Ch 21 Managerial Accounting Flashcards
Unlock all answers in this set
Unlock answersquestion
the manner in which a cost changes as a related activity changes.
answer
Cost behavior
question
Cost behavior is useful to managers because knowing how costs behave allows managers to predict profits as sales and production volume change. T/F
answer
True
question
the activities that cause the cost to change
answer
Activity bases
question
The range of activity over which the changes in the cost are of interest
answer
Relevant range
question
Understanding the behavior of a cost depends on: 1. Activity bases 2. Relevant range T/F
answer
True
question
Costs are normally classified as variable costs, fixed costs, or mixed costs T/F
answer
True
question
costs that vary in proportion to changes in the activity base.
answer
Variable costs
question
costs that remain the same in total dollar amount as the activity base changes.
answer
Fixed costs
question
costs that have a characteristic of both a variable and a fixed cost. This cost is also sometimes called semivariable or semifixed costs.
answer
Mixed costs
question
a cost estimation method that uses the highest and lowest activity levels and their related costs to estimate the variable cost per unit and the fixed cost.
answer
High low method
question
Difference in total cost / Difference in units produced
answer
Variable cost per unit
question
Total costs - (Variable cost per unit x Units produced)
answer
Fixed cost
question
only the variable manufacturing costs (DM, DL, variable FOH) are included in the product cost.
answer
Variable costing
question
the examination of the relationships among the selling prices, sales and production volume, costs, expenses, and profits
answer
Cost volume profit analysis
question
Cost volume profit analysis is useful for managerial decision making T/F
answer
True
question
the excess of sales over variable costs Sales - Variable costs
answer
Contribution margin
question
Sales - Variable costs = Contribution margin Contribution margin - Fixed costs = income from operations T/F
answer
True
question
(sometimes called profit-volume ratio) indicates the percentage of each sales dollar available to cover fixed costs and to provide income from operations. Contribution Margin / Sales
answer
Contribution margin ratio
question
Useful for analyzing the profit potential of proposed decisions Sales prices per unit - Variable cost per unit
answer
Unit contribution margin
question
the level of operations at which a company's revenues and expenses are equal.
answer
Break even point
question
At break-even, a company reports neither an income nor a loss from operations T/F
answer
True
question
Fixed costs / Unit Contribution margin
answer
Break even sales in units
question
Fixed costs / Contribution margin ratio
answer
Break even sales in dollars
question
If fixed costs go up, then break even point goes up If fixed costs go down, then break even point goes down T/F
answer
True
question
If unit variable cost goes up, break even point goes up If unit variable cost goes down, break even point goes down T/F
answer
True
question
If unit selling price goes up, break even point goes down If unit selling price goes down, break even point goes up T/F
answer
True
question
(sometimes called a break-even chart) graphically shows sales, costs, and the related profit or loss for various levels of units sold
answer
Cost volume profit chart
question
Cost volume profit chart assists in understanding the relationship among sales, costs, and operating profit or loss T/F
answer
True
question
plots only the differences between total sales and total costs (or profits)
answer
Profit volume chart
question
The profit-volume chart allows managers to determine the operating profit (or loss) for various levels of units sold T/F
answer
True
question
the relative distribution of sales among the products sold by a company
answer
Sales mix
question
The relationship between a company's contribution margin and income from operations Contribution margin / Income from operations
answer
Operating leverage
question
The difference between contribution margin and income from operations is fixed costs. Companies with high fixed costs will also have high operating leverage T/F
answer
True
question
Percent change in sales x Operating leverage
answer
Percent change in income from operations
question
indicates the possible decrease in sales that may occur before an operating loss results Sales - Sales at break even point / Sales
answer
Margin of safety
question
If the margin of safety is low, even a small decline in sales revenue may result in an operating loss T/F
answer
True
