ACC 230 Exam 2
Distinctive objects
strategic objectives that distinguish an organization from its competitors, based on the organization's strategy
Comfort Corporation manufactures two models of office chairs. Chair A requires 18 setups, 265 direct labor hours, and $61,100 of overhead. The Chair B requires 29 setups, 200 direct labor hours, and $64,800 of overhead. Assume a traditional costing system applies the overhead costs based on direct labor hours. What is the total amount of overhead costs assigned to Chair A? (Do not round interim calculations.) -A) $62,950 -B) $54,151 -C) $71,749 -D) $36,929
$71,749
Strategy
-Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. -Strategy describes how an organization can create value for its customers while differentiating itself from its competitors.
4 levels of cost hierarchy
1. Output unit-level costs 2. Batch-level costs 3. Product-sustaining costs 4. Facility-sustaining costs
Focal points
A focal point is a strategic objective that has many other links funneling INTO it
Overhead Allocation Rate
A measure of overhead cost divided by a measure of the overhead allocation base.
Trigger points
A trigger point is a strategic objective where many ties spur OUT from it, resulting in the achievement of many strategic objectives
Orphan objectives
An orphan objective has only weak ties leading out of it to other strategic objectives
COGS Budget
Beg. Inv. FG +Cost of goods manufactured =Cost of goods available for sale -Ending inv, FG =COGS
Production Budget
Budgeted Sales + Target End. Inv. FG =Required -Beg. Inv. FG =To be produced
Unit Cost-Ending Inventory budget
Cost per unit of input x input
Financial budget
Financial decisions on how to obtain the funds to acquire those resources made up of the Capital Expenditure budget, the Cash budget, the Budgeted Balance Sheet, and the Budgeted Statement of Cash Flows
4 perspectives of balanced scorecard
Financial—profits and value created for shareholders Customer—the success of the company in its target market Internal business perspective—the internal operations that create value for customers Learning and growth—the people and systems capabilities that support operations
Which of the following describes a rolling budget? -A) It is a budget that continually outlines the amount required to roll over debt in a future period. -B) It is created continually by adding a month, quarter, or year to the period just ended. -C) It is a budget that outlines budgeted expenses while utilizing a moving average. -D) It is a budget that is submitted to a bank at the beginning of every month as per a loan covenant.
It is created continually by adding a month, quarter, or year to the period just ended.
Successful balanced scorecard
Must have commitment and leadership from top management. Must be communicated to all employees. For the balanced scorecard to be effective, managers must view it as a fair way to assess and reward all important aspects of a manager's performance and promotion prospects.
operating budget
Operating decisions on how to best use the limited resources of an organization begins with the Revenues budget, includes multiple schedules, and concludes with the Budgeted Income Statement
Strength of ties
Ties are the causal links between strategic objectives and can be qualified as strong, moderate, or weak
Direct Labor Budget
Units to be produced x DL hours per unit = total DL hours required x DL cost per hour = total direct labor cost
Allocation base
a measure such as direct labor hours or machine hours that is used to assign overhead costs to products and services
Master budget
a presentation of an organization's operational and financial budgets that represents the firm's overall plan of action for a specified time period
Static budget
based on the level of output planned at the start of the budget period
Cost Hierarchy
categorizes various activity cost pools on the basis of the different types of cost drivers, cost-allocation bases, or different degrees of difficulty in determining cause-and-effect relationships
ABC System
commonly use a cost hierarchy with four levels to identify cost-allocation bases that are cost drivers of the activity cost pools
Static budget variance
difference between the actual result and the corresponding static budget amount
Activity-based costing can eliminate distortions because ABC systems: -A) establish a cause-and-effect relationship with activities performed -B) use single cost pool for all overhead costs, thereby enabling simplicity -C) use a broad average to allocate all overhead costs -D) never consider interactions between different departments in assignment support costs
establish a cause-and-effect relationship with activities performed
Budgets incorporate management goals and: -A) are a strategic long range plan -B) are both a short range and long rage profit plan -C) includes only financial aspects of an operation as those are the only items than can be quantified in a profit plan -D) express management's operating and financial plan for a specified period - usually a fiscal year
express management's operating and financial plan for a specified period - usually a fiscal year
Sales Volume Variance
flexible budget - static budget It arises solely from the difference between the actual volume and the budgeted volume (from the static budget).
favorable variance
has the effect, when considered in isolation, of increasing operating income relative to the budget amount
unfavorable variance
has the effect, when viewed in isolation, of decreasing operating income relative to the budget amount
Activity based costing system differs from traditional costing systems in the treatment of: -A) direct labor costs -B) direct materials costs -C) prime costs -D) indirect costs
indirect costs
Overcosting
occurs when the cost measurement system reports a cost for a product that is above the cost of the resources the product consumes
Undercosting
occurs when the cost measurement system reports a cost for a product that is below the cost of the resources the product consumes
Activity-based costing can eliminate distortions because ABC systems: -A) unit-level cost -B) batch-level cost -C) product-sustaining cost -D) facility-sustaining cost
product-sustaining cost
For variable manufacturing overhead, there is no
production volume variance
Budgetary slack
the practice of underestimating budgeted revenues or overestimating budgeted costs to make budgeted targets easier to achieve
Budget
the quantitative expression of a proposed plan of action by management for a specified period both financial and non-financial aspects, acts like a roadmap
Balanced scorecard
translates an organization's mission and strategy into a set of performance measures that serves as the framework for implementing the organization's strategy
Revenues Budget
units x selling price = total