting functions and reports directly to the general manager and chief operating officer (COO)

answer

Controller

question

The managerial activity of monitoring a plan's implementation and taking corrective action as needed. Control is usually achieved by comparing actual performance with expected performance.

answer

Controlling

question

The process of choosing among competing alternatives

answer

Decision making

question

involves choosing actions that are right, proper, and just.

answer

Ethical behavior

question

primarily concerned with producing information (financial statements) for externalusers, including investors, creditors, customers, suppliers, government agencies (Food and Drug Administration, Federal Communications Commission, etc.), and labor unions.

answer

Financial accounting

question

organizes costs according to the value chain and collects both financial and nonfinancial information.

answer

Lean accounting

question

Positions that have direct responsibility for the basic objectives of an organization are referred to as

answer

Line positions

question

the provision of accounting information for a company's internal users. It is the firm's internal accounting system and is designed to support the information needs of managers.

answer

Managerial accounting

question

a management activity that involves the detailed formulation of action to achieve a particular end.

answer

Planning

question

attempt to limit securities frauds and accounting misconduct scandals like those associated with Enron, WorldCom, Adelphia, and HealthSouth.

answer

SOX

question

Positions that are supportive in nature and have only indirect responsibility for an organization's basic objectives are called

answer

Staff positions

question

in which manufacturers strive to create an environment that will enable workers to manufacture perfect (zero-defect) products

answer

Total quality management

question

responsible for the finance function. Specifically, the treasurer raises capital and manages cash and investments. The treasurer may also be in charge of credit and collection and insurance.

answer

Treasurer

question

the set of activities required to design, develop, produce, market, and deliver products and services to customers.

answer

Value chain

question

the way that costs are measured and recorded.

answer

Accumulating costs

question

all costs associated with research, development, and general administration of the organization that cannot reasonably be assigned to either selling or production.

answer

Administrative costs

question

when an indirect cost is assigned to a cost object using a reasonable and convenient method.

answer

Allocation

question

the way that a cost is linked to some cost object.

answer

Assigning costs

question

the sum of direct labor cost and overhead cost.

answer

Conversion cost

question

the amount of cash or cash equivalent sacrificed for goods and/or services that are expected to bring a current or future benefit to the organization.

answer

Cost

question

any item such as products, customers, departments, projects, and so on, for which costs are measured and assigned.

answer

Cost object

question

the total product cost of goods completed during the current period.

answer

Cost of goods manufactured

question

the total product cost of goods sold during the period.

answer

Cost of goods sold

question

costs that can be easily and accurately traced to a cost object.

answer

Direct costs

question

the labor that can be directly traced to the goods or services being produced.

answer

Direct labor

question

materials that are a part of the final product and can be directly traced to the goods or services being produced.

answer

Direct materials

question

costs that are used up (expired) in the production of revenue.

answer

Expenses

question

costs that, in total, are constant within the relevant range as the level of output increases or decreases.

answer

Fixed cost

question

the difference between sales revenue and cost of goods sold.

answer

Gross margin

question

costs that cannot be easily and accurately traced to a cost object.

answer

Indirect costs

question

an organization that produces tangible products.

answer

Manufacturing organizations

question

all product costs other than direct materials and direct labor. In a manufacturing firm, manufacturing overhead also is known as factory burden orindirect manufacturing costs. Costs are included as manufacturing overhead if they cannot be traced to the cost object of interest (e.g., unit of product).

answer

Manufacturing overhead

question

the benefit given up or sacrificed when one alternative is chosen over another.

answer

Opportunity cost

question

costs that are expensed in the period in which they are incurred; they are not inventoried.

answer

Period costs

question

the revenue per unit.

answer

Price

question

the sum of direct materials cost and direct labor cost.

answer

Prime cost

question

costs associated with the manufacture of goods or the provision of services. Product costs include direct materials, direct labor, and overhead.

answer

Product (manufacturing) costs

question

goods produced by converting raw materials through the use of labor and indirect manufacturing resources, such as the manufacturing plant, land, and machinery.

answer

Products

question

those costs necessary to market, distribute, and service a product or service.

answer

Selling costs

question

an organization that produces intangible products.

answer

Service organizations

question

tasks or activities performed for a customer or an activity performed by a customer using an organization's products or facilities.

answer

Services

question

costs that, in total, vary in direct proportion to changes in output within the relevant range.

answer

Variable cost

question

the cost of the partially completed goods that are still being worked on at the end of a time period.

answer

Work in process (WIP)

question

the percentage of total variability in a dependent variable that is explained by an independent variable. It assumes a value between 0 and 1.

answer

Coefficient of determination

question

re fixed costs that cannot be easily changed. Often, committed fixed costs are those that involve a long-term contract (e.g., leasing of machinery or warehouse space) or the purchase of property, plant, and equipment.

answer

Committed fixed costs

question

the way in which a cost changes when the level of output changes.

answer

Cost behavior

question

a causal factor that measures the output of the activity that leads (or causes) costs to change.

answer

Cost driver

question

a variable whose value depends on the value of another variable.

answer

Dependent variable

question

fixed costs that can be changed relatively easily at management discretion.

answer

Discretionary fixed costs

question

costs that, in total, are constant within the relevant range as the level of output increases or decreases.

answer

Fixed costs

question

a method for separating mixed costs into fixed and variable components by using just the high and low data points. [Note: The high (low) data point corresponds to the high (low) output level.]

answer

High-low method

question

a variable whose value does not depend on the value of another variable.

answer

Independent variable

question

the fixed cost, representing the point where the cost formula intercepts the vertical axis.

answer

Intercept

question

a statistical method to find the best-fitting line through a set of data points. It is used to break out the fixed and variable components of a mixed cost.

