Cost Accounting and Budgeting Flashcards

A company has fixed costs of $120,000 and a contribution margin per unit of $30. What is the break-even point in units?

Answer: 4,000 units

Break-even units = Fixed costs ÷ Contribution margin per unit = $120,000 ÷ $30 = 4,000 units.

Under variable costing, which of the following is included in product cost?

Answer: Variable manufacturing overhead

Under variable (direct) costing, only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—are included in product cost.

The difference between the static budget and the flexible budget at the actual level of activity is known as the:

Answer: Sales volume variance

The sales volume variance (or activity variance) measures the effect of the difference between actual and budgeted activity levels on revenues and costs.

Which of the following is an example of a committed fixed cost?

Answer: Depreciation on factory building

Committed fixed costs arise from decisions about long-term investments, such as depreciation on buildings and equipment, which cannot easily be changed in the short run.

In a process costing system, equivalent units of production are used to:

Answer: Measure the productive output of partially completed units

Equivalent units convert work-in-process into a measure of fully completed units, enabling cost per unit calculations when production is partially complete.

A favorable direct labor efficiency variance indicates that:

Answer: Fewer labor hours were used than the standard hours allowed

A favorable labor efficiency variance means actual hours worked were less than the standard hours allowed for actual production, indicating efficient use of labor.

Which budget is used to plan for the acquisition of long-term assets such as equipment and facilities?

Answer: Capital expenditure budget

The capital expenditure budget plans for purchases of long-term assets and is a key component of the financial budget within the master budget.