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Test 2
review
53
Accounting
Undergraduate 2
10/16/2013

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Cards

Term
Incremental analysis is an analytical approach that focuses only on those revenues and costs that will change as a result of a decision
Definition
true
Term
On a Cost Volume Profit graph for a profitable company, the total expense line will be steeper than the line representing fixed costs
Definition
true
Term
the variable expense per unit $12 and the selling price per unit is $40 then the CM ratio is 70%
Definition
true
Term
if a company reduces variable expenses by $20 but increases fixed expenses by $10,000, the break even point will (increase/decrease)
Definition
decrease
Term
the total volume in sales dollars that would be required to attain a given target profit is determined by dividing the sum of the fixed expenses and the target profit by the contribution margin ratio
Definition
true
Term
the break even point in units can be obtained by dividing total fixed espenses by the cm ratio
Definition
false
Term
if the fixed expenses increase in a company, and all other factors remain unchanged, then one would expect the margin of safety to decrease
Definition
true
Term
if two companies produce the same product and ahve the same total sales and the same total expenses, operating leverage will be lower in the company with a higher proportion of fixed expenses in its cost structure
Definition
false
Term
a shift in the sales mixfrom products with a low cm ratio toward products with a high cm ratio will lower the break even point in a company as a whole
Definition
true
Term
a company sells a product for $25. The variable expense per unit is $15 and the fixed expense per unit is $5. The company's net operating income will increase by $5 if one more unit is sold
Definition
false
Term
under variable costing, all variable costs are treated as product costs
Definition
false
Term
under variable costing, fixed manufacturing overhead cost is treated as a product cost
Definition
false
Term
the unit product cost under absorption costing does not include fixed manufacturing overhead cost
Definition
false
Term
Variable manufacturing overhead costs are treated as period costs under both absorption and variable costing
Definition
false
Term
When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs deferred in inventory under absorption costing should be added to variable costing net operating income to arrive at the absorption costing net operating income
Definition
true
Term
When production is less than sales for the period, absorption costing net operating income will generally be less than variable costing net operating income
Definition
true
Term
absorption costing is more compatible with CVP analysis than is variable costing
Definition
false
Term
contribution margin and segment margin mean the same thing
Definition
false
Term
assuming that a segment has both variable expenses and traceable fixed expenses, an increase in sales should increase profits by an amount equal to the sales times the segment margin ratio
Definition
false
Term
the salary of the treasurer of a corporation is an example of a common cost which normally cannot be traced to product segments
Definition
true
Term
the salary paid to a store manager is a traceable fixed expense of the store
Definition
true
Term
segmented statements for internal use should be prepared in the contribution format
Definition
true
Term
fixed costs that are traceable to a segment may become common if the segment is divided into smaller units
Definition
true
Term
the cm is viewed as a better gauge of the long run profitability of a segment than the segment margin
Definition
false
Term
in responsibility accounting, each segment in an organization should be charged with the costs for which it is responsible and over which it has control plus its share of common organizational costs
Definition
false
Term
the cm tells us what happens to profits as volume changes if a segment's capacity and fixed costs change as well
Definition
false
Term
only those costs that would disappear over time if a segment were eliminated should be considered traceable costs of the segment
Definition
true
Term
in segment reporting, sales dollars is usually an appropriate allocation base for selling, general, and administrative expenses
Definition
false
Term
a segment is any portion or activity of an organization about which a manager seeks revenue, cost, or profit data
Definition
true
Term
Unit level activities are performed each time a unit is produced
Definition
true
Term
organization sustaining activities are activities of the general organization that support specific products
Definition
false
Term
costs classified as batch level costs should depend on the number of batches processed rather than on the number of units produced, the number of units sold, or other measures of volume
Definition
true
Term
Customer level activities relate to specific customers and are not tied to any specific products
Definition
true
Term
managing and sustaining product diversity requires many more overhead resources such as production schedulers and product design engineers than managing and sustaining a single product. the costs of these resources can be accurately allocated to products on the basis of direct labor hours
Definition
false
Term
Activity based costing is a costing method that is designed to provide managers with product cost information for (external/internal) financial reports
Definition
internal
Term
transaction drivers usually take (more/less) effort to record than duration drivers
Definition
less
Term
in general, duration drivers are more accurate measures of the consumption of resources than transaction drivers
Definition
true
Term
even departmental overhead rates will not correctly assign overhead costs in situations where a company has a range of products that differ in volume, lot size, or complexity of production
Definition
true
Term
in activity based costing, some manufacturing costs may be excluded from product costs
Definition
true
Term
in activity based costing, there are a number of activity cost pools, each of which is allocated to products and other costing objects using its own unique measure of activity
Definition
true
Term
the practice of assigning the costs of idle capacity to products can result in unstable unit product costs
Definition
true
Term
an activity based costing system should include all of the activities carried out in an organization because any simplification will inevitable result in inaccuracy
Definition
false
Term
the costs of a particular department should not be split up among activity cost pools in an activity based costing system
Definition
false
Term
absorption costing
Definition
a costing method that includes all manufacturing costs
Term
common fixed cost
Definition
fixed cost that supports more than one business segment, but not traceable in whole or in part to any one of the business segments
Term
segment
Definition
any part or activity of an organization about which managers sekk cost, revenue, or profit data
Term
segment margin
Definition
a segment's contribution margin less its traceable fixed costs. it represents the margin available after a segment has covered all of its own traceable costs
Term
traceable fixed cost
Definition
a fixed cost that is incurred because of the existence of a particular business segment and that would be eliminated if the segment were eliminated
Term
variable costing
Definition
a costing method that includes only variable manufacturing costs- direct materials, direct labor , and variable manufacturing overhead- in unit product costs
Term
sales mix
Definition
the relative proportions in which a company's products are sold. computed by expressing the sales of each product as a percentage of total sales
Term
target profit analysis
Definition
estimating what sales volume is needed to achieve a specific target profit
Term
variable expense ratio
Definition
a ratio computed by dividing variable expenses by dollar sales
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