Accounting 200

The difference in Variable and Absorption costing is that

fixed overhead is spread throughout units in variable costing, unsold goods stay in ending inventory.

Materials Price Variance Equation

(AQ x AP) - (AQ x SP)

Materials Quantity Variance Equation

(AQ x SP) - (SQ x SP)

Product costs under ABSORPTION costing

1. DM 2. DL 3. Fixed MOH ( / units produced) 4. Variable MOH

Product costs under VARIABLE costing

1. DM 2. DL 3. Variable MOH (Do not change MOH Fixed to per unit in fixed cost section)

A flexible budget is made by

1. Using actual quantity (Predicted) to determine revenue 2. Subtracting all expenses by unit

Which of the following statements is true? I The master budget consists of a number of separate but interdependent budgets. II. The production budget is typically prepared before the direct materials budget. III. The selling and administrative budget is typically prepared before the cash budget.

All Statements are true

Budgeted Assets, Liabilities and Equity are found on the

Balance Sheet

Ending Inventory is found on the

Balance sheet in the asset section

Ending Retained Earnings =

Beginning Retained Earnings + Net Income - Dividends

Break Even Point Given Contribution Format Income Statement

Break-Even Point = (Traceable Fixed Expenses + Common Fixed Expenses)/ Overall CM ratio {CM / Revenue}

Management by Exception

Comparing actual results to a budget

Budgeted Net Income is found on the

Income Statement, Statement of Retained Earnings

Which of the following statements is true? I. The budgeted income statement is typically prepared before the budgeted balance sheet. II. The cash budget is the starting point in preparing the master budget. I. The production budget is typically prepared prior to the sales budget.

Only Statement I

Which of the following statements is true? I. A benefit from budgeting is that it forces managers to think about and plan for the future. II. One of the weaknesses of budgets is that they are of little value in uncovering potential bottlenecks. III. One disadvantage of budgeting is that budgeting makes it more difficult to coordinate the plans and activities of departmental managers.

Only Statement I is true

A segment margin added to the purchase of a product instead of making it should be accounted for as a

Opportunity cost (what is missed out on) under making the making column

Standard Materials Cost =

SQ x SP

(Contribution) Income Statement - Absorption Costing

Sales Revenue (Variable Expenses) (S & A Variable Expenses) ___________________________________ Contribution Margin (Fixed Expenses) ___________________________________ Net Operating Income

The break-even point is where

Sales Revenue = Total costs Traceable and Common Fixed expenses / CM ratio

Which budget is Prepared first?

Sales: It budgets inputs by the amount that you expect to sell

Continuing/Discontinuing a segment is determined by

Subtracting all traceable costs from the Contribution margin of that segment

Revenue and spending variances are calculated by

Subtracting values from the Flexible budget and Income Statement

Income Statement- Variable Costing

Total Sales (COGS) __________________________________ Gross Margin (S & A) __________________________________ Net Operating Income

What costing method is used to calculate the break-even point?

Variable Costing. Include all variable expenses for break-even, not just product costs.

2 Questions to ask first to keep v. drop a segment before cost analysis are

Will it affect the sale of other products? Is there adequate capacity available?

Standards are

benchmarks for performance

Avoidable Costs

can be eliminated by choosing one alternative over another

Contribution Margin

revenue - variable costs

Depreciation, though traceable to one product, is a result of a decision made in the past. This makes it a

sunk cost

The usual starting point for a master budget is:

the sales forecast or sales budget