Test 3 flash cards.txt

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isatonk
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152990
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Test 3 flash cards.txt
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2012-05-09 01:47:41
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UNT cost accounting test3
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UNT cost accounting updated flashcards for test 3
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  1. What is a static budget?
    developed at beginning of some period

    • based on
    • *input standards
    • *price standards
    • *expected sales
    • *expected production volume
  2. Describe the static budget revenues.
    expected revenues based on budgeted sales volume

    static budget revenue = budgeted sales volume x budgeted price
  3. Describe the static budget variable costs.
    expected variable costs based on budgeted sales volume

    static budget variable cost = budgeted sales volume x budgeted variable cost per unit
  4. Describe the static budget fixed overhead costs.
    • expected total fixed costs for the year
    • not generally affected by changes in sales volume
  5. What is a standard?
    carefully determine price, cost, or quantity used as benchmark for judging performance
  6. What is a standard quantity of input for direct material?
    expected quantity of direct material used per unit of output
  7. What is a standard input price for direct material?
    expected price paid to purchase direct materials
  8. What is a standard cost of direct material per unit of output?
    expected direct material cost of one unit of output based on price and input standard

    DM cost standard = input standard x price standard
  9. What is a standard quantity of input for direct labor?
    expected quantity of direct labor used per unit of output
  10. What is a standard input price for direct labor?
    expected price paid for each hour of direct labor
  11. What is a standard cost of direct labor per unit of output?
    expected direct labor cost of one unit of output based on price and input standard

    DL cost standard = input standard x price standard
  12. What is a standard quantity of input for variable overhead?
    expected quantity of allocation base used per unit of output
  13. What is the standard input price for variable overhead (variable allocation rate)?
    expected price paid for each unit of allocation base
  14. What is the standard cost of variable overhead per unit of output?
    expected variable overhead cost of one unit of output based on price standard and input standard

    vOH cost standard = input standard x price standard
  15. What is a flexible budget?
    • developed using same standards used to create static budget but based on actual production
    • budget that would have been developed had the actual sales and production output been known
  16. Describe the flexible budget revenues.
    expected revenues based on actual sales volume

    flexible budget revenue = actual sales volume x budgeted price

    static ./. flexible budget revenue = sales activity variance for revenue.
  17. Describe the flexible budget variable costs.
    expected variable costs based on actual sales volume

    flexible budget variable cost = actual sales volume x budgeted variable cost per unit

    = standard price x standard quantity allowed for actual sales volumes

    static ./. flexible budget variable costs = sales activity (or volume) variance for variable costs
  18. Describe the flexible budget fixed overhead costs.
    • expected total fixed costs we expect to incur for the year
    • not generally affected by changes in sales volume
    • equal to static budget fixed costs
  19. Describe the actual revenues.
    actual revenues earned based on actual sales volume

    actual revenue = actual sales volume x actual price

    actual revenues ./. static budget revenues = static budget variance

    actual revenues ./. flexible budget revenues = sales price variance
  20. Describe the actual variable costs.
    actual variable costs incurred based on actual sales volume

    actual variable cost = actual sales volume x actual variable cost per unit
  21. Describe actual fixed overhead costs.
    actual fixed overhead costs incurred during the period

    actual ./. flexible (and static) budget fixed overhead costs = fixed overhead spending variance
  22. What is a variance?
    difference between expected and actual results
  23. Why is it useful to measures and evaluate variances?
    help explain why actual income differs from budgeted income
  24. What makes a variance favorable or unfavorable?
    favorible = more income than budgeted

    unfavorable = less income than budgeted
  25. Are unfavorable variances bad or all favorable variances good?
    No.

    example: favorable variable cost = fewer units sold = bad
  26. What is management by exception?
    A practice where managers focus their attention on understanding and addressing areas that are not operating as expected.
  27. What is a static budget variance?
    actual ./. static budget

    • sales activity variance (static ./. flexible)
    • flexible budget variance (actual ./. flexible)

