Flexible Budgets‚ and Absorption/Variable Costing Questions 1. Although both variable and mixed costs change in total with activity measure changes‚ the difference is that variable costs change in direct proportion to such activity changes and mixed costs do not. Since a mixed cost has both a fixed and variable component‚ the cost per unit at different activity levels is not constant as it is with a variable cost. 2. No‚ these are not always the best points of observation. First‚ the points must be within
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Chapter 4 Cost-Volume-Profit Analysis QUESTIONS 1. A mixed cost is a cost that has a fixed cost component and a variable cost component. For example‚ the amount paid for telecommunication services would be a mixed cost if there was a fixed monthly fee plus a charge for use. 2. Discretionary fixed costs are those fixed costs that management can easily change in the short-run (e.g.‚ advertising). Committed fixed costs are those fixed costs that cannot be easily changed in the short-run
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that drives costs at Salem Data Services. Which expenses in Exhibit 2 are variable with respect to revenue hours? Which expenses are fixed with respect to revenue hours? Expenses Spase costs: Rent Fixed cost1 Custodial services Fixed cost2 Equipment costs Computer leases Fixed cost3 Maintenance Fixed cost4 Depreciation: Computer equipment Fixed cost5 Office equipment and fixtures Fixed cost5 Power Variable cost6 Wages and salaries Operations: salaried staff Fixed cost7 Operations:
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Questions 1. What is the meaning of cost behavior and how does the variable cost behave differently than fixed cost (per unit & total)? Cost behavior is the change of cost relative to change in some extent of activity. The total fixed cost remains constant regardless of change in the volume of activity. However‚ the fixed cost per unit is inversely related to the change in the volume of activity. As the change in the volume of activity increases‚ the fixed cost per unit decreases‚ and as the change
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of accumulated costs to a cost object is: a. cost accumulation b. cost assignment c. cost tracing d. conversion costing 1 Quick Check 2 (Topic 1) 2. The determination of a cost as either direct or indirect depends upon the: a. accounting system b. allocation system c. cost tracing system d. cost object chosen 2 Quick Check 3 (Topic 1) 3. Which one of the following items is a direct cost? a. Customer-service costs of a multiproduct firm; Product A Customeris the cost object. b. Printing
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CHAPTER 1 Managerial Accounting and Cost Concepts ___________________________________________________________________________________ ______ Costs are split into two groups: Manufacturing Costs Nonmanufacturing Costs Manufacturing Costs: Direct Materials - Materials that go into the final product Direct Labor - Labor costs that can be traced into parts of the product Manufacturing Overhead - all manufacturing costs except direct materials/labor ‚ such as Indirect Materials‚ Indirect Labor
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________________________ 1. Direct material costs are generally variable costs. True False 2. Property taxes and insurance premiums paid on a factory building are examples of manufacturing overhead. True False 3. Manufacturing overhead combined with direct materials is known as conversion cost. True False 4. All costs incurred in a merchandising firm are considered to be period costs. True False 5. Depreciation is always considered a product cost for external financial reporting purposes in a
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volume levels Setting prices Allocation of indirect costs Deciding whether to use a fixed or flexible budget Question 3.3. (TCO 4) Effectiveness is a relationship between: Outputs and organizational goals Inputs and outputs Inputs and organizational goals None of the above. Question 4.4. (TCO 3) Estimate the total variable cost (i.e.‚ including both routine and ancillary) per MSDRG 505 using the departmental cost/charge ratios and variable cost percentages. (Your answer might be slightly different
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Data Service (the subsidiary) on the status quo revenues and costs‚ a prediction on its break even situation‚ as well as possible options to increase profit. The report has its limitations due to insufficient detailed information on both other revenues and variable costs of Prestige Data Service. But under certain consumptions and calculation methods‚ as applied in the report‚ we can still figure out the optimal solutions. Revenues‚ costs and profits are expressed in terms of the company’s output
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1. Selling costs can be either direct or indirect costs. TRUE 2. A direct cost is a cost that cannot be easily traced to the particular cost object under consideration. FALSE 3. Property taxes and insurance premiums paid on a factory building are examples of period costs. FALSE 4. Conversion cost equals product cost less direct labor cost. FALSE 5. Thread that is used in the production of mattresses is an indirect material that is therefore classified as manufacturing overhead. TRUE 6.
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