Chapter 08 - Absorption and Variable Costing
Absorption and Variable Costing
ANSWERS TO REVIEW QUESTIONS
Under absorption costing, fixed manufacturing-overhead costs are assigned to units
of product as product costs. Under variable costing,
Inventoriable costs are expensed when incurred.
Finished goods inventory is ordinarily held for sale by a manufacturing company.
Indirect labor is not a component of manufacturing overhead.
Fixed manufacturing overhead is not inventoried under absorption costing.
Variable manufacturing overhead becomes part of a unit's cost when variable costing is used.
Absorption costing is required for tax pu
Variable costs change in direct proportion to a change in the activity level.
The relevant range is that range of activity where a company achieves its maximum efficiency.
The least-squares regression method
1. Controlling involves the coordination of daily business functions within an organization.
2. Measuring the performance of managers and subunits is not an objective of managerial accounting.
3. Middle-level man
In an activity-based costing system, direct materials used would typically be classified as a unit-level
Activity-based costing systems have a tendency to distort product costs.
Consumption ratios are u
A cost center manager does not have the ability to produce revenue.
Performance reports help managers use management by exception and effectively control operations.
An allocation base for a cost pool should
The break-even point is that level of activity where total revenue equals total cost.
The contribution-margin ratio is calculated as unit contribution margin divided by the selling price per
The comprehensive set of budgets that serves as a company's overall financial plan is commonly known
as the financial budget.
A company's sales forecast would likely not consider general economic and industry trends.
Variances are computed by taking the difference between the product cost and standard cost.
Normal defect rates in an assembly process would be considered if a company desires to establish a series
of practical manufacturi
The direct method ignores the fact that some service departments provide service to other service
When allocating service department costs, companies should use actual costs rather than budgeted costs,
The internal rate of return equates the present value of a project's cash inflows with the present value of
the cash outflows.
When income taxes are considered in capital budgeting, the cash flows related to a company's ad
The revenue curve shows the relationship between the sales price and quantity sold.
If a company uses a cost-plus approach to pricing, it will find that there are several different definitions of
cost and the higher the co
Flexible budgets reflect a company's anticipated costs based on variations in activity levels.
A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed
manufacturing overhead of $120
A division's return on investment may be improved by increasing sales margin and cost of capital.
Economic value added uses a firm's weighted-average cost of capital.
The income calculation for a division man
The concept of a relevant cost can be defined as a past cost that differs among alternatives.
The City of Columbus should not consider the purchase price of its old vehicle when making the decision
to replace it with a mor
by Tour Buses
1. Variable cost per tour mile traveled and fixed cost per mo
10000 medals per month
7500 medals per month
Price per medal
Total Variable Costs
Overhead cost per machine hour
Fixed Manufacturing overhead
Machine Hours Limit
Cost if purchased from outside supplier
Annual Demand (units)
Chapter 13 - Investment Centers and Transfer Pricing
Investment Centers and Transfer Pricing
ANSWERS TO REVIEW QUESTIONS
The managerial accountant's primary objective in designing a responsibilityaccounting system is to provide incentives
German Selling price of final product
Shipping fees to import circuit board
Labor, overhead, and additional material costs of final product
Import duties levied on circuit board
German Tax Rate
10% (of transfer price)
Cost of Debt Capital
Cost Equity Capital
(numbers in millions)
Market Value of Debt
Market Value of Equity
Current Liabilities Before Tax Operat
(All numbers in thousands)
Ending Balance 12/31/x1
Increase since last year
Cost of Goods Sold
Income from operations before income taxes
Chapter 12 - Responsibility Accounting, Quality Control and Environmental Cost Management
Responsibility Accounting, Quality Control and
Environmental Cost Management
ANSWERS TO REVIEW QUESTIONS
Goal congruence results when the managers of
Water and sewer
Cable TV and phone
Less Sales Commission
Income before Taxes
Total Product Cost
Manufacturing overhead is applied per standard direct-labor hour at the following rate:Add'l
Economy of Scope
A firms success in sharing a resource among two or more of its products
When the company can leverage a resource or value chain activity across more than one
product, service, or geographic area
Relates to cutting costs
Average Cost (X,Y)
Brent, who had just graduated eight months ago with his Masters degree worked with a
large accounting firm in Portland. Aside from Brent just retrieving his masters, he also got married ten months ago, and is having problems at the house. Brent and his wi
This is a case between two corporations, Bankers Trust and Procter & Gamble.Bankers
Trust is a leading seller of complex derivatives, and P&G become one of their clients due to the