Managerial Accounting Exam 2
account analysis
a method for determining cost behavior that is based on a managers judgment in classifying each general ledger account as a variable, fixed, or mixed cost
high-low method
a method for determining cost behavior that is based on two historical data points: the highest and lowest volume of activity
sunk cost
a past cost that cannot be changed regardless of which future action is taken
weighted-average method
a process costing method that combines any beginning inventory units (and costs) with the current period's units (and costs) to get a weighted-average cost
segment margin income statement
a product line income statement that contains no allocation of common fixed costs.
regression analysis
a statistical procedure for determining the line that best fits the data by using all of the historical data points, not just the high and low data points
outliers
abnormal data points; data points that do not fall in the same general pattern as the other data points
constraint
a factor that restricts the production or sale of a product
scatterplot
a graph that plots historical cost and volume data
avoidable fixed
________costs that can be eliminated as a result of taking a particular course of action
unavoidable fixed
________costs that will continue to be incurred even if a particular course of action is taken
common fixed
________expenses that cannot be traced to a particular product line
cost equation
a mathematical equation for a straight line that expresses how a cost behaves
committed fixed costs
fixed costs that are locked in because of previous management decisions; management has little or no control over these costs in the short run
discretionary fixed costs
fixed costs that are result of annual management decisions; fixed costs that are controllable in the short run
contribution margin ratio
ratio of contribution margin to sales revenue; is the difference between a company's sales and variable expenses, expressed as a percentage.
contribution margin
sales revenue minus variable expenses
waste audit
studying the contents of a company's trash in order to identify solid waste and scraps that could potentially be recycled, repurposed, or sold to create a new revenue stream. Also known as trash audit or waste sort
production cost report
summarizes a processing department's operations for a period
relevant range
the band of volume where total fixed costs remain constant at a certain level and where the variable cost per unit remains constant at a certain level
opportunity cost
the benefit forgone by choosing a particular alternative course of action
sales mix
the combination of products that make up total sales
variable, direct
the costing method that assigns only ________ manufacturing costs to products. All fixed manufacturing costs (fixed MOH) are expensed as period costs. also known as _______ costing
absorption costing
the costing method where products absorb both fixed and variable manufacturing costs
contribution margin per unit
the excess of the unit sales price over the variable cost per unit; also called unit contribution margin excess of the unit sales price/ variable cost per unit
segment margin
the income resulting from subtracting only the direct fixed costs of a product line from its contribution margin. it contains no allocation of common fixed costs
operating leverage
the relative amount of fixed and variable costs that make up a firm's total costs
breakeven point
the sales level at which operating income is zero: total revenues=total expenses
indifference point
the volume of sales at which a company would be indifferent between alternative cost structures because they would result in the same total cost
sensitivity analysis
a "what-if" technique that asks what results will be if actual prices or costs change or if an underlying assumption changes
C
A transfer of $30,000 from the assembly department to the packaging department would require the entry of a A) debit to Finished Goods Inventory. B) debit to WIP Inventory-Assembly. C) credit to WIP Inventory-Assembly. D) credit to Raw Materials Inventory.
cost behavior
a behavior that describes how costs change as volume changes
curvilinear costs
a cost behavior that is not linear
C
Baxter Company produces children's wiffle ball sets using a three-step sequential process that includes molding, coloring and finishing. When the sets are completely finished, out of which account should the cost be transferred? A) Finished Goods Inventory B) WIP Inventory-Coloring C) WIP Inventory-Finishing D) WIP Inventory-Molding
B
Target total cost is defined as A) cost of goods sold less desired profit. B) revenue at market price less desired profit. C) revenue at market price less variable costs. D) revenue at market price less fixed costs.
A
Expected future data that differs among alternative courses of action are referred to as A) relevant information. B) historical information. C) predictable information. D) irrelevant information.
A
Fixed costs that may be avoided in the future are referred to as A) relevant costs. B) opportunity costs. C) replacement costs. D) sunk costs.
