# Shared Flashcard Set

## Details

Test 2
review
53
Accounting
10/16/2013

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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