answer

Method of least squares (regression)

question

costs that have both a fixed and a variable component.

answer

Mixed costs

question

the range of output over which an assumed cost relationship is valid for the normal operations of a firm.

answer

Relevant range

question

a method to fit a line to a set of data using two points that are selected by judgment. It is used to break out the fixed and variable components of a mixed cost.

answer

Scattergraph method

question

when economies of scale are present, the true total cost function is increasing at a decreasing rate, as shown by the nonlinear cost curve

answer

Semi-variable costs

question

the variable cost per unit of activity usage.

answer

Slope

question

costs that, in total, vary in direct proportion to changes in output within the relevant range.

answer

Variable costs

question

the point where total sales revenue equals total cost; at this point, neither profit nor loss is earned.

answer

Break-even point

question

fixed expenses that cannot be directly traced to individual segments and that are unaffected by the elimination of any one segment.

answer

Common fixed expenses

question

sales revenue minus total variable cost or price minus unit variable cost.

answer

Contribution margin

question

contribution margin divided by sales revenue. It is the proportion of each sales dollar available to cover fixed costs and provide for profit.

answer

Contribution margin income statement

question

contribution margin divided by sales revenue. It is the proportion of each sales dollar available to cover fixed costs and provide for profit.

answer

Contribution margin ratio

question

a graph that depicts the relationships among costs, volume, and profits. It consists of a total revenue line and a total cost line.

answer

Cost-volume-profit (CVP) analysis

question

A company's mix of fixed costs relative to variable costs.

answer

Cost structure

question

a graph that depicts the relationships among costs, volume, and profits. It consists of a total revenue line and a total cost line.

answer

Cost-volume-profit graph

question

a measure of the sensitivity of profit changes to changes in sales volume. It measures the percentage change in profits resulting from a percentage change in sales.

answer

Degree of operating leverage (DOL)

question

fixed costs that are directly traceable to a given segment and, consequently, disappear if the segment is eliminated.

answer

Direct fixed expenses

question

the quantity at which two systems produce the same operating income.

answer

Indifference point

question

the units sold, or expected to be sold, or sales revenue earned, or expected to be earned, above the break-even volume.

answer

Margin of safety

question

the use of fixed costs to extract higher percentage changes in profits as sales activity changes. Leverage is achieved by increasing fixed costs while lowering variable costs.

answer

Operating leverage

question

a graphical portrayal of the relationship between profits and sales activity in units.

answer

Profit-volume graph

question

the relative combination of products (or services) being sold by an organization.

answer

Sales mix

question

the "what-if" process of altering certain key variables to assess the effect on the original outcome.

answer

Sensitivity analysis

question

variable costs divided by sales revenues. It is the proportion of each sales dollar needed to cover variable costs.

answer

Variable cost ratio

question

an approach that assigns actual costs of direct materials, direct labor, and overhead to products.

answer

Actual cost system

question

the cost of goods sold after all adjustments for overhead variances are made.

answer

Adjusted cost of goods sold

question

overhead assigned to production using predetermined rates.

answer

Applied overhead

question

activities or variables that invoke service costs. Generally, it is desirable to use causal factors as the basis for allocating service costs.

answer

Causal factors

question

the costs of resources used in the output of two or more services or products.

answer

Common costs

question

estimated overhead for a single department divided by the estimated activity level for that same department.

answer

Departmental overhead rate

question

a method that allocates service costs directly to producing departments. This method ignores any interactions that may exist among support departments.

answer

Direct method

question

one distinct unit or set of units for which the costs of production must be assigned.

answer

Job

question

a subsidiary account to the work-in-process account on which the total costs of materials, labor, and overhead for a single job are accumulated.

answer

Job-order cost sheet

question

a costing system in which costs are collected and assigned to units of production for each individual job.

answer

Job-order costing system

question

a source document that records the type, quantity, and unit price of the direct materials issued to each job.

answer

Materials requisition form

question

the cost of goods sold before adjustment for any overhead variance.

answer

Normal cost of goods sold

question

an approach that assigns the actual costs of direct materials and direct labor to products but uses a predetermined rate to assign overhead costs.

answer

Normal cost system

question

the amount by which applied overhead exceeds actual overhead.

answer

Overapplied overhead

question

the difference between actual overhead and applied overhead.

answer

Overhead variance

question

a single overhead rate calculated using all estimated overhead for a factory divided by the estimated activity level across the entire factory.

answer

Plantwide overhead rate

question

an overhead rate computed using estimated data.

answer

Predetermined overhead rate

question

a costing system that accumulates production costs by process or by department for a given period of time.

answer

Process-costing system

question

units within an organization responsible for producing the products or services that are sold to customers.

answer

Producing departments

question

a method that simultaneously allocates service costs to all user departments. It gives full consideration to interactions among support departments.

answer

Reciprocal method

question

a method that allocates service costs to user departments in a sequential manner. It gives partial consideration to interactions among support departments.

answer

Sequential (or step) method

question

units within an organization that provide essential support services for producing departments.

answer

Support departments

question

a source document by which direct labor costs are assigned to individual jobs.

answer

Time ticket

question

the amount by which actual overhead exceeds applied overhead.

answer

Underapplied overhead

question

All of these answers are correct Cost objects are items where a manager needs costing information. They could be products, customers, departments or projects.

answer

Cost objects include all of the following except products. customers. departments. projects. All of these answers are correct.

question

easily traced to their cost object. Direct costs are costs that can be easily traced to a cost object and therefore do not require using an allocation method. Cost behaviors include costs that increase in total as output increases (variable) or costs that do not increase in total as output increases (fixed).

answer

Direct costs are: assigned to a cost object using a reasonable and convenient method. costs that do not increase in total as output increases. easily traced to their cost object. All of these choices are correct.

