Managerial & Cost Accounting Flashcards

A company uses activity-based costing (ABC). Which of the following is an activity cost driver for a machine setup activity?

Answer: Number of setups

In ABC, setup costs are driven by the number of setups performed, not by volume-based measures like machine or labor hours.

Under variable costing, fixed manufacturing overhead is treated as a:

Answer: Period cost expensed in the current period

Variable costing treats fixed manufacturing overhead as a period cost, expensing it in full in the period incurred rather than attaching it to inventory.

The contribution margin ratio equals:

Answer: Contribution margin divided by sales

The contribution margin ratio (CMR) is contribution margin (sales minus variable costs) divided by sales, showing the portion of each sales dollar available to cover fixed costs.

When actual overhead exceeds applied overhead, the manufacturing overhead account has a:

Answer: Debit balance indicating under-applied overhead

A debit balance in manufacturing overhead means actual costs exceeded what was applied to production, resulting in under-applied overhead.

In a standard cost system, a favorable direct labor efficiency variance results when:

Answer: Standard hours allowed exceed actual hours worked

A favorable labor efficiency variance occurs when actual hours used are less than the standard hours allowed for actual output, meaning workers were more efficient than expected.

Which costing method is most appropriate for a custom furniture manufacturer producing unique items per customer order?

Answer: Job-order costing

Job-order costing accumulates costs for each unique job or customer order, making it ideal for customized production environments.

The margin of safety is best defined as:

Answer: The excess of actual or budgeted sales over breakeven sales

The margin of safety measures how far sales can decline before the company reaches breakeven, calculated as actual sales minus breakeven sales.