Exam 2-202

Question 1

Total revenue line

Answer 1

Starts at orgin slopes up

Question 2

Fixed cost line

Answer 2

Horizontal line

Question 3

Total cost line

Answer 3

Starts at fixed cost line and slopes up

Question 4

Break even point

Answer 4

Total revenue crosses total cost

Question 5

Variable cost

Answer 5

Cost whose total dollar amount varies in direct proportion to changes in the activity level. Constant on per unit basis, slope of the line is variable cost

Question 6

Fixed cost

Answer 6

Remain constant in total dollars as volume changed within the relevant range of activity. Increases as volume decreases

Question 7

Step cost

Answer 7

Only obtainable in chunks

Question 8

Scatter plot method

Answer 8

Total maintance cost-fixed cost=variable cost. /units=variable cost per unit

Question 9

High low method

Answer 9

Based on level of activity. Change in cost/change volume

Question 10

Absorpition costing

Answer 10

Cogs=DM,DL,all MOH

Question 11

Variable costing

Answer 11

Cogs=DM,DL,variable MOh

Question 12

Advantages absortion costing

Answer 12

GAAP and meets matching principal

Question 13

Disadvantages absorption

Answer 13

Not for CVP, fixed MOH as variable

Question 14

Advantages variable costing

Answer 14

Useful for manages not responsible for fixed costs. CVP analysis

Question 15

Disadvantages variable costing

Answer 15

Different for GAAP

Question 16

Sales equals

Answer 16

VC+FC+profit

Question 17

Contribution margin

Answer 17

Sales-VC

Question 18

Contribution Margin Ratio

Answer 18

(Sales-VC)/sales

Question 19

Assumptions underlying CVP analysis

Answer 19

Selling price per unit is constant, cost are linear, sales mix is constant, no change in inventories

Question 20

Break even in sales

Answer 20

Fixed expenses/CMR

Question 21

Break even in units

Answer 21

Fixed expenses/CM

Question 22

Sales to profit

Answer 22

(Fixed + profit)/CMR

Question 23

of units to profit

Answer 23

(Fixed +profit)/CM

Question 24

Margin of safety

Answer 24

Total sales-break even sales

Question 25

Margin of safety as % of sales

Answer 25

Margin of safety/sales

Question 26

Operating leverage

Answer 26

Measure of hoe a percent change in sales will affect profits

Question 27

Operating leverage equation

Answer 27

(S-V)/(CM-FC) CM/NOI

Question 28

Relevant cost are

Answer 28

Incremental, differential and marginal

Question 29

Differential approacht

Answer 29

Only relevant cost are considered

Question 30

Total cost approach

Answer 30

All revenue and cost are displayed in income statement then NOI is compared

Question 31

Special order

Answer 31

Accept a special order if incremental revenue exceeds the incremental expense of producing it

Question 32

Target costing

Answer 32

Revenue-profit=target total cost

Question 33

Cost plus pricing

Answer 33

Total cost+profit=cost plus price

Question 34

Discontinue a product

Answer 34

Drop if advoidable FC exceeds CM

Question 35

Resource constraints

Answer 35

Given bottle neck, emphasize the products with the greatest CM/unit of constrained resources

Question 36

Make or buy

Answer 36

Choose alternatice that has the greatest net incremental revenues over incremnetal cost

Question 37

Joint products

Answer 37

Continue process after split off point if the revenue exceeds cost of more processing

Question 38

Budget

Answer 38

A detailed plan for acquiringg and using financial and other resources over a specific period

Question 39

Budgeting is used for

Answer 39

Planning and control

Question 40

Issues to consider in budgeting

Answer 40

Strategic planning, budget period, type of budgeting, input process

Question 41

Steps for creating a master budget

Answer 41

1. Sales budget 2. Production 3. DM budget 4. DL budget 5. MOH budget 6. Operating expenses budget 7. Budgeted income statement 8. Capital expenditured budget 9. Cash budgets 10. Budgeted balance sheet

Question 42

The first 7 budgets are

Answer 42

Operating budgets used to build income statements

Question 43

The last three budgets are

Answer 43

Financial budgets

Question 44

Sales budgets

Answer 44

Expected sales x selling price per unit

Question 45

Production budgets

Answer 45

Expected sales+ending inventory-beginning inventory

Question 46

DM budget

Answer 46

DM needed+desired FG inventory-beginning inventory

Question 47

Income statement budget

Answer 47

Sales-COGS=gross profit-SGA=NOI-nonoperating income=net income

Question 48

Capital expenditures budget

Answer 48

Planned purchases of long-lived assets

Question 49

Cash collections budget

Answer 49

May be useful in analyzing the flow of sales/accounts recievable/receipts