question

opportunity cost. Opportunity costs occur when the decision maker uses one alternative over another one. The benefit given up is an opportunity cost.

answer

The benefit sacrificed when one alternative is chosen over another is the definition of: opportunity cost. indirect cost. allocated cost. assigned cost. None of these answers are correct.

question

both "Direct materials" and "Factory overhead" answers are correct. Manufacturing (product) costs consist of direct materials, direct labor and manufacturing overhead. Selling and administrative costs are period costs.

answer

Which of the following is an example of a manufacturing cost? Direct materials Selling expense Factory overhead both "Selling expense" and "Factory overhead" answers are correct. both "Direct materials" and "Factory overhead" answers are correct.

question

Direct labor Prime costs are direct materials and direct labor added together. Conversion costs are direct labor and manufacturing overhead. The Direct labor is part of both prime and conversion costs.

answer

Which of the following costs is part of prime and conversion costs? Direct materials Direct labor Manufacturing overhead Direct materials and direct labor

question

$5.90 Prime costs = direct materials plus direct labor. ($38,000

answer

The Super Co. manufactured 10,000 units and reported the following information during December: The prime cost per unit is: $5.90 $3.80 $5.80 $3.70 None of these answers are correct.

question

selling (marketing) costs The costs to market, distribute, and service a product are selling (marketing) costs, which are often referred to as "order getting" and "order filling" costs.

answer

"Order getting" and "order filling" costs are associated with: selling (marketing) costs manufacturing costs administrative costs product costs direct labor

question

represents the costs of goods transferred from finished goods inventory on the balance sheet to cost of goods sold on the income statement. Cost of goods sold is the cost of goods transferred from finished goods inventory to cost of goods sold on the income statement. It is computed as cost of goods manufactured plus beginning finished goods inventory minus ending finished goods inventory. The selling and administrative costs associated with sales for the period are a separate expense on the income statement, they are not included as part of cost of goods sold.

answer

Cost of goods sold: represents the costs of goods transferred from finished goods inventory on the balance sheet to cost of goods sold on the income statement. is computed as cost of goods manufactured minus beginning finished goods inventory plus ending finished goods inventory. includes the selling and administrative costs associated with the sales for the period. All of these choices are correct for cost of goods sold.

question

The GAP Merchandising companies are those that buy a completed product and sell it without any modification. They are retailers.

answer

Which of the following companies is part of the merchandising sector of our economy? General Motors KPMG Accounting firm The GAP Microsoft

question

$270,000 Gross margin equals: sales less cost of goods sold (COGS). COGS is 40 % of revenue or $180,000 (40% x $450,000). Gross margin is $270,000 ($450,000 - $180,000).

answer

Impact Corporation reports $450,000 of revenue for the year. Expenses include: Selling of $50,000 and Administrative of $75,000. Cost of goods sold was 40% of revenue. Impact's gross margin is: $325,000 $375,000 $400,000 $180,000 $270,000

question

remain the same in total as volume increases. Fixed costs will remain at the same level for all volume levels within the relevant range.

answer

Within the relevant range, costs classified as fixed will: decrease in total as volume increases. increase in total as volume increases. remain the same in total as volume increases. remain the same on a unit basis as volume increases. remain the same in total and on a unit basis as volume increases.

question

Fast food Fast food restaurants incur more variable costs than fixed costs.

answer

Which of the following firms is likely to have a higher proportion of variable costs in its cost structure compared to fixed costs? Jewelry Airline Public utility Fast food

question

step cost. A step cost remains constant for a certain level of production and then increases to a higher level at some point where it remains for a similar range of output. A mixed cost has both fixed and variable components, and a fixed cost is fixed in total.

answer

A cost that remains constant for a range of output and then increases to a higher level is called a: mixed cost. step cost. fixed cost. variable cost.

question

None of these choices are correct. A step cost with relatively narrow steps would be exemplified by the cost of paper at a copy shop. Step costs with very narrow steps can be approximated as variable costs. Step costs are by definition discontinuous cost functions since they are semi-fixed within a range of activity.

answer

A step cost with relatively narrow steps: is exemplified by a lease for production machinery. can be approximated as a fixed cost due to the narrow steps. is a continuous cost function. All of these choices are correct. None of these choices are correct.

question

All of these choices are correct. The least squares regression method requires the use of the computers, several observations and eliminating outliers in order to provide accurate results.

answer

In order for the least square regression method to be as accurate as possible: as many observations as possible should be recorded. extreme observations should be eliminated from the analysis. calculation should be done using a computer software. All of these choices are correct.

question

Total cost = (Fixed cost ÷ Output)

answer

Which of the following properly expresses the total cost equation?

question

requires that management to use experience and judgment to determine fixed and variable costs. Managerial judgment is the most widely used method in practice, is simple to apply, and requires management to use judgment and experience in determining cost behavior.

answer

Managerial judgment in determining cost behavior: is not used frequently in practice due to the wide availability of computers to perform regression analysis. is difficult to apply. requires that management to use experience and judgment to determine fixed and variable costs. All of these choices are correct.

question

All of these choices are correct. The R2 is called the coefficient of determination, has a value between 0 and 1, and measures how well the independent variable explains the change in the dependent variable.

answer

The R2 in a regression analysis: is called the coefficient of determination. measures the percentage of variability in the dependent variable explained by an independent variable. always has a value between 0 and 1. All of these choices are correct.

question

cost/expense In CVP analysis, cost and expense are used interchangeably. This is because the foundation of CVP is the economics of break-even analysis in the short run. For this analysis, it's assumed that all units produced are sold, therefore, all product and all period costs end up on the income statement.

