Cost Management and Analysis Flashcards
7 cards from real CPFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Cost Management and Analysis flashcards as text
A company allocates fixed manufacturing overhead based on machine hours. If actual production exceeds the budgeted level, what is the most likely overhead variance result?
Answer: Favorable volume variance
Producing more units than budgeted over-absorbs fixed overhead, creating a favorable volume variance.
Which costing method assigns overhead to products based on the activities that drive costs?
Answer: Activity-based costing
Activity-based costing traces overhead through cost drivers tied to specific activities.
A relevant cost for a decision must be:
Answer: Future-oriented and differs between alternatives
Relevant costs are future costs that differ among the options being considered.
What does the contribution margin represent?
Answer: Sales revenue minus variable costs
Contribution margin is sales revenue less variable costs, available to cover fixed costs and profit.
In a make-or-buy decision, which cost should generally be ignored?
Answer: Unavoidable allocated fixed overhead
Unavoidable fixed overhead continues regardless of the decision, so it is irrelevant.
The high-low method is used primarily to:
Answer: Separate mixed costs into fixed and variable components
The high-low method estimates variable and fixed cost elements from the highest and lowest activity levels.
A favorable direct materials price variance combined with an unfavorable quantity variance might indicate:
Answer: Purchasing low-quality materials that caused waste
Cheaper materials may save on price but cause excess usage, producing an unfavorable quantity variance.