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