answer

In cost-volume-profit analysis which of the following pairs of terms are used interchangeably? total revenue/total expense cost/expense contribution margin/break-even point variable cost ratio/contribution margin ratio All of these choices are correct.

question

110,000 The break-even point in units is computed as Total fixed expenses/(Price - Variable cost). In this case, $12,100,000/($200 - 90) = 110,000 units.

answer

Kelly Company sells its only product for $200. It has variable expenses of $90. Annual fixed operating costs amount to $12,100,000. Kelly's break-even point in units is: 96,800 65,405 110,000 60,500 134,444

question

45% Contribution margin ratio is computed as Total contribution margin/Total sales. In this case, contribution margin is $20,000,000 - 11,000,000 = $9,000,000. Take the contribution margin of 9,000,000 divided by $20,000,000. = 45%.

answer

Friendly Company projects sales for the coming year will be $20,000,000. It has variable expenses of $11,000,000. Annual fixed operating costs amount to $12,100,000. Friendly's contribution margin ratio is: 45% 55% 62.5% 92.5% 57.5%

question

Sales mix can vary Cost-volume-profit analysis assumes a constant sales mix.

answer

Which of the following is NOT an underlying assumption for cost-volume-profit analysis? Cost-volume-profit analysis is only applicable within the relevant range Production equals sales Cost and revenue functions are linear Sales mix can vary Prices and costs are known with certainty

question

sales mix. The sales mix is the relative combination of products being sold by the company.

answer

The relative combination of products being sold by a firm is: sales mix. the unit variable cost x number of units sold. package contribution margin. All of these choices are correct.

question

the use of fixed costs to extract higher percentage changes in profits as sales activity changes. Operating leverage is the use of fixed costs to extract higher percentage changes in profits as sales activity changes.

answer

Operating leverage is: the use of fixed costs to extract higher percentage changes in profits as sales activity changes. the ratio of contribution margin as a percentage of sales. the proportion of variable costs in a company's cost structure. All of these choices are correct.

question

costs are computed separately for each job. Job order costing tracks costs separately for each job.

answer

An important characteristic of job order costing is that: costs are computed separately for each job. costs are accumulated by process or department. to determine unit costs, all costs are added and divided by the number of units produced in a period. costs are calculated in a similar way for similar jobs.

question

Process costs / output. Firms who use process costing compute units costs as Process costs/output. Job-order costing firms use Total job costs/output.

answer

Firms in process industries who use process costing compute unit costs as: Output × process costs. Process costs / output. Output / process costs. Total job costs / output.

question

Wide variety of unique products, cost accumulated by job Job-order costing is appropriate for the production of a wide variety of unique products. Each job serves as the cost accumulation vehicle.

answer

Which of the following groups of terms describes the essential characteristics of job-order costing? Wide variety of unique products, cost accumulated by department Homogeneous products, cost accumulated by job Wide variety of unique products, cost accumulated by job Homogeneous products, cost accumulated by department Wide variety of unique products, unit cost equals department cost divided by completed units

question

determines unit cost by adding direct materials, direct labor and estimated overhead. Normal costing consists of using estimated overhead for the calculation of product cost rather than actual overhead.

answer

Normal costing: determines unit cost by adding direct materials, direct labor and actual overhead. determines unit cost by adding direct materials, direct labor and estimated overhead. determines unit cost by adding direct materials, direct labor and underapplied overhead. determines unit cost by adding direct materials, direct labor and subtracting overapplied overhead. None of these choices are correct.

question

underapplied overhead. Underapplied overhead occurs when the actual overhead is greater than the overhead that's been applied (not enough was applied, resulting in under application).

answer

If actual overhead is greater than applied overhead, then the variance is called: underapplied overhead. normal costing. overapplied overhead. normal cost of goods sold.

question

All of these choices are correct. A job-order cost sheet is prepared for every job and is the primary document for accumulating all costs for a particular job. The job-order cost sheet is subsidiary to the WIP account.

answer

A job-order cost sheet is: the primary document for accumulating all costs related to a particular job. subsidiary to the work-on-process account. prepared for every job. All of these choices are correct.

question

used to indicate the need for a department to acquire materials for production. A materials requisition indicates a department needing to acquire materials for production.

answer

A materials requisition form is: used to request purchases of materials. used to indicate the need for a department to acquire materials for production. used by the company to communicate with the supplier a request to purchase materials. used to trace the cost of supplies to a particular job.

question

indicates jobs that are unfinished regardless of the stage of completion. Work in process indicates products that have not yet been completed.

answer

The "Work in Process" account: indicates jobs that are completed. indicates jobs that are ready to be sold. indicates jobs that are unfinished regardless of the stage of completion. is irrelevant in determining unit costs.

question

$8,750,000 Applied overhead equals the predetermined overhead rate x Overhead driver (direct material costs) or 2.5 times $3,500,000 = $8,750,000.

answer

Theta Industries applies overhead based upon direct material costs. The predetermined overhead rate for the current year is 250% of direct material costs. During the year, $3,500,000 of direct material costs and $4,000,000 of direct labor costs were incurred. Theta's applied overhead is: $9,375,000 $1,600,000 $1,400,000 $10,000,000 $8,750,000

question

work in process is credited and finished goods is debited. When a product is completed the work in process account is relieved of the cost (credit) and the costs are transferred to finished goods (debit)

answer

When a product is completed and transferred to finished goods: finished goods is credited and cost of goods sold is debited. work in process is credited and finished goods is debited. cost of goods sold is credited and finished goods is debited. finished goods is credited and work in process is debited.

question

direct method. The direct method is the most simple and straightforward way to assign support department costs. The other methods recognize interactions among support departments which are ignored under the direct method.

