CCA Cost Accounting & Management Flashcards

Which costing method assigns manufacturing overhead to products based on the activities that drive costs?

Answer: Activity-based costing (ABC)

Activity-based costing assigns overhead using multiple cost drivers tied to specific activities, giving a more accurate picture of product costs.

A company has fixed costs of $120,000, a selling price of $40 per unit, and variable costs of $25 per unit. What is the break-even point in units?

Answer: 8,000 units

Break-even = Fixed Costs ÷ Contribution Margin per unit = $120,000 ÷ ($40 – $25) = 8,000 units.

Under absorption costing, which of the following is treated as a product cost?

Answer: Fixed manufacturing overhead

Absorption costing includes both variable and fixed manufacturing overhead as product costs, unlike variable costing.

What does a favorable materials price variance indicate?

Answer: Material was purchased at less than standard price

A favorable materials price variance means the actual price paid for materials was lower than the standard price.

Which of the following is a characteristic of a joint cost?

Answer: It is incurred before the split-off point in producing multiple products

Joint costs arise from a single production process that simultaneously produces two or more products before the split-off point.

Which inventory valuation method results in the highest net income during a period of rising prices?

Answer: FIFO

FIFO assigns the oldest (lowest) costs to cost of goods sold, leaving the highest-cost items in ending inventory, resulting in higher net income when prices rise.