BEC MCQ 2.1 Flashcards Preview

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Flashcards in BEC MCQ 2.1 Deck (38):

Absorption cost

are not relevant when management must decide on accepting or rejecting one time only special orders where there is sufficient idle capacity . Absorption costing methods represent generally accepted accounting principles and are, therefore, for the benefit of external users.


The costs which are suitable for making management decide on one time special orders

Direct costs, variable costs, incremental costs


The Relevance of a particular cost to a decision not determined by

Riskness of the decision, number of decision variables, accuracy of the cost


The difference between variable costing and full absorption costing lies in the

treatment of fixed costs. full absorption costs treats this as product costs while variable costs treat this as period costs
Under absorption costing all product costs and no period expenses are put into product cost


Contribution margin

Net sales revenue less variable costs


Operating income

CM-Fixed Costs


When considering alternatives

such as discontinuation of product line management should consider relevant costs.


Brekeven in units

Fixed costs/contribution margin


Margin of safety

Cuurent sales and breakeven sales


Break even analysis assumes

that all variable costs and revenues are constant per unit basis and are linear over a relevant range. fixed cost in total are constant


to maximize profit at full capacity

CM margin must be maximised


minimum acceptable selling price

should include only the incremental costs associated with the order....33000 + 7750=$40750.


Contribution margin

does not change with volume


Learning curve

releated to the efficiency with which productive resources typically labour are employed and it suggests that productivity will increase over time.If the product have long production runs learning curve analysis is the best method for estimating the cost of competitive bid .The basic premise of the learning curve is that operating efficiency and/or production increases in repetiti\oe tasks as experience is gained. The rate of impro-.m.eent, measured by the learning cur.e, has a regular pattern that can be stated as follo'NS: As cumulati-.e. quantities double, a-..erage cost per unit decreases by a specified percent of the pre\-ious cost.


multiple regression analysis

Is an expansion of simple regression analysis


Relevant range

range over which cost relationships are valid


Regression analysis

Regression analysis is a statistical method that fits a line to the data by the method of least squres.It can estimate the dependent cost varaiable based on independent variable. it is the most accurate way to find fixed and variable costs. It estimates the dependent variables.
Objective and constraint function are used in linear programming not regression analysis.
An independent variable is assumed not estimated in regression analysis and is based on activity rather costs
Coeffficient of determinationisa statistivcal messure used to evaluate regression analysis. Coefficient of variation r squred in a multiple regression equation is the percentage of variation in the dependent variable explained by the variation in independent variable


The engineering method

uses time and motion study to classify costs. It can be only used where there is observable relationships between inputs and outputs.


Account analysis method

is merely review of methods by someone knowledgeable of the activities of the firm. It is only good as the person making judgements


High low method

It only considers high and low point not all points like regression analysis


which costing would be least likely to encourage managers to reduce inventory

absorption costing because it can absorb some of managers job and increase profits


variable costing

variable costing places only variable cost into products and all fixed overheads is charged to COGS. Variable costing capitalize all fixed cost are expensed.


throughput costing

is an inventory costing method that places only variable direct material as inventoriable cost


Trend analysis

Projection of future trends based on past


Monte carlo simulation

Monte Carlo simulation is a computerized mathematical technique that allows people to account for risk in quantitative analysis and decision making. The technique is used by professionals in such widely disparate fields as finance, project management, energy, manufacturing, engineering, research and development, insurance, oil & gas, transportation, and the environment.


Dynamic programming

is breaking of big problems to smaller future problems


Expected value analysis

it is the anticipated value of a given investment. In statistics and probability analysis, the EV is calculated by multiplying each of the possible outcomes by the likelihood each outcome will occur, and summing all of those values.


Continous propablity simulation

Continuous probability simulation is a procedure that studies a problem by creating a model of the process and then, through trial and error solutions, attempts to impro..e the problem solution.


Units to be produced to achieve after tax profit

total fixed cost+ target after cost profit /contribution margin per unit


Cost volume profit

Selliing prices are to be unchanged
All costs can be divided into fixed and variable elements . Only total variable cost are diretly proportional to volume over the relevant range
Volume is the only relevant factor affecting cost


Delphi forecasting

rely mostly on judgement


Opportunity costs

Opportunity costs are costs that would have been saved or the profit that would have been earned if another decision alternative had been selected. Implicit costs are opportunity costs. Opportunity cost is zero. Opportunity cost are not recorded in accounting records. Opportunity cost is a potential benefit lost by selecting a particular course. Opportunity cost do not represent cash outlays.


Accounting profit

is the total revenue minus total explicit costs


Explicit costs

Are documented out of profits cost


selling price

costs/ratio of costs to sales


Assuming available capacity

the minimum cost per unit of a special order is equal to the variable cost per unit.


An increase in production level within the relevant range

will increase the total cost


Break even point in dollars

Total fixed costs/contribution margin ratio