answer

The simplest most straightforward way to assign support department costs is the: step method. reciprocal method. direct method. sequential method.

question

performs cost allocations in a step-down fashion. The sequential method does recognizes that interactions among support department occurs, but does not fully account for interaction among support departments (and therefore does not ignore interaction either). Cost allocations are performed in a step-down fashion following a ranking procedure. This ranking procedure uses amount of service rendered, from greatest to least.

answer

The Sequential method of allocation of service costs: fully accounts for support department interaction. ignores support department interaction. performs cost allocations in a step-down fashion. ranks the support departments in order of the amount of service rendered, from least to greatest.

question

Direct Materials + Direct Labor

answer

Formula for PRIME COST

question

Direct Material + Direct Labor + Manufacturing Overhead

answer

Formula for TOTAL PRODUCT COST

question

Total Product Cost/Number of Units Produced

answer

Formula for PER_UNIT PRODUCT COST

question

Direct Labor + Manufacturing Overhead

answer

Formula for CONVERSION COST

question

Sales Revenue - Cost of Goods Sold

answer

Formula for GROSS MARGIN

question

Gross Margin - Selling and Administrative Expense

answer

Formula for OPERATING INCOME

question

Variable rate x Units of Output

answer

Formula for TOTAL VARIABLE COSTS

question

Total Fixed cost + Total Variable Cost (variable rate x units of output)

answer

Formula for Total Cost

question

(High Point Cost - Low Point Cost) / (High Point Output - Low Point Output)

answer

Formula for Variable Rate

question

(Price x # units sold) - (Variable cost per unit x number of units sold) - Total Fixed Cost

answer

Formula for Operating Income

question

Price - Unit variable cost

answer

Formula for Unit contribution margin

question

Sales - Total variable cost

answer

Formula for Total contribution margin

question

Total fixed cost/Unit contribution margin

answer

Formula for Break-Even Units

question

Price x Units Sold

answer

Formula for Sales Revenue

question

Total variable cost / sales or Unit variable cost/ price

answer

Formula for Variable Cost Ratio

question

Total contribution margin/sales or Unit contribution margin/Price

answer

Formula for Contribution margin ratio

question

Total fixed expenses/contribution margin ratio

answer

Formula for Break-Even sales

question

sales-breakeven sales

answer

Formula for Margin of safety

question

total contribution margin / operating income

answer

Formula for Degree of operating leverage

question

Estimated annual overhead / estimated annual activity level

answer

Formula for Predetermined Overhead Rate

question

Predetermined Overhead Rate x Actual Activity Level

answer

Formula for Applied Overhead

question

Actual Direct Materials + Actual Direct Labor + Applied Overhead

answer

Formula for Total Normal Product Costs

question

Actual overhead - applied overhead

answer

Formula for Overhead Variance

question

unadjusted COGS+- Overhead Variance* Depends if applied overhead is underapplied or overapplied

answer

Formula for Adjusted COGS

question

estimated department overhead / Estimated departmental activity level

answer

Formula for Departmental overhead rate

question

consists of work done on partially completed units that represents prior-period work with the costs assigned to them being prior-period costs. Uses two approaches for dealing with the prior-period output and costs found in BWIP: the weighted average method and the FIFO method.

answer

beginning work-in-process (BWIP)

question

the final section of the production report that compares the costs to account for with the costs accounted for to ensure that they are equal.

answer

cost reconciliation

question

inventory that is not complete and attaching a unit cost to it requires defining the output of the period. A unit completed and transferred out during the period is not identical (or equivalent) to one in EWIP inventory, and the cost attached to the two units should not be the same

answer

ending work-in-process (EWIP)

question

complete units that could have been produced given the total amount of manufacturing effort expended during the period

answer

equivalent units of output

question

a process-costing method that separates units in beginning inventory from those produced during the current period. Unit costs include only current-period costs and production

answer

FIFO costing method

question

a processing pattern in which two or more sequential processes are required to produce a finished good.

answer

parallel processing

question

a schedule that reconciles units to account for with units accounted for. The physical units are not adjusted for percent of completion.

answer

physical flow schedule

question

a document that summarizes the manufacturing activity that takes place in a process department for a given period of time.

answer

production report

question

a processing pattern in which units pass from one process to another in a set order.

answer

sequential processing

question

costs transferred from a prior process to a subsequent process.

answer

transferred-in costs

question

a process-costing method that combines beginning inventory costs with current-period costs to compute unit costs. Costs and output from the current period and the previous period are averaged to compute unit costs.

answer

weighted average costing method

question

action taken or work performed by equipment or people for other people.

answer

activity

question

the process of identifying, describing, and evaluating the activities an organization performs

answer

activity analysis

question

a list of activities described by specific attributes such as name, definition, classification as primary or secondary, and activity driver.

answer

activity dictionary

question

factors that measure the consumption of activities by products and other cost objects.

answer

activity drivers

question

the process of eliminating non-value-added activities.

answer

activity elimination

question

the resources consumed by an activity in producing its output (they are the factors that enable the activity to be performed).

answer

activity inputs

question

the result or product of an activity.

answer

activity output

question

the number of times an activity is performed. It is the quantifiable measure of the output.

answer

activity output measure

question

decreasing the time and resources required by an activity.

answer

activity reduction

question

the process of choosing among sets of activities caused by competing strategies

answer

activity selection

question

increasing the efficiency of necessary activities by using economies of scale.

answer

activity sharing

question

a cost assignment approach that first uses direct and driver tracing to assign costs to activities and then uses drivers to assign costs to cost objects.

answer

activity-based costing (ABC) system

question

a system wide, integrated approach that focuses management's attention on activities with the objective of improving customer value and the profit achieved by providing this value. It includes driver analysis, activity analysis, and performance evaluation, and draws on activity-based costing as a major source of information

answer

activity-based management

question

cost incurred to determine whether products and services are conforming to requirements.