A
Fun Stuff Manufacturing produces ping pong balls using a three-step sequential process that includes molding, coloring and finishing. When the balls and associated costs are transferred from the coloring process to the finishing process, which account is credited? A) WIP Inventory-Coloring B) WIP Inventory-Molding C) Raw Materials Inventory D) WIP Inventory-Finishing
true
If the data points were randomly scattered, the R-square value would be closer to 0 than 1. True or False
A
In a process costing system, the number of WIP inventories A) equal the number of production departments. B) equal the number of products produced. C) equal the number used in a job cost system. D) cannot equal the number of parts used in the product.
A
On a CVP graph, the total cost line intersects the total revenue line at which of the following points? A) The breakeven point B) The level of the variable costs C) The level of the fixed costs D) None of the above
A
On a production cost report, where would current costs added during the period appear? A) After any beginning WIP Inventory cost B) As part of unit output for the period C) After any ending WIP Inventory cost D) As part of beginning WIP Inventory cost
A
Process costing is most likely used in which of the following industries? A) Pharmaceuticals B) Health Care C) Shipbuilding D) Construction
B
The costing system used by a company producing custom fireplace mantels would be A) process costing B) job costing C) equivalent units costing D) conversion cost costing
product line
________ income statement shows the operating income of each product line, as well as the company as a whole
contract
___________manufacturers that make products for other companies, not for themselves
C
Using account analysis, what type of cost is the price of gasoline when your car gets 30 miles per gallon and each gallon costs $3.65? A) Fixed B) Mixed C) Variable D) Step
C
What factor related to manufacturing costs causes the difference between operating income computed using absorption costing and operating income computed using variable costing? A) Absorption costing expenses all costs, whether fixed or variable. B) Absorption costing "inventories" all direct manufacturing costs. C) Absorption costing "inventories" all fixed manufacturing costs. D) Absorption costing "inventories" all fixed manufacturing and period costs.
B
When absorption costing is used and management bonuses are related to operating income, managers are more likely to A) decrease inventory levels. B) increase inventory levels. C) keep inventory levels consistent. D) steal from the company.
A
Which is true about a scatterplot? A) If there is a strong relationship between cost and volume, the points will fall in a linear pattern. B) If there is a strong relationship between cost and volume, the points will fall in a scattered pattern. C) Cost and volume have no effect on the pattern of the points on a scatterplot. D) A strong relationship between production and inventory is shown by a linear pattern.
A
Which of the following best describes "target costing"? A) An approach to pricing that begins with revenue at market price and subtracts desired profit to arrive at target total cost B) A factor that restricts production or sales of a product C) All costs incurred along the value chain in connection with the product or service D) An approach to pricing that begins with the product's total cost and adds desired profit
C
Which of the following product costing systems is normally used to assign costs to goods that are mass-produced goods? A) Fixed costing B) Job costing C) Process costing D) LIFO costing
A
Which of the following represents the total mixed cost equation? A) y = vx + f B) y = vx - f C) = vx - y D) = vx + y
target costing
an approach to pricing used by price takers; it begins with the revenue at the market price and subtracts the company's desired profit to arrive at the target total cost
cost-plus pricing
an approach to pricing used by price-setters; it begins with the product's total costs and adds the company's desired profit to determine a cost-plus price
operating leverage factor
at a given level of sales, the contribution margin divided by operating income; the operating leverage factor indicates the percentage change in operating income that will occur from a 1% change in sales volume
outsourcing
contracting an outside company to produce a product or perform a service. this work can be done domestically or overseas
variable
costs incurred for every unit of activity. as a result, total _______ costs change in direct proportion to changes in volume
Transferred-In costs
costs incurred in a previous process that are carried forward as part of the product's cost when it moves to the next process
mixed cost
costs that change, but not in direct proportion to changes in volume. have both variable cost and fixed cost components
margin of safety
excess of expected sales over breakeven sales; the drop in sales a company can absorb without incurring an operating loss
relevant information
expected future date that differ among alternatives
equivalent units
express the amount of work done during a period in terms of fully completed units of output
cost-volume-profit analysis
expresses the relationships among costs, volume, and profit or loss
offshoring
having work performed overseas. this work can be performed either by the company itself or by outsourcing the work to another company
contribution margin, internal
income statement that organizes costs by behavior (variable or fixed costs) rather than by function; it can be used only by (internal or external?) management
