Management Accounting Techniques Flashcards

A company has fixed costs of $120,000 and a contribution margin ratio of 40%. What is the breakeven point in sales revenue?

Answer: $300,000

Breakeven sales = Fixed costs ÷ Contribution margin ratio = $120,000 ÷ 0.40 = $300,000.

Which costing method treats fixed production overheads as period costs rather than product costs?

Answer: Marginal costing

Marginal costing charges fixed production overheads entirely to the period in which they are incurred, not to products.

In a standard costing system, a favorable material usage variance means:

Answer: Less material was used than the standard allowed

A favorable material usage variance occurs when actual material consumed is less than the standard quantity allowed for actual output.

A company uses throughput accounting. Which cost is treated as a 'totally variable cost'?

Answer: Direct materials

In throughput accounting, only direct materials are considered truly variable; labor and overheads are treated as fixed operating expenses.

What does the term 'life cycle costing' refer to in management accounting?

Answer: Tracking costs across all stages from design to disposal

Life cycle costing accumulates and manages costs across all phases: design, development, production, marketing, and disposal.

Under activity-based costing, a cost driver is best described as:

Answer: A factor that causes changes in the cost of an activity

A cost driver is any factor whose change causes a corresponding change in the total cost of a related cost pool or activity.

A product has a selling price of $50, variable cost of $30, and the company faces a shortage of machine hours. To maximize profit, management should rank products by:

Answer: Contribution per machine hour

When a single resource is scarce, products should be ranked by contribution per unit of the limiting factor (machine hour).