exam 2 (5-10)

Question 1

cost pool

Answer 1

the sum of resources related to a particular activity undertaken in response to customer demand or need

Question 2

cost driver

Answer 2

the characteristic selected for measuring the quantity of the activity for a particular period of time

Question 3

activity

Answer 3

a discrete task or step in a manufacturing or service process

Question 4

resource

Answer 4

a cost or expense incurred by a company

Question 5

production department costs

Answer 5

costs that are incurred by the production department

Question 6

support department costs

Answer 6

costs allocated from other departments

Question 7

practical capacity

Answer 7

the maximum possible volume of activity, while allowing for normal downtime for repairs and maintenance

Question 8

how to calculate the POHR in ABC?

Answer 8

(total overhead cost pool) / ( budgeted activity driver) = POHR

Question 9

how to know if a customer is profitable?

Answer 9

customer-specific gross profits > customer-specific costs

Question 10

activity-based management

Answer 10

the identification and selection of activities to maximize the value of the activities while minimizing their cost from the perspective of the final customer

Question 11

relevant range

Answer 11

the range of the activity where TOTAL fixed costs and variable cost PER UNIT remain constant

Question 12

step costs

Answer 12

costs that increase abruptly at certain intervals in a “step” pattern

Question 13

curvilinear costs

Answer 13

increase at a consistent rate as activity levels increase

Question 14

the formula for break-even sales?

Answer 14

total variable costs + fixed costs = break even sales

or

(variable cost x units sold) + fixed costs = Sales price x units sold

Question 15

the formula for variable costs?

Answer 15

variable cost x units sold = variable costs

Question 16

the formula for break-even units?

Answer 16

fixed costs / unit contribution margin

Question 17

the formula for unit contribution margin?

Answer 17

sales price - variable cost

Question 18

what is another formula for break-even sales?

Answer 18

fixed costs / contribution margin ratio = break even sales

Question 19

how to calculate net operating income

Answer 19

contribution margin - fixed costs = net operating income

Question 20

contribution margin

Answer 20

the amount available to cover fixed costs and generate profits

Question 21

the formula for the contribution margin ratio?

Answer 21

contribution margin / sales = contribution margin ratio

Question 22

contribution margin ratio

Answer 22

Tell managers the amount from each sales dollar that is contributing margin

Question 23

the formula for desired sales?

Answer 23

total variable costs+ fixed costs + desired net income = desired sales

Question 24

the formula for desired units?

Answer 24

(fixed costs + desired net income) / unit contribution margin = desired units

Question 25

the formula for desired sales revenue?

Answer 25

(fixed costs + desired net income) / contribution margin ratio = desired sales revenue

Question 26

the formula for margin of safety units?

Answer 26

actual sales units - break-even sales units = margin of safety units

Question 27

the formula for margin of safety revenue?

Answer 27

actual sales revenue - break-even revenue = margin of safety revenue

Question 28

the formula for operating leverage?

Answer 28

contribution margin / net operating income = operating leverage

Question 29

the formula for % change in operating income?

Answer 29

% change in sales x operating leverage = % change in operating income

Question 30

when should you use absorption costing?

Answer 30

when you produce more than you sold you will have a higher net income under absorption costing

Question 31

when should you use variable costing?

Answer 31

when you sell more than you produce you will have a high net income under variable costing

Question 32

the formula for net income?

Answer 32

Sales - COGS = Gross profit - SG&A costs(selling, general, and administrative costs) = NI

Question 33

the formula for unit product cost under absorption costing?

Answer 33

Unit variable product cost + (Total fixed product costs / Units Produced) = unit product cost(absorption costing)

Question 34

the formula for absorption cost of goods sold?

Answer 34

absorption unit product cost x units sold = COGS

Question 35

the formula for absorption SG&A costs?

Answer 35

Unit variable period costs x Units sold + Total fixed period costs = SG&A costs

Question 36

the formula for total variable COGS?

Answer 36

Unit variable product costs x Units sold = variable COGS

Question 37

the formula for total variable SG&A costs?

Answer 37

Unit variable period costs x Units sold = variable SG&A costs

Question 38

the formula for total fixed costs under variable costing?

Answer 38

Fixed product costs + Fixed period costs = total variable fixed costs

Question 39

relevant cost

Answer 39

a cost that differs between alternatives

Question 40

future cost

Answer 40

a cost that will be incurred in the future

Question 41

opportunity costs

Answer 41

future benefits forfeited due to a particular choice

Question 42

formula for the advantage of accepting the special order?

Answer 42

Increase in revenue - increase in production costs - added FC = advantage of accepting the special order

Question 43

how to know if you should sell or process further?

Answer 43

focus on the contribution margin

Question 44

how to deal with a constrained resource?

Answer 44

focus on the contribution margin

Question 45

the formula for budgeted sales revenue? (budgeting)

Answer 45

sales forecast x expected sales price = budgeted sales revenue

Question 46

the formula for budgeted unit production? (budgeting)

Answer 46

sales forecast + desired ending inventory - expected beginning inventory = budgeted unit production

Question 47

the formula for direct materials purchase? (budgeting)

Answer 47

units of material to be purchased x average unit price = direct materials purchase

Question 48

the formula for total direct labor cost? (budgeting)

Answer 48

direct labor hours required x hourly rate = total direct labor cost (budgeting)

Question 49

the formula for total manufacturing overhead? (budgeting)

Answer 49

(unit variable overhead x cost driver level) + total fixed overhead = total manufacturing overhead (budgeting)

Question 50

the formula for selling and administrative expenses? (budgeting)

Answer 50

variable expenses + fixed expenses = selling and adminstrative expenses (budgeting)

Question 51

when is a cost variance favorable?

Answer 51

when the actual is less than the standard