Flashcards in Exam 2 Deck (13):
2 reasons you should use Activity Based Costing?
-when one product requires more resources than other
-when you sell one product a lot more(volume) than other
3 differences between ABC costing and Traditional costing methods
-ABC may assign non-manufacturing costs to products
-ABC may not assign some manufacturing costs to inventory
-ABC uses different activities to drive up costs of multiple products
-Traditional ONLY assigns manufacturing costs
4 categories of Activities under ABC costing? Give examples of each
-Indirect Material or OH
- set-up costs
-product level advertising
Facility-level (organization-sustaining) activities
-maintaining the plant
-costs MAY not be assigned to inventory
-Study change of effects in costs and volume of profits
CVP studies the ___
5 things CVP studies
Volume of Activity
Unit Selling Prices
Variable Cost per Unit
Total Fixed Costs
4 Assumptions the Cost Volume Profit Analysis makes
Costs/Revenue are LINEAR in their relevant range
Sales Mix remains constant
All units Produced will be Sold
Costs can be classified as Variable/Fixed
-studies effect of change in variable on profit
-called "What if Analysis"
What costs are included to find the unit product costs under Absorption and Variable?
-Fixed OH / Units produced
If Production < Sales Volume, which cost system will report the highest Net Income?
If Production > Sales Volume, which cost system will report the highest Net Income?
Which is required by GAAP and IFRS? Which is used for Internal Purposes only?
-GAAP and IFRS
-Internal purposes only