ACCTG 404

Question 1

Break-Even Point

Answer 1

sales where profit is zero

Question 2

Contribution Approach

Answer 2

Income statement

that separates costs into variable and fixed

first deducting all variable expenses from sales to obtain the contribution margin

Question 3

Contribution Margin

Answer 3

portion of sales revenue not consumed by variable expenses, thus being fixed expenses

Question 3

Cost-Volume-Profit (CVP) Graph

Answer 3

Shows relationship between an organizations revenues, costs, and profits on the one hand and its sales volume on the other hand

Question 4

Degree of Operating Leverage

Answer 4

Measure of how a % change in sales volume will affect profits

Question 4

Margin of Safety

Answer 4

Actual dollar sales or excess of budget / break-even dollar sales

Question 5

Incremental Analysis

Answer 5

Focusing on costs and revenues that change as a result of a decision

Question 6

Operating Leverage

Answer 6

Measure of how sensitive net operating income is to a change in unit sales

Question 7

Sales Mix

Answer 7

Sales mix is sales of each product as a % of total sales

More high margin sales than low margin sales increase profits

Question 8

Target Profit Analysis

Answer 8

Estimating level of sales needed to achieve a desired target profit

Question 9

Absorption costing

Answer 9

Costing method that includes all manufacturing costs (direct materials, direct labor, variable and fixed manufacturing overhead) in unit product costs

Question 10

Common Fixed Cost

Answer 10

Fixed cost supporting more than one business segment, but not traceable

Question 11

Segment

Answer 11

Any part or activity of an organization about which managers seek cost, revenue, or profit data

Question 12

Segment Margin

Answer 12

Segments contribution margin less its traceable fixed costs

Represents margin available after a segment has covered all of its own traceable costs

Question 13

Traceable Fixed Cost

Answer 13

Fixed cost incurred because of the existence of a particular business segment that would be eliminated if the segment were eliminated

Easily traceable

Question 14

Variable Costing

Answer 14

Costing method that includes only variable manufacturing costs (direct materials, direct labor, variable manufacturing overhead) in unit product costs

Not easily traceable

Question 15

Activity Cost Pool

Answer 15

Accumulates cost related to a single activity measure in an activity-based costing system

Question 16

Activity Measure

Answer 16

Allocation based in an activity-based costing system

Ideally is a measure of the amount of activity that drives the costs in an activity cost pool

Question 17

Activity-Based Costing (ABC)

Answer 17

Based on activities that provides managers with cost information for strategic and other decisions potentially affecting capacity and therefore fixed and variable costs

Question 18

Activity Based Management (ABM)

Answer 18

Management approach focusing on managing activities as a way of eliminating waste and reducing delays and defects

Question 19

Batch-Level Activities

Answer 19

Activities performed each time a batch of goods is handled or processed, regardless of how many units are in the batch

Amount of resources consumed depends on the number of batches run rather than the number of units in the batch

Question 20

Benchmarking

Answer 20

identifying activities with the greatest potential for improvement

Question 21

Duration Driver

Answer 21

Measure of the time required to perform an activity

Question 22

First-Stage Allocation

Answer 22

overhead costs to activity cost pools in an activity-based costing system

Question 23

Organization-Sustaining Activities

Answer 23

Activities that are carried out regardless of which customers are served, which products are produced, how many batches are run, or how many units are made

Question 23

Product-Level Activities

Answer 23

Activities that are related to specific products that must be performed regardless of how many units are produced and sold or batches run

Question 24

Second-Stage Allocation

Answer 24

Using activity rates to apply costs to products and customers in activity based costing

Question 25

Transaction Driver

Answer 25

Count of the number of times an activity occurs

Question 26

Unit-Level Activities

Answer 26

Activities performed each time a unit is produced

Question 27

Budget

Answer 27

Plan for future expressed in quantitative terms

Question 28

Cash Budget

Answer 28

Schedule estimating how cash will be acquired and used over a specific time period

Question 29

Control

Answer 29

Process of gathering feedback to ensure a plan is being properly executed or modified as circumstances change

Question 30

Direct Labor Budget

Answer 30

Plan showing the direct labor-hours required to fulfill the production budget

Question 31

Direct Materials Budget

Answer 31

Plan showing the amount of raw materials that must be purchased to fulfill the production budget and provide adequate inventories

Question 32

Ending Finished Goods Inventory Budget

Answer 32

Budget showing the dollar amount of unsold finished goods inventory appearing on the ending balance sheet

Question 33

Manufacturing Overhead Budget

Answer 33

Plan showing the production costs, other than direct materials and direct labor, that will be incurred over a specified time period

Question 34

Master Budget

Answer 34

Number of separate but interdependent budgets quantifying the company's sales, production, and financial goals and culminating in a cash budget, budgeted income statement, and budgeted balance sheet

Question 35

Merchandise Purchases Budget

Answer 35

Plan used by merchandising company showing the amount of goods to be purchased from supplies during the period

Question 36

Participative Budget

Question 37

Planning

Answer 37

Process of establishing goals and specifying how to achieve them

Question 38

Production Budget

Answer 38

Plan showing the number of units that must be produced during a period to satisfy both sales and inventory needs

Question 39

Sales Budget

Answer 39

Schedule showing expected sales in dollars and units

Question 40

Self-Imposed Budget

Answer 40

Method of preparing budgets in which managers prepare their own budgets Budgets are then reviewed by higher-level managers, and any issues are resolved by mutual agreement

Question 41

Selling and Administrative Expense Budget

Answer 41

Schedule of planned nonmanufacturing expenses

Question 42

Activity Variance

Answer 42

Difference between the amount of revenue or expense in the flexible budget and the planning budget Caused by the difference in actual and planned activities

Question 43

Flexible Budget

Answer 43

Budget showing what management costs and revenues should have been, given the actual level of activity

Question 44

Management by Exception

Answer 44

Management system that compares actual results to a budget so significant deviations can be flagged as exceptions

Question 45

Planning Budget

Answer 45

Budget created before the period begins that is valid only for the planned level of activity

Question 46

Revenue Variance

Answer 46

Difference between the actual amount of revenue and what is should have been, given the actual level of activity A favorable (unfavorable) revenue variance occurs because the revenue is higher (lower) than expected, given the actual level of activity

Question 47

Spending Variance

Answer 47

Difference between the actual amount of a cost and how much it should have been, given the activity level A favorable (unfavorable) spending variance occurs because the cost is lower (higher) than expected, given the activity level