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Cost Behavior and Cost-Volume Relationships
Cost behavior: How costs change with the change in the level
of activities (volume).
Cost driver: is any factor that causes or drives an activitys
Variable, Fixed, and Mixed Costs:
Measurement of Cost Behavior
Accountants and managers assume that cost behavior is linear
over some relevant range of activities or change in cost drivers.
Two types of costs combine characteristics of both fixed and
variable cost behavior.
Management Control Systems and Responsibility
The foundation for control is the planning process. The
outcome of planning provides the basis for control.
Management Control System (MCS) - a logical
integration of management accounting
Accounting 202- Solution to Sample Question Chapter 3
3- Variable cost per unit = 440,000/110,000 = $4 per unit
Next year expected variable cost: 115,000 *4=$460,000
4- Fixed cost is constant for the relevant range of production at $200,000. Since next ye
Job Costing and Process-Costing Systems
Distinction Between Job-Order Costing and Process Costing
Job-Order Costing - allocates costs to products that are readily
identified by individual units or batches (e.g., construction,
Management Control in Decentralized Organizations
Decentralization - the delegation of decision-making authority to
managers throughout an organization.
The lower in the
organization that this freedom exists, the greater the degree of
Accounting for Overhead Costs
How to Apply Factory Overhead to Products
Few companies wait until the actual factory overhead is
finally known before computing the costs of products.
Instead, they compute a budgeted (predetermined)
Accounting 202-Solution to Sample Questions Chapter 5
6) Direct Material 3 is relevant because it is a future cost and different for both products. Other costs are
not relevant because even though they all are future costs but they are the same for both p
Accounting 202- Chapter 6-Detailed solution to sample question
5) Since the $4 fixed cost is unavoidable, and then if Bird company buy the parts, they still have to pay
for the fixed cost. Therefore, the highest price is the sum of all avoidabl
Accounting 202- Detailed solution to chapter 2 sample questions
5- Total fixed cost = 4000 + 6000 = $ 10,000 this fixed cost does not changed unless the problem tell you
it does. Next year total cost = Fixed cost + Total Variable cost = Fixed cost + (vari
Accounting 202- Solution to Sample Questions- Chapter 7
11) .95*100*31*150= $441,750
+ Target Ending
Total units required
Units to be produced
Cost of goods sold = .35 of the sale
Relevant Information for Decision Making with a Focus on Operational
It is the maximum available contribution to profit forgone (i.e., rejected) by using limited
resources for a particular purpose.
It is the sacrif
Flexible Budgets and Variance Analysis
Using Budgets to Evaluate Actual Results
Favorable Cost Variance - actual costs are less than budgeted costs.
Favorable (F) versus Unfavorable (U) Variances
Actual > Expected
Introduction to Budgets and the
Budget - a condensed business plan for the forthcoming year (or less).
Budget a plan expressed in quantitative terms.
The most important functions of budgets are for planning, performance evaluation,
Cost Management Systems and
A collection of tools and techniques that identifies
how management's decisions affect costs.
The primary purposes of a cost management
1.To provide cost information
Managerial Accounting, the Business Organization, and
Accounting: Is the process of identifying, measuring and
communicating economic information to permit informed
judgments and decisions by users of the information.
Relevant Information for Decision Making with a Focus on Pricing
Information is relevant when:
It is future-oriented, and
It differs between the alternatives available to the decision-maker.
These criteria apply