Accounting Technician Budgeting & Cost Control Flashcards

A company's break-even point in units is calculated by dividing fixed costs by:

Answer: Contribution per unit

Break-even point (units) = Total fixed costs ÷ Contribution per unit, because each unit sold must contribute enough to cover fixed costs before profit is earned.

A rolling (continuous) budget is one that:

Answer: Is updated monthly by adding a new period as the most recent period passes

A rolling budget is continuously updated by adding a new future period (e.g., month or quarter) as each current period ends, maintaining a constant planning horizon.

Which variance would be calculated by comparing actual material usage with the standard usage for actual production?

Answer: Material usage variance

Material usage variance = (Standard quantity for actual production − Actual quantity used) × Standard price per unit.

Responsibility accounting requires that managers are held accountable for:

Answer: Only those costs and revenues within their control

Responsibility accounting holds managers accountable only for controllable items within their area of authority, making performance evaluation fair and meaningful.

A profit center differs from a cost center because a profit center:

Answer: Is responsible for both revenues and costs

A profit center manager controls both the costs and revenues of their unit, whereas a cost center manager is only responsible for controlling costs.

The margin of safety represents:

Answer: The excess of budgeted sales over break-even sales

The margin of safety = Budgeted (or actual) sales − Break-even sales, showing how much sales can fall before the business makes a loss.

In a standard costing system, an adverse fixed overhead volume variance indicates that:

Answer: Actual production was lower than budgeted production

An adverse fixed overhead volume variance arises when actual output is less than budgeted output, so less overhead is absorbed than planned.