answer

appraisal costs

question

the proportion of an overhead activity consumed by a product.

answer

consumption ratio

question

activities performed by an organization to prevent or detect poor quality (because poor quality may exist).

answer

control activities

question

costs incurred from performing control activities.

answer

control costs

question

costs incurred because poor quality may exist or because poor quality does exist.

answer

costs of quality

question

the length of time required to produce one unit of a product.

answer

cycle time

question

the effort expended to identify those factors that are the root causes of activity costs.

answer

driver analysis

question

costs that are incurred because poor environmental quality exists or may exist.

answer

environmental costs

question

costs incurred to detect poor environmental performance

answer

environmental detection costs

question

costs incurred after contaminants are introduced into the environment.

answer

environmental external failure costs

question

costs incurred to prevent damage to the environment.

answer

environmental prevention costs

question

costs incurred because products fail to conform to requirements after being sold to outside parties.

answer

external failure costs

question

activities performed by an organization or its customers in response to poor quality (poor quality does exist).

answer

failure activities

question

the costs incurred by an organization because failure activities are performed.

answer

failure costs

question

costs incurred because products and services fail to conform to requirements where lack of conformity is discovered prior to external sale.

answer

internal failure costs

question

drivers factors that measure the consumption of nonunit-level activities by products and other cost objects

answer

nonunit-level activity

question

all activities other than those that are absolutely essential to remain in business

answer

nonvalue-added activities

question

costs that are caused either by nonvalue-added activities or by the inefficient performance of value-added activities.

answer

nonvalue-added costs

question

cost incurred to prevent defects in products or services being produced.

answer

prevention costs

question

an approach that focuses on processes and activities and emphasizes systemwide performance instead of individual performance.

answer

process-value analysis

question

the situation present when products consume overhead in different proportions.

answer

product diversity

question

environmental costs caused by environmental degradation and paid for by the responsible organization

answer

realized external failure costs

question

factors that measure the consumption of resources by activities.

answer

resource drivers

question

environmental costs caused by an organization but paid for by society.

answer

societal costs

question

activities that are performed each time a unit is produced.

answer

unit-level activities

question

drivers factors that measure the consumption of unit-level activities by products and other cost objects

answer

unit-level activity

question

environmental costs caused by an organization but paid for by society.

answer

unrealized external failure costs

question

activities that are necessary for a business to achieve corporate objectives and remain in business.

answer

value-added activities

question

costs caused by value-added activities

answer

value-added costs

question

the number of units that can be produced in a given period of time (e.g., output per hour).

answer

velocity

question

identifies the amount of labor consumed by each activity and is derived from the interview process (or a written survey).

answer

work distribution matrix

question

a product-costing method that assigns all manufacturing costs to units of product: direct materials, direct labor, variable overhead, and fixed overhead.

answer

absorption costing

question

the costs of holding inventory.

answer

carrying costs

question

fixed expenses that cannot be directly traced to individual segments and that are unaffected by the elimination of any one segment.

answer

common fixed expenses

question

fixed costs that are directly traceable to a given segment and, consequently, disappear if the segment is eliminated.

answer

direct fixed expenses

question

the amount that should be ordered (or produced) to minimize the total ordering (or setup) and carrying costs.

answer

economic order quantity (EOQ)

question

a demand-pull system whose objective is to eliminate waste by producing a product only when it is needed and only in the quantities demanded by customers.

answer

just-in-time (JIT)

question

the time required to receive the economic order quantity once an order is placed or a setup is started.

answer

lead time

question

the costs of placing and receiving an order.

answer

ordering costs

question

the point in time when a new order should be placed (or setup started).

answer

reorder point

question

extra inventory carried to serve as insurance against changes in demand. Safety stock is computed by multiplying the lead time by the difference between the maximum rate of usage and the average rate of usage.

answer

safety stock

question

a subunit of a company of sufficient importance to warrant the production of performance reports.

answer

segment

question

the contribution a segment makes to cover common fixed costs and provide for profit after direct fixed costs and variable costs are deducted from the segment's sales revenue.

answer

segment margin

question

the costs of insufficient inventory.

answer

stockout costs

question

a product-costing method that assigns only variable manufacturing costs to production: direct materials, direct labor, and variable overhead. Fixed overhead is treated as a period cost.

answer

variable costing

question

a committee responsible for setting budgetary policies and goals, reviewing and approving the budget, and resolving any differences that may arise in the budgetary process.

answer

budget committee

question

the individual responsible for coordination and directing the overall budgeting process.

answer

budget director

question

the process of padding the budget by overestimating costs and underestimating revenues

answer

budgetary slack

question

plans of action expressed in financial terms.

answer

budgets

question

a detailed plan that outlines all sources and uses of cash.

answer

cash budget

question

a moving 12-month budget with a future month added as the current month expires.

answer

continuous budget

question

the process of setting standards, receiving feedback on actual performance, and taking corrective action whenever actual performance deviates significantly from planned performance.

answer

control

question

costs that managers have the power to influence.

answer

controllable costs

question

the estimated costs for the units sold.

answer

cost of goods sold budget

question

a budget showing the total direct labor hours needed and the associated cost for the number of units in the production budget.

answer

direct labor budget

question

purchases budget a budget that outlines the expected usage of materials production and purchases of the direct materials required.

answer

direct materials

question

individual behavior that conflicts with the goals of the organization.

answer

dysfunctional behavior

question

a budget that describes planned ending inventory of finished goods in units and dollars.

answer

ending finished goods inventory budget

question

detail the inflow and outflows of cash and the overall financial position.

