Management Accounting Techniques Flashcards

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

Answer: Warehouse rental that doubles when a second warehouse is required

Stepped fixed costs remain constant within a range but increase in steps when activity exceeds a certain level, such as needing an additional warehouse.

In variance analysis, the sales volume variance measures the difference between:

Answer: Budgeted and actual units sold, valued at standard profit or contribution

The sales volume variance = (Actual sales volume − Budgeted sales volume) × Standard profit per unit (absorption) or standard contribution (marginal).

A budget that is updated continuously by adding a new period as each period ends is called a:

Answer: Rolling budget

A rolling (or continuous) budget always covers a set period ahead by dropping the most recent period completed and adding a new future period.

The transfer price that maximizes overall group profit when there is no external market for the intermediate product is:

Answer: Marginal cost of the supplying division

When no external market exists, transferring at marginal (variable) cost ensures the buying division makes decisions in the group's best interest.

Target costing sets the product cost as:

Answer: Target selling price minus desired profit margin

Target cost = Target selling price − Required profit, so the company must design or re-engineer the product to meet this cost.

Which of the following correctly describes a favorable fixed overhead volume variance?

Answer: Actual output was greater than budgeted output

The fixed overhead volume variance is favorable when actual production volume exceeds budgeted production, absorbing more overhead than planned.

In throughput accounting, Return per Factory Hour (RPFH) is calculated as:

Answer: Throughput per unit ÷ Time on bottleneck resource per unit

RPFH = (Selling price − Material cost) per unit ÷ Time required on the bottleneck resource per unit.