ACCT 3224 Final Exam

Question 1

What is Variable Costing?

Answer 1

A costing method where only variable manufacturing costs are treated as product costs; fixed MOH is treated as a period cost.

Question 2

What is Absorption Costing?

Answer 2

A costing method that includes all manufacturing costs (variable and fixed) as part of the cost of a finished product.

Question 3

How is Fixed Manufacturing Overhead (MOH) treated under variable costing?

Answer 3

Under variable costing, it is expensed in the period incurred; under absorption costing, it is included in inventory until sold.

Question 4

What are Product Costs under variable costing?

Answer 4

DM, DL, variable MOH.

Question 5

What are Product Costs under absorption costing?

Answer 5

DM, DL, variable MOH, and fixed MOH.

Question 6

What are Period Costs?

Answer 6

Costs that are expensed in the period incurred, including selling & admin costs.

Question 7

What is Cost-Volume-Profit (CVP) Analysis?

Answer 7

A tool for analyzing the relationship between sales volume, costs, and profit.

Question 8

What is the Matching Principle?

Answer 8

A GAAP principle requiring revenues and related expenses to be matched in the same period.

Question 9

What is the Reconciliation of Operating Income?

Answer 9

Explains differences in operating income under absorption and variable costing due to the treatment of fixed MOH.

Question 10

What is a Budget?

Answer 10

A detailed quantitative plan for acquiring and using financial and other resources over a specified time period.

Question 11

What is a Master Budget?

Answer 11

Summarizes a company’s plans, setting specific targets for sales, production, distribution, administrative, and financing activities.

Question 12

What is Budgetary Control?

Answer 12

The use of budgets to control an organization’s activities by comparing actual results to budgeted amounts.

Question 13

What is Participative Budgeting?

Answer 13

A budgeting process that involves managers from across the organization in developing budget estimates for their areas.

Question 14

What is Budgetary Slack?

Answer 14

The difference between the revenues and expenses a manager expects can be achieved and the amounts included in the budget.

Question 15

What is a Sales Budget?

Answer 15

A detailed schedule showing the expected sales for the budget period, expressed in both dollars and units.

Question 16

What is a Production Budget?

Answer 16

Determines the production level needed to meet budgeted sales and desired ending inventory.

Question 17

What is a Direct Materials Budget?

Answer 17

Details the raw materials that must be purchased to fulfill the production budget and provide for adequate inventories.

Question 18

What is a Direct Labour Budget?

Answer 18

A detailed plan showing labour requirements over a specific time period.

Question 19

What is a Cash Budget?

Answer 19

Combines receipts, disbursements, cash excess or deficiency, and financing to project cash flow.

Question 20

What is a Standard Cost?

Answer 20

A benchmark for measuring performance, including quantity and cost standards.

Question 21

What is Variance Analysis?

Answer 21

The process of evaluating differences between standard costs and actual costs.

Question 22

What is Direct Material Price Variance?

Answer 22

The difference between the actual price paid for materials and the standard price, multiplied by the quantity purchased.

Question 23

What is Direct Material Quantity Variance?

Answer 23

The difference between the actual quantity of materials used and the standard quantity, multiplied by the standard price.

Question 24

What is Labour Rate Variance?

Answer 24

The difference between the actual hourly rate paid to workers and the standard rate, multiplied by hours worked.

Question 25

What is Labour Efficiency Variance?

Answer 25

The difference between the actual hours worked and the standard hours, multiplied by the standard hourly rate.

Question 26

What is a Segment?

Answer 26

A part of an organization about which a manager seeks cost, revenue, or profit data.

Question 27

What are Traceable Fixed Costs?

Answer 27

Costs that exist solely because of a specific segment.

Question 28

What are Common Fixed Costs?

Answer 28

Costs that relate to the overall operation and would not disappear if a segment were eliminated.

Question 29

What is Segment Margin?

Answer 29

The segment’s contribution margin minus its traceable fixed costs.

Question 30

What is a Responsibility Centre?

Answer 30

Any part of an organization whose manager has control over and is accountable for cost, profit, or investment.

Question 31

What is Return on Investment (ROI)?

Answer 31

ROI = Operating Income / Average Operating Assets.

Question 32

What is Residual Income?

Answer 32

Measures the excess of operating income over the minimum required return on average operating assets.

Question 33

What is a Relevant Cost?

Answer 33

A cost that differs between alternatives and is considered in decision-making.

Question 34

What is an Avoidable Cost?

Answer 34

A cost that can be eliminated by choosing one alternative over another.

Question 35

What is a Sunk Cost?

Answer 35

A cost that has already been incurred and cannot be recovered.

Question 36

What is a Make or Buy Decision?

Answer 36

Compare the cost of making internally (including opportunity costs) to the cost of buying externally.

Question 37

What is an Opportunity Cost?

Answer 37

The benefit foregone as a result of choosing one alternative over another.

Question 38

What is a Special Order?

Answer 38

A one-time order not part of the company's normal business that requires incremental cost analysis.

Question 39

What are Joint Costs?

Answer 39

Costs incurred up to the split-off point where joint products can be separately identified.

Question 40

What is a Constrained Resource?

Answer 40

A limited resource that restricts a company’s ability to meet demand.