answer

financial budgets

question

the alignment of a manager's personal goals with those of the organization.

answer

goal congruence

question

the difference between sales revenue and cost of goods sold.

answer

gross margin

question

the positive or negative measures taken by an organization to induce a manager to exert effort toward achieving the organization's goals.

answer

incentives

question

of all area and activity budgets representing a firm's comprehensive plan of action.

answer

master budget the collection

question

the use of economic rewards to motivate managers.

answer

monetary incentives

question

behavior that occurs when a manager takes actions that improve budgetary performance in the short run but bring long-run harm to the firm.

answer

myopic behavior

question

the use of psychological and social rewards to motivate managers.

answer

nonmonetary incentives

question

budgets associated with the income-producing activities of an organization.

answer

operating budgets

question

a budget that reveals the planned expenditures for all indirect manufacturing items.

answer

overhead budget

question

an approach to budgeting that allows managers who will be held accountable for budgetary performance to participate in the budget's development.

answer

participative budgeting

question

a budget that shows how many units must be produced to meet sales needs and satisfy ending inventory requirements.

answer

production budget

question

a budgetary system in which top management solicits inputs from lower-level managers and then ignores those inputs. Thus, in reality, budgets are dictated from above.

answer

pseudoparticipation

question

a budget that describes expected sales in units and dollars for the coming period.

answer

sales budget

question

a budget that outlines planned expenditures for nonmanufacturing activities.

answer

selling and administrative expenses budget

question

the long-term plan for future activities and operations, usually involving at least five years.

answer

strategic plan

question

the maximum allowable deviation from a standard.

answer

control limits

question

variances produced whenever the actual amounts are less than the budgeted or standard allowances.

answer

favorable (F) variances

question

the difference between the actual direct labor hours used and the standard direct labor hours allowed multiplied by the standard hourly wage rate.

answer

labor efficiency variance (LEV)

question

the difference between the actual hourly rate paid and the standard hourly rate multiplied by the actual hours worked.

answer

labor rate variance (LRV)

question

the difference between the actual price paid per unit of materials and the standard price allowed per unit multiplied by the actual quantity of materials purchased.

answer

materials price variance (MPV)

question

the difference between the direct materials actually used and the direct materials allowed for the actual output multiplied by the standard price.

answer

materials usage variance (MUV)

question

variance the difference between standard price and actual price multiplied by the actual quantity of inputs used.

answer

price (rate)

question

the price that should be paid per unit of input.

answer

price standards

question

the amount of input that should be used per unit of output.

answer

quantity standards

question

the per-unit cost that should be achieved given materials, labor, and overhead standards.

answer

standard cost per unit

question

a listing of the standard costs and standard quantities of direct materials, direct labor, and overhead that should apply to a single product.

answer

standard cost sheet

question

the direct labor hours that should have been used to produce the actual output (Unit labor standard × Actual output).

answer

standard hours allowed (SH)

question

the quantity of materials that should have been used to produce the actual output (Unit materials standard × Actual output).

answer

standard quantity of materials allowed (SQ)

question

the difference between the sales price needed to achieve a projected market share and the desired per-unit profit.

answer

target cost

question

variance the difference between the actual cost of an input and its planned cost.

answer

total budget

question

variances produced whenever the actual input amounts are greater than the budgeted or standard allowances.

answer

unfavorable (U) variances

question

the difference between standard quantities and actual quantities multiplied by standard price.

answer

usage (efficiency) variance

question

predicting what activity costs will be as activity usage changes.

answer

activity flexible budgeting

question

a budget system that focuses on estimating the costs of activities rather than the costs of departments and plants and the use of multiple drivers, both unit-based and nonunit-based.

answer

activity-based budgeting (ABB) system

question

the difference between the actual fixed overhead (AFOH) and the budgeted fixed overhead (BFOH).

answer

fixed overhead spending variance

question

the difference between budgeted fixed overhead (BFOH) and applied fixed overhead.

answer

fixed overhead volume variance

question

a budget that can specify costs for a range of activity.

answer

flexible budget

question

the sum of price variances and efficiency variances in a performance report comparing actual costs to expected costs predicted by a flexible budget.

answer

flexible budget variance

question

a report that compares the actual data with planned data.

answer

performance report

question

a budget for a particular level of activity.

answer

static budget

question

budgets that can specify costs for a range of activity.

answer

variable budgets

question

the difference between the actual direct labor hours used and the standard hours allowed multiplied by the standard variable overhead rate.

answer

variable overhead efficiency variance

question

the difference between the actual variable overhead and the budgeted variable overhead based on actual hours used to produce the actual output.

answer

variable overhead spending variance

question

a strategic management system that defines a strategic-based responsibility accounting system. This system translates an organization's mission and strategy into operational objectives and performance measures for four different perspectives: the financial perspective, the customer perspective, the internal business process perspective, and the learning and growth (infrastructure) perspective.

answer

balanced scorecard

question

a division of a company that is evaluated on the basis of cost.

answer

cost center

question

a balanced scorecard viewpoint that defines the customer and market segments in which the business will compete.

answer

customer perspective

question

realization less sacrifice, where realization is what the customer receives and sacrifice is what is given up.

answer

customer value

question

information about both the effectiveness of strategy implementation and the validity of assumptions underlying the strategy.

answer

double-loop feedback

question

a performance measure that is calculated by taking the after-tax operating profit minus the total annual cost of capital.

answer

economic value added (EVA)

question

the rate that indicates the minimum ROI necessary to accept an investment.

answer

hurdle rate

question

a process that anticipates the emerging and potential needs of customers and creates new products and services to satisfy those needs.

answer

innovation process

question

a balanced scorecard viewpoint that describes the internal processes needed to provide value for customers and owners.

