CFM Cost Accounting & Management Flashcards
6 cards from real CFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CFM Cost Accounting & Management flashcards as text
What is the purpose of a flexible budget in cost management?
Answer: To adjust budgeted costs to the actual production volume achieved, enabling meaningful variance analysis
A flexible budget recalculates budgeted costs at the actual volume attained, isolating spending efficiency from volume differences for more relevant performance evaluation.
Which method allocates service department costs to production departments based on how much each department uses those services?
Answer: Reciprocal method
The reciprocal method is the most accurate service department cost allocation method because it recognizes the mutual services exchanged between service departments.
When making a make-or-buy decision, which costs are relevant?
Answer: Incremental costs to make versus the purchase price plus avoidable internal costs
Only differential (incremental) costs matter: compare the full cost to buy with the variable costs to make plus any avoidable fixed costs to identify the more economical option.
A product has a selling price of $50, variable cost of $30, and there is a constraint of 1,000 machine hours. The product uses 2 machine hours each. What is the contribution margin per constraint unit?
Answer: $10
Contribution margin per unit = $50 - $30 = $20; per machine hour = $20 / 2 hours = $10 per machine hour.
What is 'throughput costing' (also known as super-variable costing)?
Answer: A method that treats all costs except direct materials as period costs
Throughput costing, rooted in the Theory of Constraints, treats only direct materials as product costs and expenses all labor and overhead immediately, focusing on throughput contribution.
Target costing works by:
Answer: Starting with the market price, subtracting desired profit, and engineering the product to meet the cost target
Target costing begins with the market-driven selling price, deducts the required profit margin, and sets the resulting figure as the maximum allowable product cost to engineer toward.