Cost Accounting & Management Flashcards
7 cards from real CA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Cost Accounting & Management flashcards as text
A budget that automatically adjusts to reflect the actual level of activity achieved is called a:
Answer: Flexible budget
A flexible budget recalculates budgeted costs at the actual output level, enabling meaningful variance analysis by comparing like-for-like activity.
Which statement about throughput accounting is CORRECT?
Answer: It maximizes the rate at which inventory is converted to sales above material cost
Throughput accounting (Theory of Constraints) focuses on maximizing throughput (sales minus direct material costs) while treating most costs as fixed.
The overhead volume variance measures the difference between:
Answer: Budgeted fixed overhead and absorbed fixed overhead
The volume variance arises because actual production volume differs from budgeted volume, causing under- or over-absorption of fixed overhead.
In joint product costing, the 'net realizable value method' allocates joint costs based on:
Answer: Expected selling price less further processing costs after split-off
The NRV method deducts post-split-off costs from final selling prices to estimate value at the split-off point, then uses those NRVs to allocate joint costs.
A company's break-even point in units will DECREASE if:
Answer: Fixed costs decrease
Fewer units are needed to break even when fixed costs fall, since each unit still contributes the same margin toward a smaller fixed cost burden.
Target costing differs from traditional cost-plus pricing in that it:
Answer: Starts with customer-acceptable price and works backward to determine allowable cost
Target costing begins with the market price customers will pay, subtracts desired profit to derive a target cost, then engineers the product to meet that cost.
Which costing system is MOST appropriate for a law firm tracking time spent on individual client cases?
Answer: Job order costing
Job order costing assigns costs to specific jobs or clients, making it ideal for professional service firms where each engagement has distinct costs.