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Accounting 2 > Exam 1 > Flashcards

Exam 1 Flashcards

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1
Q

describes how costs react to changes in the volume of activity

A

cost behaviors

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2
Q

in total: change in direct proportion
per unit: constant

A

Variable Costs

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3
Q

Examples of Variable Costs

A

direct materials and direct labor

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4
Q

in total: constant
per unit: changes inversely

A

Fixed Costs

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5
Q

Examples of Fix Costs

A

Depreciation, rent, advertising

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6
Q

A variable and fixed element with no constants

A

mixed costs

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7
Q

Examples of mixed costs

A

utilities and overhead

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8
Q

range of activity within which the assumptions made by managers are valid

A

Relevant Range

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9
Q

high-low method equation

A

(change in cost for 2 data points)/(change in activity level 2 data points)

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10
Q

total cost =

A

fixed cost+variable cost

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11
Q

Contribution Margin=

A

Sales Revenue-Variable Costs

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12
Q

Net Income

A

Contribution Margin-Fixed Costs

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13
Q

When revenues increase, variable costs and contribution margin…

A

increase as well

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14
Q

helps managers understand the relationship among cost, volume, profit

A

Cost Volume Profit Analysis

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15
Q

What are the 4 basic elements of a CVP analysis

A

break-even calculations
target profit analysis
margin of safety
operating leverage

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16
Q

contribution margin/unit=

A

selling price/unit - variable cost/unit

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17
Q

CM ratio=

A

CM/SR

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18
Q

when the net income=0; no profit or loss

A

breakeven point

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19
Q

Selling Price per unit x # of units

A

Sales Revenue

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20
Q

Variable Cost Ration

A

VC/SR

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21
Q

trying to come up with the volume of sales that would be necessary to earn a good level of income

A

target profit analysis

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22
Q

measure of firm riskness

A

margin of safety

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23
Q

margin of safety=

A

actual sales revenue-break even sales revenue

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24
Q

degree of operating leverage=

A

contribution margin/net income

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25
the relative combination of products being sold by a firm
Sales mix
26
helps push the organization toward its overall goals
tactical decision making
27
a cost that differs between alternatives; a cost that is different if we choose A instead of B
relevant cost
28
a cost that can be eliminated but always relevant
avoidable cost
29
examples of avoidable costs
direct materials, direct labor, all variable costs, some fixed costs
30
a cost that exists under all decision alternatives; never relevant
unavoidable costs
31
examples of unavoidable costs
some fixed costs
32
a cost that cannot be directly linked to a cost object, assigned to a product using an arithmetic process, never relevant
Allocated Costs
33
Examples of allocated costs
rent & administrative salaries
34
a cost that has been incurred and can not be recovered by some future action; never relevant
sunk costs
35
the originial cost of a building when trying to sell it in 5 years is an example of what cost
sunk costs
36
a benefit given up by choosing one alternative over another; always relevant
opportunity costs
37
make of buy decision
should we make the part ourself, or should we buy the part from an outside supplier
38
if the (avoidable costs+opportunity costs) > (outside purchase price) should you buy or make
buy
39
if the (avoidable costs+opportunity costs) <(outside purchase price) should you buy or make
Make
40
keep or drop decision
the company must decide whether a segment of a business should be kept or eliminated
41
if the (avoidable costs+opportunity costs) > (lost contribution margin) should you drop or keep
drop
42
if the (avoidable costs+opportunity costs) < (lost contribution margin) should you drop or keep
keep
43
one time orders usually requested at a lower selling price than regular sales
special order decision
44
if the (actual selling price of special order) > (minimum acceptable selling price of special order) should you accept or reject
accept
45
if the (actual selling price of special order) < (minimum acceptable selling price of special order) should you accept or reject
reject
46
minimum acceptable selling price of special order equation
variable costs per unit of the special order + contribution margin lost from 'given up' regular sales
47
contribution margin 'lost' is equal to
(CM per unit of regular sales x units of regular sales given up)/(units in the special order)
48
one raw material that will generate multiple products
joint products
49
able to uniquely identify each joint product
split off point
50
costs incurred prior to being able to separately identify products
join costs
51
Process further only if the
(sales value from further processing - additional processing costs)> sales value at the split off point
52
Joint costs are considered in calculating
net income
53
which costs does not have an effect on the decision to sell now or process further
joint costs
54
In product mix decision, a company should produce products that have
the highest CM per unit of scarce resource
55
CM per unit of scarce resource
CM per unit/ Scarce resource needs per unit
56
What happens when a company is faced with more than one resource constraint?
used linear programming to determine the optimal mix of products
57
What is the first step of linear programming
define your decision variables (label them as x and y)
58
what is the second step of linear programming
determine the objective function; which will always to be to maximize the CM
59
what is the third step of linear programming
determine the resource constraints
60
what is the fourth step of linear programming
solve the linear program to determine the optimal product mix

Accounting 2 (1 decks)

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