Exam 2 review Managerial Accounting
How do you findVariable cost in Y=a+bX?
Change in cost/Change in activity
CVP stands for
Cost, Volume, Profit
responsibility accounting
manager is held accountable for only those items the manager can actually control
what is the term for the amount sales can drop before losses are incurred
margin of safety
A number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the _____ budget
master, static, or planning
When there are multiple products, what effect does a change in the sales mix have on the break even point?
most likely changes
Do income statements prepared under variable and absorption costing report the same net income?
not always; they account for fixed MOH differently
More accurate estimates and higher motivation are generally the result of using a(n) Blank______ budget.
participative
variable costing treats fixed MOH as what kind of cost?
period
when using variable costing, fixed MOH is expensed when?
period incurred
2 distinct purposes for budgets
planning and control
what does contribution margin become after fixed expenses are covered?
profit
the relative proportions in which a company's products are sold is referred to as :
sales mix
contribution margin=
sales-all variable expenses
in CVP calculations, what is expected to remain constant
selling price
JVL Enterprises has set a target profit of $126,000. The company sells a single product for $50 per unit. Variable costs are $15 per unit and fixed costs total $98,000. How many units does JVL have to sell to BREAK-EVEN?
total fixed cost/(price per unit-variable cost per unit)
when a company produces/sells multiple products, what are each products contribution margin
unique
In a master budget, the schedules are based on who's estimate and assumptions?
variety of management
What are the components of Y=a +bX
y=total mixed cost a=the total fixed cost b=the variable cost per unit X=level of activity
Do both income statements prepared under variable and absorption costing include period and product costs?
yes
when the number of units produced equals the number sold, are the costing methods equal to each other?
yes
Formula method to find unit sales to attain target profit
(target profit+ fixed expenses)/Unit CM
A company's selling price is $90 per unit, variable cost per unit is $28 and total fixed expenses are $320,000. The number of unit sales needed to earn a target profit of $200,800 is ? How I found it
(target profit+ total fixed expenses)/(seeling price per unit-variable cost per unit) 8400
self-imposed budgeting
-Recognizing individuals at all levels of the organization as team members whose views and judgments are valued by top management
How is the fixed cost calculated using the high-low method?
-using either high or low level of activity -after the variable cost per unit is calculated -youre just plugging the numbers you found and have info the equation
continuous budgeting
12-month budget that rolls forward one month was the current one is comepleted
Equation method to find unit of sales needed for target profit (Q)
Target profit=unit CMxQ-Fixed Expense
The sales mix must be taken into consideration when calculating the break-even point for more than one product due to different selling prices, costs, and contribution margins among the products.
True
A detailed plan for the future that is usually expressed in formal quantitative terms is
a budget
When inventory decreases, which costing method will have a higher cost of goods sold?
absorption
When inventory increases, which costing method ends up with a higher net income
absorption
what costing method included fixed MOH in WIP?
absorption
What do product costs consist of under absorption costing?
both variable and fixed manufacturing
what format are variable costing income statements based on
contribution
sales budget
detailed schedule showing the expected sales for a budgeted period. the budget does not related to one's views being valued by top management
When units produced exceed units sold, net income will generally be ______ costing.
higher under absorption
What does CVP analysis investigate?
how profit is affected by selling prices, cost, and sales mix
the higher the margin of safety, the ___ the risk of incurring loss
lower
CVP relates changes in profit to: (3)
selling price, product mix, volume
the margin of safety
the excess of budgeted or actual sale dollars over the break-even sales dollars.
the high low method uses...
the highest and lowest level of activity and their respective costs
the amount by which sales can drop before losses are incurred is...
the margin of safety
when the number of units produced equals the number sold, where does fixed overhead go for either costing methods
they go to the income statements for both
how to calculate activity rates for cost pools
total cost of cost pool/activity level (i.e amount of hours)
variable expense ratio
total variable expenses/total sales
