Exam 2 (ACCT 2102)

Sales Budget

A _____ ______ is a detailed schedule showing the expected sales for the budget period expressed in both dollars and units.

Common Fixed Cost

A ______ _____ ____ is a fixed cost that supports more than one business segment, but is not traceable in whole or in part to any one of the business segments.

Direct Labor Budget

A ______ _____ ______ is a detailed plan that shows the direct labor-hours required to satisfy the production budget.

Master Budget

A ______ ______ consists of a number of separate but interdependent budgets that formally lay out the company's sales, production, and financial goals and that culminates in a cash budget, a budgeted income statement, and a budgeted balance sheet

Direct Materials Budget

A ______ _________ ______ is a detailed plan showing the amount of raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories.

Budget

A ______ is a detailed plan for the future that is usually expressed in formal quantitative terms.

Segment

A ______ is any part or activity of an organization about which managers seek cost, revenue, or profit data.

Selling and Administrative Expense Budget

A _______ ___ ______________ _______ ______ is a detailed schedule of planned expenses that will be incurred in areas other than manufacturing during a budget period.

Segment Margin

A _______ ______ is obtained by deducting the traceable fixed costs of a segment from the segment's contribution margin. It represents the margin available after a segment has covered all of its own costs.

Traceable Fixed Cost

A _________ _____ ____ is a fixed cost that is incurred because of the existence of a particular business segment and that would be eliminated if the segment were eliminated.

Dependent Variable

A _________ ________ is a variable that responds to some casual factor.

Continuous Budget

A __________ ______ is a 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed. Also called a perpetual budget.

Production Budget

A __________ ______ is a detailed plan that lists the number of units that must be produced during a period in order to satisfy both sales and inventory needs.

Merchandise Purchases Budget

A ___________ _________ ______ is a detailed plan used by a merchandising company that shows the amount of goods that must be purchased from suppliers during the period.

Manufacturing Overhead Budget

A ____________ ________ ______ is a detailed plan showing the production costs, other than direct materials and direct labor, that will be incurred over a specified time period.

Degree of Operating Leverage

A measure, at a given level of sales, of how a percentage change in sales will affect profits. The ______ __ _________ ________ is computed by dividing contribution margin by net operating income.

Ending Finished Goods Inventory Budget

An ______ ________ _____ _________ ______ is a budget showing the dollar amount of unsold finished goods inventory that will appear on the ending balance sheet.

Independent Variable

An ___________ ________ is a variable that acts as a casual factor.

Revenue

Break-even point is the level of sales at which total _______ equals total costs.

False The statement would be true if the operating leverage is high

True or false: If operating leverage is low, a small percentage increase in sales can produce a much larger percentage increase in net operating income.

True

True or false: Operating budgets generally cover a one-year period to correspond to the company's fiscal year.

True

True or false: Variable Costing is best suited for cost-volume-profit analysis.

Sales Volume

What is represented on the X axis of a cost-volume-profit (CVP) graph?

Fixed Expenses

What is usually plotted as a horizontal line on the CVP graph?

Least-Squares Regression Method

_____-_______ __________ ______ is a method of separating a mixed cost into its fixed and variable elements by fitting a regression line that minimizes the sum of the squared errors.

Account Analysis

_______ ________ is a method for analyzing cost behavior in which an account is classified as either variable or fixed based on the analyst's prior knowledge of how the cost in the account behaves.

Control

_______ involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change.

Variable Costing

________ _______ is a costing method that includes only variable manufacturing costs - direct materials, direct labor, and variable manufacturing overhead - in unit product costs.

Planning

________ involves developing goals and preparing various budgets to achieve those goals.

Operating Leverage

_________ ________ is a measure of how sensitive net operating income is to a given percentage change in dollar sales.

Absorption Costing

__________ _______ is a costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in unit product costs.

Absorption

__________ costing income statements ignore variable and fixed cost distinctions.

Engineering Approach

___________ ________ is a detailed analysis of cost behavior based on an industrial engineer's evaluation of the inputs that are required to carry out a particular activity and of the prices of those inputs.

Incremental Analysis

___________ ________ is an analytical approach that focuses only on those costs and revenues that change as a result of a decision.

Responsibility Accounting

______________ __________ is a system of accountability in which managers are held responsible for those items of revenue and cost - and only those items - over which they can exert significant control. The managers are held responsible for differences between budgeted and actual results.

<

when units produced < units sold, absorption income (>,<, or =) variable income

=

when units produced = units sold, absorption income (>,<, or =) variable income

>

when units produced > units sold, absorption income (>,<, or =) variable income

Cash Budget

A ____ ______ is a detailed plan showing how cash resources will be acquired and used over a specific time period.

Cost-Volume-Profit Graph (CVP Graph)

A ____-______-______ _____ is a graphical representation of the relationships between an organization's revenues, costs, and profits on the one hand and its sales volume on the other hand.

Self-Imposed Budget

A ____-_______ ______ is a method of preparing budgets in which managers prepare their own budgets. These budgets are then reviewed by higher-level managers, and any issues are resolved by mutual agreement. Also called a participative budget.

Linear

Cost behavior is said to be ______ whenever a straight line is a reasonable approximation for the relation between cost and activity.

Target Profit Analysis

Examining what sales volume is needed to achieve a specific target profit is known as performing a ______ ______ ________.

First

For a production budget, the beginning inventory for the _____ quarter is the beginning inventory for the year.

Net Loss

If the total contribution margin is less than the total fixed expenses, a ___ ____ occurs.

Budgetary Slack

Managers who set their own budgetary goals often face temptation to "pad their budgets" Thus, self-imposed budgets should be reviewed by higher levels of management to prevent such _________ _____.

Net Operating Income

Once the break-even point has been reached, ___ _________ ______ will increase by the amount of the unit contribution margin for each additional unit sold.

Decrease

Shifting sales mix from high-margin items to low margin items can cause total profits to ________.

High-Low Method

The ____-___ ______ is a method of separating a mixed cost into its fixed and variable elements by analyzing the change in cost between the high and low activity levels.

Break-Even Point

The _____-____ _____ is the level of sales at which profit is 0.

Margin of Safety

The ______ __ ______ is the excess of budgeted or actual sales dollars over the break-even volume of sales dollars. It is the amount by which sales can drop before losses are incurred.

Higher : Lower

The ______ the margin of safety, the _____ the risk of not breaking even and incurring a loss.

Variable Expense Ratio

The ________ _______ _____ is computed by dividing variable expenses by sales.

Contribution Margin Ratio (CM Ratio)

The ____________ ______ _____ is computed by dividing the contribution margin by sales.

Sales

The budgeting process begins with the preparation of the _____ budget.

Fixed Overhead Costs

The difference between absorption costing net operating income and variable costing net operating income can be explained by the way these two methods account for _____ ________ _____.

Sales Mix

The relative proportions in which a company's products are sold is known as the _____ ___. This is computed by expressing the sales of each product as a percentage of total sales.