Ch 17 MIDTERM 2 Flashcards
(35 cards)
What is the stand-alone revenue allocation method?
This method uses product-specific information (like selling prices or manufacturing costs) to allocate the total revenue from a bundled product to its individual components.
What are the possible allocation bases for the stand-alone revenue allocation method?
sp
unit manufacturing costs
physical units
total product line revenues
What is a bundled product?
A bundled product is a package of two or more products or services sold together at a single price. Individual components may also be sold separately at their own prices.
How are revenues allocated in the stand-alone revenue allocation method?
based on the relative value or price of each product within the bundle.
What is the incremental revenue-allocation method?
This method ranks products in a bundle by importance or value and allocates revenue based on that ranking.
How does the incremental revenue-allocation method work?
The first-ranked product receives the most revenue allocation, followed by the second-ranked, and so on.
What are the five shared cost categories in an ABC system when the customer is the cost object?
Customer output unit-level costs 2) Customer batch-level costs 3) Customer-sustaining costs 4) Distribution channel costs 5) Facility/corporate sustaining costs.
How are customer output unit-level costs defined in an ABC system?
Costs that are incurred to sell each individual unit of a product to a customer.
What are customer-sustaining costs in an ABC system?
Costs that support individual customers, regardless of the number of units sold.
What are facility/corporate sustaining costs in an ABC system?
Costs that cannot be traced to individual customers or distribution channels, like overhead costs.
What should a company track when offering price discounts to customers?
The company should track discounts by customer and salesperson to assess their impact on overall profitability.
How can customer profitability analysis help in decision-making?
It provides insights into which customers are profitable and which ones are not, helping businesses make better pricing and sales decisions.
What does customer profitability analysis focus on?
It focuses on short-term and long-term profitability, customer retention, and growth potential.
What does a short-term profitability analysis focus on?
It focuses on immediate revenue generated from customers.
What does long-term profitability analysis focus on?
It evaluates the potential for ongoing customer relationships, future sales, and retention.
Why should discounts be analyzed in customer profitability analysis?
To understand the trade-off between offering discounts and the potential long-term profitability of customers.
What is the static-budget variance?
It is the difference between the actual result and the original, static budgeted amount.
What is the flexible-budget variance?
It is the difference between the actual result and the flexible-budgeted amount, which is based on the actual level of output.
What is the sales-volume variance?
It is the difference between the actual sales volume and the budgeted sales volume, measuring the impact on contribution margin.
What is the sales-mix variance?
It measures the effect on the contribution margin when the actual sales mix differs from the budgeted sales mix.
What is the sales-quantity variance?
It measures the effect on the contribution margin due to a change in the total number of units sold, while keeping the sales mix constant.
hat is the purpose of contribution margin variance analysis?
It helps determine how much of the variance in profits is due to changes in sales volume, sales mix, or prices.
How do you calculate the sales-volume contribution margin variance?
It is calculated by multiplying the difference between actual and budgeted sales quantity by the budgeted contribution margin per unit.
How do you calculate the sales-mix contribution margin variance?
It is calculated by comparing the contribution margin of the actual sales mix to the budgeted sales mix.