answer

internal business process perspective

question

a division of a company that is evaluated on the basis of return on investment.

answer

investment center

question

a balanced score-card viewpoint that defines the capabilities that an organization needs to create long-term growth and improvement.

answer

learning and growth (infrastructure) perspective

question

measured as value-added time divided by total time. The result tells the company what percentage of total time spent is devoted to actual production.

answer

manufacturing cycle efficiency (MCE)

question

the ratio of net operating income to sales.

answer

margin

question

assets used to generate operating income, consisting usually of cash, inventories, receivables, and property, plant, and equipment. Average operating assets are found by adding together beginning operating assets and ending operating assets, and dividing the result by 2.

answer

operating assets

question

revenues minus operating expenses from the firm's normal operations. Operating income is before-tax income.

answer

operating income

question

a process that produces and delivers existing products and services to customers.

answer

operations process

question

the costs of using, maintaining, and disposing of the product.

answer

postpurchase costs

question

process a process that provides critical and responsive service to customers after the product or service has been delivered.

answer

postsales service

question

the innovation, operations, and postsales service processes.

answer

process value chain

question

units within an organization responsible for producing the products or services that are sold to customers.

answer

producing departments

question

a division of a company that is evaluated on the basis of operating income or profit.

answer

profit center

question

the difference between operating income and the minimum dollar return required on a company's operating assets.

answer

residual income

question

a segment of the business whose manager is accountable for specified sets of activities.

answer

responsibility center

question

the ratio of operating income to average operating assets.

answer

return on investment (ROI)

question

a segment of the business that is evaluated on the basis of sales.

answer

revenue center

question

information about the effectiveness of strategy implementation.

answer

single-loop feedback

question

the process of choosing a business's market and customer segments, identifying its critical internal business processes, and selecting the individual and organizational capabilities needed to meet internal, customer, and financial objectives.

answer

strategy

question

a set of linked objectives aimed at an overall goal that can be restated into a sequence of cause-and-effect hypotheses.

answer

testable strategy

question

the price charged for goods transferred from one division to another.

answer

transfer price

question

the ratio of sales to average operating assets.

answer

turnover

question

mathematical expressions that express resource limitations.

answer

constraints

question

a specific set of procedures that, when followed, produces a decision.

answer

decision model

question

the difference in total cost between the alternatives in a decision.

answer

differential cost

question

products that are inseparable prior to a split-off point. All manufacturing costs up to the split-off point are joint costs.

answer

joint products

question

relevant costing analyses that focus on keeping or dropping a segment of a business.

answer

keep-or-drop decisions

question

relevant costing analyses that focus on whether a component should be made internally or purchased externally.

answer

make-or-buy decisions

question

applied to a base cost; it includes desired profit and any costs not included in the base cost.

answer

markup the percentage

question

the benefit given up or sacrificed when one alternative is chosen over another.

answer

opportunity cost

question

future costs that change across alternatives.

answer

relevant costs

question

relevant costing analysis that focuses on whether a product should be processed beyond the split-off point.

answer

sell-or-process-further decision

question

relevant costing analyses that focus on whether a specially priced order should be accepted or rejected.

answer

special-order decisions

question

the point at which products become distinguishable after passing through a common process.

answer

split-off point

question

costs for which the outlay has already been made and that cannot be affected by a future decision.

answer

sunk costs

question

a method of determining the cost of a product or service based on the price (target price) that customers are willing to pay.

answer

target costing

question

the rate of return obtained by dividing the average accounting net income by the original investment (or by average investment). Average Income / Initial Investment

answer

accounting rate of return

question

a series of future cash flows.

answer

annuity

question

the process of making capital investment decisions.

answer

capital budgeting

question

decisions the process of planning, setting goals and priorities, arranging financing, and identifying criteria for making long-term investments.

answer

capital investment

question

paying interest on interest.

answer

compounding of interest

question

the cost of investment funds, usually viewed as a weighted average of the costs of funds from all sources.

answer

cost of capital

question

the factor used to convert a future cash flow to its present value

answer

discount factor

question

the rate of return used to compute the present value of future cash flows.

answer

discount rate

question

flows future cash flows expressed in present-value terms.

answer

discounted cash

question

the act of finding the present value of future cash flows.

answer

discounting

question

capital investment models that explicitly consider the time value of money in identifying criteria for accepting and rejecting proposed projects.

answer

discounting models

question

the value that will accumulate by the end of an investment's life if the investment earns a specified compounded return.

answer

future value

question

projects that, if accepted or rejected, will not affect the cash flows of another project.

answer

independent projects

question

the rate of return that equates the present value of a project's cash inflows with the present value of its cash outflows (i.e., it sets the NPV equal to zero). Also, the rate of return being earned on funds that remain internally invested in a project.

answer

internal rate of return

question

projects that, if accepted, preclude the acceptance of competing projects.

answer

mutually exclusive projects

question

the difference between the present value of a project's cash inflows and the present value of its cash outflows.

answer

net present value

question

capital investment models that identify criteria for accepting or rejecting projects without considering the time value of money.

answer

nondiscounting models

question

the time required for a project to return its investment.

answer

payback period

question

a follow-up analysis of an investment decision, comparing actual benefits and costs with expected benefits and costs.

answer

postaudit

question

the current value of a future cash flow. It represents the amount that must be invested now if the future cash flow is to be received assuming compounding at a given rate of interest.

answer

present value

question

the minimum rate of return that a project must earn in order to be acceptable. Usually corresponds to the cost of capital.

answer

required rate of return

question

Original Investment / Annual cash flow = Years payback $100,000/$50,000 = 2 years

answer

Payback Period Formula

ACCT 2203 Mowen Financial Accounting OK State Chapters 1-14 Final – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards