Exam 4

Question 1

who uses financial data

Answer 1

investors
creditors
execs
managers

Question 2

value added principle

Answer 2

benefits attained from process should outweigh cost of process

Question 3

product cost

Answer 3

any cost associated with obtaining or manufacturing a product

Question 4

midstream costs

Answer 4

costs from making product (direct labor and materials)

Question 5

upstream costs

Answer 5

incurred prior to manufacturing (research and development)

Question 6

Downstream costs

Answer 6

costs incurred after manufacturing (marketing and distribution)

Question 7

where are most costs accumlated for a company

Answer 7

raw materials

Question 8

just in time

Answer 8

inventory method that decreases holding time

Question 9

oppertunity cost

Answer 9

cost of LOST opportunity

Question 10

fixed cost

Answer 10

amount stays the same regardless of volume OR volume will change as price changes

Question 11

variable cost

Answer 11

cost changes34 with volume OR price stays the same and amount changes

Question 12

contribution margin formula

Answer 12

sales revenue- variable costs (the amount available to cover fixed costs

Question 13

break even point

Answer 13

where profit equals zero

Question 14

sunk costs

Answer 14

irrelevant information

Question 15

differential revenue

Answer 15

revenue relevant to decision making

Question 16

avoidable costs

Answer 16

future costs that can be estimated

Question 17

unit level costs

Answer 17

costs incurred each time a company makes one of each product

Question 18

batch level costs

Answer 18

costs associated with making a batch of product

Question 19

facility level costs

Answer 19

costs incurred on behalf of whole company and cant be removed unless whole segment is removed

Question 20

vertical intergration

Answer 20

having control over every aspect of product

Question 21

what is contribution margin

Answer 21

the revenue generated for each product sold

Question 22

contribution margin format

Answer 22

sales revenue
(variable cost)
———————————
Contribution margin
(fixed cost)
———————————
Net income

Question 23

Operating leverage formula

Answer 23

profit- wages- deprication-COGS

Question 24

Operating leverage definition

Answer 24

shows how a small change in net income can cause large changes in revenue

Question 25

what is operating leverage with respect to a companies income statement?

Answer 25

the more fixed costs a company has the more sensitive a company’s operating income is to a change in sales