Managerial & Cost Accounting Flashcards
7 cards from real ABA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Managerial & Cost Accounting flashcards as text
Residual income (RI) is superior to ROI for evaluating investment center managers because RI:
Answer: Encourages managers to accept projects that exceed the minimum required rate of return
RI encourages managers to accept any investment earning above the minimum required rate, while ROI may cause managers to reject profitable projects that would lower their division's existing high ROI.
A favorable sales volume variance in a profit center indicates that:
Answer: Actual units sold exceeded the budgeted quantity
The sales volume variance reflects the impact of selling more or fewer units than planned; favorable means actual volume exceeded the static budget quantity.
Target costing determines the target cost by:
Answer: Subtracting the desired profit margin from the competitive market price
Target cost = competitive selling price − desired profit margin, forcing the design and production team to achieve that cost rather than simply pricing to cover actual costs.
In a responsibility accounting system, a cost center manager is evaluated primarily on:
Answer: Costs incurred relative to budgeted costs
A cost center manager controls costs but not revenue or asset investment, so performance evaluation focuses on cost control relative to the budget.
Which of the following is an example of a batch-level activity in activity-based costing?
Answer: Processing a purchase order for a production run
Batch-level activities are performed once per batch regardless of the number of units; processing a purchase order for a production run is a classic batch-level example.
The spending variance for variable overhead equals:
Answer: (Standard rate − Actual rate) × Actual hours worked
The variable overhead spending variance compares what was actually paid per hour to the standard rate, multiplied by actual hours worked, isolating price differences in overhead costs.
A company evaluating whether to process a joint product further beyond the split-off point should proceed if:
Answer: Incremental revenue from further processing exceeds incremental processing costs beyond the split-off point
The sell-or-process-further decision requires that incremental revenue from further processing exceed the incremental costs of that processing; joint costs are sunk and irrelevant.