cost accounting test one

this is intended for future use and provides capacity for potential demand surges

unused capacity

advocates of throughput costing argue that

-only direct materials are truly variable -direct manu labor is relatively fixed -variable manu costs are period costs

includes fixed manufacturing overhead as an inventorial cost

absorption costing

sales volume variance using contriution margin

actual sales in units - budgeted sales in units * contribution margin per unit

to determine sales mix percentage

add budgeted sales in units use this as denominator and then put what ur looking for in units on numerator

the difference between operating incomes under variable costing and absorption costing centers on how to account for

both fixed manufacturing costs and variable manufacturing costs

these are demand based - based on the demand for the output of the plant

both master budget capitalization and normal capacity utilization

using a single cost pool, to divisions using one cost pool and then reallocating costs to products using multiple cost pools, using numerous individual cost pools

corporate overhead costs can be allocated by

costs incurred to process orders would MOST likely be classified as

customer batch level cost

categorizes costs related to customers into different cost pools on the basis of either different classes of cost drivers or different degrees of difficulty in determining the best cause and effect relationships

customer cost hierarchy

absorption costing is required in all of the following EXCEPT

determining a competitive selling price (so it is required for gaap, reporting to external shareholders, income tax reporting)

what is included in absorption costing?

direct labor, direct manu, variable manu, fixed MOH

costs that are inventoried when using variable costing

direct manufacturing costs, variable manufacturing costs (NOT marketing)

to allocate corporate costs to divisions, the allocation base used should

have the best cause and effect relationship with the costs

master budget capacity utilization

hides the amount of unused capacity

provides the lowest estimate of denominator level capacity

master budget capacity utilization

focuses on the demand side of production

master budget capitizalaton and normal capacity utilization

"expensed on the income statement"

means the units that were sold

all of the following are drawbacks of absorption costing EXCEPT

operating income solely reflects income from the sale of units and excludes the effects of manipulating production schedules

variable costing regards fixed manufacturing overhead as an

period cost

focuses on the supply side of production

practical and theoretical

reduces theoretical capacity for unavoidable operating interruptions

practical capacity

to provide information for encomium decisions to motivate managers and other employees to justify costs or compute reimbursement to measure income and assets for reporting to external parties

purposes of cost allocation

budgeted fixed manu costs of a product using practical capacity

represents the cost per unit of supplying capacity

to guide cost allocation decisions, the ability to bear criterion

results in subsidizing products that are not profitable

loss causing customers

should be evaluated for ways to become profitable customers

one possible means of determining the difference between operating incomes for absorption costing and variable costing is by

subtracting fixed MOH in beginning inventory from fixed MOH in ending inventory

an unfavorable production volume variance occurs when

the denominator level (the level at which the factory produces maximum possible)exceeds production

more insight into the static-budget-variance can be gained by subdividing it into

the flexible budget variance and the sales volume variance

more insight into the sales quantity variance can be gained by subdividing it into

the market share variance and the market size variance

the most likely reason for NOT allocating corporate costs to divisions include that

these costs are not controllable by division managers

ti improve customer profitability, companies should

track discounts by customer, and track discounts by sales person