Cost Accounting and Budgeting Flashcards
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Read the first 7 Cost Accounting and Budgeting flashcards as text
A company uses activity-based costing (ABC). Which of the following best describes a cost driver in ABC?
Answer: A factor that causes costs to change in an activity cost pool
A cost driver is a factor that causes the costs of an activity to change, and it is used to allocate costs from a cost pool to products or services.
Under a flexible budget, if actual production exceeds the budgeted production level, what happens to the variable cost budget?
Answer: It increases proportionally
Under a flexible budget, variable costs increase proportionally with production volume, so a higher output level results in a higher variable cost budget.
Which costing method is most appropriate when products are unique and produced to customer specifications?
Answer: Job order costing
Job order costing is used when products are custom-made or produced in distinct batches, allowing costs to be tracked per individual job.
The contribution margin ratio is calculated as:
Answer: Contribution margin divided by total sales revenue
The contribution margin ratio equals contribution margin (sales minus variable costs) divided by total sales revenue, expressing the percentage of each sales dollar available to cover fixed costs.
A master budget typically begins with which of the following budgets?
Answer: Sales budget
The master budget starts with the sales budget because all other operating budgets—production, materials, labor—are driven by projected sales volume.
In standard costing, a favorable direct materials price variance means:
Answer: Materials were purchased at a lower price than the standard price
A favorable direct materials price variance occurs when the actual purchase price of materials is less than the standard (budgeted) price per unit.
Which of the following costs would be classified as a period cost under absorption costing?
Answer: Selling and administrative expenses
Under absorption costing, selling and administrative expenses are period costs expensed in the period incurred, while manufacturing costs are inventoriable product costs.