Managerial Accounting & Budgeting Flashcards

A company has fixed costs of $120,000, variable costs of $8 per unit, and sells each unit for $20. What is the break-even point in units?

Answer: 10,000 units

Break-even units = Fixed costs / (Selling price - Variable cost) = $120,000 / ($20 - $8) = 10,000 units.

Which budgeting approach builds the budget from zero each period, requiring justification for every expenditure?

Answer: Zero-based budgeting

Zero-based budgeting starts from a 'zero base' each period, requiring managers to justify all expenses rather than simply adjusting prior-year figures.

In a standard costing system, an unfavorable direct labor efficiency variance means:

Answer: More hours were worked than the standard allowed

Labor efficiency variance is unfavorable when actual hours worked exceed standard hours allowed for the actual output produced.

The master budget's starting point in a manufacturing company is typically the:

Answer: Sales budget

The sales budget is prepared first because all other budgets—production, materials, labor, and overhead—depend on projected sales volume.

Which cost behavior pattern remains constant in total but varies per unit as production volume changes?

Answer: Fixed cost

Fixed costs remain constant in total regardless of volume, so the per-unit cost decreases as more units are produced.

Under absorption costing, which of the following is included in product cost but excluded under variable costing?

Answer: Fixed manufacturing overhead

Absorption costing treats fixed manufacturing overhead as a product cost, while variable costing treats it as a period cost expensed immediately.

A flexible budget differs from a static budget in that a flexible budget:

Answer: Adjusts revenues and costs to the actual activity level

A flexible budget recalculates expected revenues and costs based on actual output achieved, enabling more meaningful variance analysis.