accounting II test 2

decrease

a shift in the sales mix from high-margin items to low-margin items can cause total profit to _________.

cost objects

in the first stage of allocation of overhead costs, products, customer orders and customers are examples of __________.

CM ratio x sales - FE

profit equation number 3

cost object

a product or service that generates activities

they assign the costs of the corporate headquarters buildings to segments because the segments must cover those costs

what is a common mistake made by companies when assigning costs to segments?

less than absorption costing net operating income

when the number of units produced is greater than the number of units sold, variable costing net operating income will be _______________.

greater than

when the units produced exceed the units sold, net operating income computed using the absorption costing approach is _____________ the net operating income computed using the variable costing approach.

less than

when units produced are less than units sold, net operating income computed using the absorption costing approach is _________ the net operating income computed using the variable costing approach.

equal to

when units produced is equal to units sold, net operating income computed using the absorption costing approach is __________ the net operating income computed using the variable approach.

variable

which costing approach is best suited for cost-volume-profit analysis?

other

which of the following would not be allocated to products or customers? -customer service -other -machine setup -product design

unit level activities

________ are performed each time a unit is produced. the cost should be proportional to the number of units produced. ex. providing power to run processing equipment, bc power tends to be consumed in proportion to the number of units produced

product level activities

_________ relate to specific products and typically must be carried out regardless of how many batches are run or how many units of product are produced and sold. ex. designing a product, advertising a product, maintaining a product manager and staff

organization sustaining activities

___________ are carried out regardless of which customers are served, which products are produced, how many batches are run, or how many units are made. ex. heating the factory, cleaning executive offices, providing a computer network, arranging for loans, preparing annual reports to shareholders.

customer level activities

___________ relate to specific customers. ex. sales calls, catalog mailings, and general technical support that are not tied to any specific product

variable and fixed cost distinctions

absorption costing income statements ignore ___________.

activity

activity based costing accumulates costs for each ___________.

cost objects

activity based costing estimates the costs of the resources consumed by __________.

product level

advertising is an example of a __________ activity.

ABC allocates all manufacturing costs to products

all of the following are differences in ABC and traditional absorption costing except __________. -ABC system may assign non manufacturing costs to products -ABC allocates all manufacturing costs to products -ABC system uses many cost pools -ABC system may exclude some manufacturing costs, such as organization sustaining costs

total revenue equals total costs

break even point is the level of sales at which ____________.

change in sales X CM ratio

equation for change in CM

percent increase in sales x DOL

equation for if there is a percent increase in NOI

change in CM- change in FE

equation for if there is an increase or decrease in net operating income (profit)

unit contribution margin

once the break even point has been reached, net operating income will increase by the amount of the __________ for each additional unit sold.

cost pools

ordering materials, setting up machines, assembling products, and inspecting products are examples of _____________.

batch level activity

shipping orders to a grocery store would be considered a _____________.

fixed overhead costs

the difference between absorption costing net operating income and variable costing net operating income can be explained by the ways these two methods account for __________.

sales minus variable cost

the following equation explains contribution margin __________.

operating leverage

the measure of how sensitive net operating income is to a given percentage change in dollar sales is called ___________.

undercosts; higher

the traditional cost system _________ low volume products and reports a ______ product margin for these products.

overcosts; lower

the traditional cost system ___________ high volume products and reports a _________ product margin for these products.

omission of upstream and downstream costs

the use of absorption costing for segmented income statements results in ____________.

grouping batch and unit level activities

first stage allocation of overhead costs to each cost pool is accomplished using all of the following except ____________. -employee interviews -grouping batch and unit level activities -percentages

product profitability reports, customer profitability reports

two common management reports prepared with ABC data are _________ and ___________.

batch level activities

___________ are performed each time a batch is handled or processed, regardless of how many units are in the batch. ex. placing purchase orders, setting up equipment, arranging for shipments to customers. costs depend on number of batches processed rather than number of units produced, units sold, etc. ex. cost of setting up machine for batch processing is the same whether you are making one item or 1000 items

direct labor

which of the following costs would not be allocated using ABC? -marketing -factory equipment depreciation -direct labor -factory utilities

direct labor hours

which of the following is an allocation base commonly used under the traditional methods for allocation of overhead costs?

customer margins

which of the following is not a management report that is normally prepared with ABC data? -product profitability -customer margins -customer profitability