Costing and Profitability Analysis Flashcards
7 cards from real CPP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Costing and Profitability Analysis flashcards as text
Which costing approach accumulates costs by individual customer orders or projects, making it MOST suitable for custom manufacturers?
Answer: Job-order costing
Job-order costing tracks costs to specific jobs or orders, making it ideal for custom or made-to-order production environments.
A company's net revenue retention (NRR) rate is 115%. What does this BEST indicate about its customer base?
Answer: Expansion revenue from existing customers exceeds churn losses
NRR above 100% means upsells and expansions from existing customers more than offset revenue lost to churn and downgrades.
When a manufacturing process yields multiple products simultaneously, the method that allocates joint costs based on relative market values at the split-off point is called:
Answer: Relative sales value method
The relative sales value method allocates joint costs proportionally to each product's market value at the split-off point.
A company raises its price by 8% and unit volume falls by 5%. What is the approximate net impact on total revenue?
Answer: Revenue increases by approximately 2.6%
New revenue index = 1.08 × 0.95 = 1.026, so total revenue increases by approximately 2.6%.
Which profitability analysis technique assigns costs to customers based on the resources they actually consume, enabling 'whale curve' analysis?
Answer: Activity-based customer profitability analysis
Activity-based customer profitability analysis traces resource consumption to individual customers, revealing that a small subset often generates most profit (the whale curve).
A product's variable manufacturing cost is $40, fixed manufacturing cost per unit is $15, and selling & administrative expenses are $10 per unit. Under absorption costing, the inventory value per unit is:
Answer: $55
Absorption costing includes both variable ($40) and fixed ($15) manufacturing costs = $55; selling & administrative expenses are period costs excluded from inventory.
A pricing team is evaluating whether to drop a product line that shows a net loss. Which cost concept is MOST critical to this decision?
Answer: Avoidable (escapable) costs
Only avoidable costs—those that would be eliminated if the product line is dropped—are relevant to the discontinuation decision.