CAA Cost Accounting & Management Flashcards

Under activity-based costing (ABC), what is the primary driver for assigning overhead costs to products?

Answer: Activities that cause costs to be incurred

ABC assigns overhead based on the activities (and their cost drivers) that actually cause costs, providing more accurate product costing.

The difference between budgeted fixed overhead and applied fixed overhead is called the:

Answer: Volume variance

The fixed overhead volume variance measures the difference between budgeted fixed overhead and the overhead applied based on standard hours for actual output.

Which of the following is NOT a characteristic of process costing?

Answer: Each job has a separate cost record

Separate cost records per job is a feature of job-order costing; process costing accumulates costs by department across all units.

In CVP analysis, the margin of safety represents:

Answer: The excess of budgeted sales over breakeven sales

Margin of safety = Budgeted (or actual) sales − Breakeven sales, showing how much sales can drop before losses occur.

Which inventory valuation method typically results in lower taxable income during periods of rising prices?

Answer: LIFO

LIFO assigns the most recent (higher) costs to cost of goods sold, resulting in lower net income and lower taxable income during inflationary periods.

A cost that has already been incurred and cannot be recovered regardless of future decisions is called a:

Answer: Sunk cost

Sunk costs are past costs that are irrelevant to future decisions because they cannot be changed or recovered.