Managerial & Cost Accounting Flashcards
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Read the first 7 Managerial & Cost Accounting flashcards as text
Joint costs are best allocated using which method when the goal is to avoid showing a loss at the split-off point for any product?
Answer: Constant gross margin percentage NRV method
The constant gross margin percentage NRV method allocates joint costs so that every joint product earns the same gross margin percentage, preventing any product from showing a loss at the split-off point.
A company uses a plantwide overhead rate based on direct labor hours. Compared to departmental rates, this approach is most likely to:
Answer: Distort product costs when departments have different overhead intensities
A single plantwide rate can distort product costs when different departments have vastly different cost structures, causing some products to be over-costed and others under-costed.
In a make-or-buy decision, which cost should be excluded from the analysis?
Answer: Sunk costs related to equipment already purchased
Sunk costs have already been incurred and cannot be recovered regardless of the decision, so they are irrelevant to the make-or-buy analysis.
The static budget variance equals:
Answer: Actual results minus static budget amounts
The static budget variance is the total difference between actual results and the original (static) budget, combining both the flexible budget variance and the sales volume variance.
Which of the following best describes 'kaizen costing'?
Answer: Continuous incremental cost reduction during the production phase
Kaizen costing focuses on continuous small improvements to reduce costs after a product is already in production, distinguishing it from target costing which addresses costs before production.
Under the FIFO method of process costing, the equivalent units of production include:
Answer: Only work done in the current period: completing beginning WIP, starting and finishing new units, and starting ending WIP
FIFO equivalent units include only current-period work: the work needed to finish beginning WIP, units started and completed, and the work done so far on ending WIP.
Return on investment (ROI) in a responsibility accounting context is calculated as:
Answer: Operating income divided by average operating assets
ROI for an investment center equals operating income divided by average operating assets, measuring how effectively the segment uses its asset base to generate profit.