Cost Accounting & Management Flashcards

A company is evaluating whether to drop a product line. Which of the following would make dropping the line most justifiable?

Answer: The product's segment margin is negative

A negative segment margin means the product cannot cover its own avoidable fixed costs, making it a candidate for elimination.

Which of the following statements about weighted-average process costing is correct?

Answer: It merges beginning WIP costs with current period costs

Weighted-average process costing blends beginning WIP costs with current period costs to compute a single average cost per equivalent unit.

Kaizen costing differs from standard costing in that it:

Answer: Focuses on continuous cost reduction targets during production

Kaizen costing sets ongoing reduction targets for current production processes rather than fixed standards established annually.

An unfavorable labor efficiency variance indicates that:

Answer: More hours were worked than the standard hours allowed for actual output

Labor efficiency variance = (Actual hours − Standard hours allowed) × Standard rate; an unfavorable result means excess hours were used.

Target costing starts with:

Answer: A market-driven selling price and subtracts the required profit margin

Target costing derives the allowable cost by subtracting the target profit margin from the competitive market price.

Which of the following is NOT a component of the cost of quality?

Answer: Opportunity costs of excess capacity

The four standard quality cost categories are prevention, appraisal, internal failure, and external failure — opportunity costs of excess capacity are not included.

Life cycle costing is valuable for decision-making because it:

Answer: Considers all costs from design through disposal

Life cycle costing captures total costs over a product's entire life — R&D, design, production, marketing, and post-sale support.