Cost Management and Analysis Flashcards

Life-cycle costing accumulates costs over which span?

Answer: From product design through end-of-life disposal

Life-cycle costing tracks all costs from initial design through disposal of the product.

In a process costing system, equivalent units are computed to:

Answer: Express partially completed units as fully completed ones

Equivalent units restate work-in-process as a number of fully completed units for cost assignment.

A bottleneck in the theory of constraints should be managed by:

Answer: Maximizing throughput at the constraint resource

Throughput is limited by the constraint, so the bottleneck's output should be maximized.

Which approach charges products only for variable manufacturing costs and treats fixed overhead as a period cost?

Answer: Variable (direct) costing

Variable costing excludes fixed manufacturing overhead from product cost, expensing it each period.

When ranking products under a single constrained resource, the decision rule is to maximize:

Answer: Contribution margin per unit of the constrained resource

With a limiting resource, profit is maximized by favoring products with the highest contribution per unit of that resource.

A flexible budget differs from a static budget because it:

Answer: Adjusts budgeted amounts to the actual level of activity

A flexible budget recalculates expected costs based on the actual activity volume achieved.

Cost of quality typically includes prevention, appraisal, internal failure, and which other category?

Answer: External failure costs

External failure costs arise when defects reach the customer, completing the four cost-of-quality categories.