    • variable manufacturing costs:
    • price variance [(actual - standard price) x actual quantity]
    • efficiency variance [(actual - standard quantity) x standard price]
    • sales activity variance (flexible ./. static)
  28. What is a flexible budget variance?
    = actual ./. flexible

    • variable manufacturing costs:
    • further divided into price and efficiency variance

    flexible + sales activity variance = static budget variance
  29. What is the sales activity variance?
    flexible ./. static

    different sales volume than expected
  30. What is profit variance analysis?
    Analysis of causes of actual budgeted profit
  31. What is cost variance analysis?
    • actual input quantities and prices vs. expected input quantities and prices
    • process of determining price and efficiency variances
  32. What is a price variance?
    actual price vs. budgeted price of an input
  33. What is an efficiency variance?
    actual vs. budgeted quantity of an input
  34. What can cause a material price variance?
    • change in purchase price of the material
    • Example: purchase discount for bulk purchase, higher or lower quality material
  35. What can cause a material efficiency variance?
    • change in input quantity per unit of output
    • Example: better (worse) machines, better (worse) quality material or better (worse) trained labor workers
  36. What can cause a labor price variance?
    • change in average labor wage
    • Example: raises, contract negotiations, new hires
  37. What can cause a labor efficiency variance?
    • change in labor hours to be used per unit of output
    • Example: different machines, different quality material or differently trained labor workers
  38. What can cause a variable overhead spending variance?
    • change in actual variable overhead head rate vs budgeted variable overheadhead
    • Example: different indirect labor cost rates, different utility rates, different indirect labor rates
  39. What can cause a variable overhead efficiency variance?
    • change in usage of cost driver (allocation base) per unit of output
    • Example: if cost driver is labor hours => different machines, different quality material or differently trained labor workers
  40. What can cause a fixed overhead spending variance?
    change in actual vs. budgeted fixed overhead
  41. What can cause a production volume variance?
    actual sales volume differs from budgeted sales volume
  42. What are the assumptions of CVP analysis?
    changes in revenue and costs due to changes in volume

    cost can be separated into fixed and variable costs

    total costs and revenues are linear

    selling price, variable cost per unit, total fixed cost are constant and known
  43. How much does selling a single unit of a product contribute to your fixed cost or operating income?
    The increase will be the contribution margin of that unit.
  44. What is the contribution margin ratio?
    percentage of sales revenue that remains after covering variable costs
  45. What is the breakeven point?
    point where revenues = total costs

    => net income = 0; total contribution margin = fixed costs
  46. What the impact of increasing taxes on the breakeven point?
    no effect (income = 0)
  47. What is the benefit of sale multi-product CVP?
    it allows companies to consider CVP changes when there is more than one product
  48. What additional assumption is required for sale mix?
    there is a constant proportion of sales of one product compared to the other
  49. What is operating leverage?
    • extent to which company's cost structure is made up of fixed costs
    • amount of fixed costs affects break-even point
  50. How does operating leverage affect breakeven point?
    higher fixed cost = higher breakeven point
  51. What does margin of safety in units tell us?
    expected sales volume ./. breakeven sales volume
  52. What does margin of safety in dollars tell us?
    expect sales revenue ./. breakeven sales revenue
  53. Describe the decision model I discussed in class.
    1. Identify the alternative

    2. Determine the best financial alternative

    3. Consider potential qualitative factors
  54. Does the decision model consider quantitative information, qualitative information or both?
    Both
  55. What is a qualitative factor?
    relevant outcomes which are difficult to measure in financial or numerical terms
  56. What is the full cost fallacy?
    incorrect belief that all costs are relevant for all decisions
  57. What is a differential or relevant revenue?
    expected future revenue that differs among alternative courses of action
  58. What is a differential or relevant cost?
    expected future costs that differ among alternative courses of action
  59. What is a sunk cost?
    irrelevant past cost that is unavoidable because they cannot be changed by any course of action
  60. What is an opportunity cost?
    foregone contribution to operating income by not using a resource in its next best alternative use
  61. What criteria should be used when choosing the best sales mix if you have a constraint?
    • demand
    • most profit per unit of the constrained resource

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