Manufacturing Cost Analysis Flashcards
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Read the first 7 Manufacturing Cost Analysis flashcards as text
Kaizen costing focuses on:
Answer: Continuous incremental cost reduction during the production phase
Kaizen costing emphasizes continuous, small-step cost improvements during manufacturing rather than redesigning the product.
When a manufacturer operates below full capacity, the opportunity cost of idle capacity is best described as:
Answer: The contribution margin lost from potential units not produced
Idle capacity opportunity cost is the contribution margin foregone on units that could have been produced and sold if capacity were fully utilized.
A company with $500,000 in fixed costs and a contribution margin ratio of 25% has a break-even point in sales of:
Answer: $2,000,000
Break-even in sales = Fixed costs / CM ratio = $500,000 / 0.25 = $2,000,000.
Which method of overhead allocation uses a single rate applied to all products based on one plantwide driver such as direct labor hours?
Answer: Plantwide overhead rate method
The plantwide overhead rate method uses one company-wide rate (e.g., per direct labor hour) applied to all products, which can distort costs when products consume overhead differently.
In standard costing, a favorable overhead efficiency variance suggests that:
Answer: Fewer machine hours were used than the standard hours allowed for actual production
A favorable overhead efficiency variance means operations used fewer activity hours (e.g., machine hours) than the standard allowed, indicating efficient resource use.
Life-cycle costing in manufacturing accounts for:
Answer: All costs from product design through customer support and disposal
Life-cycle costing captures total cost of ownership including R&D, design, production, marketing, distribution, service, and end-of-life disposal.
If actual material used is 5,200 lbs and standard quantity allowed for actual production is 5,000 lbs at a standard price of $3/lb, the material usage variance is:
Answer: $600 unfavorable
Material usage variance = (Actual qty − Standard qty) × Standard price = (5,200 − 5,000) × $3 = $600 unfavorable because more material was used than allowed.