1 POINT 2 POINTS 3 POINTS 4 POINTS 5 POINTS BUDGETING 1 POINT 4 POINTS 3 POINTS 2 POINTS2 POINTS 3...

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Transcript of 1 POINT 2 POINTS 3 POINTS 4 POINTS 5 POINTS BUDGETING 1 POINT 4 POINTS 3 POINTS 2 POINTS2 POINTS 3...

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BUDGETING

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COSTALLOCATION

& ABC

DIFFERENTIALANALYSIS

DECENTRALIZEDOPERATIONSVARIANCES

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THIS TYPE OF BUDGETING MAINTAINS A 12 MONTH PROJECTION INTO THE

FUTURE

1 POINT

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WHAT IS CONTINUOUS BUDGETING?

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ONCE A BUDGET HAS BEEN CREATED, THE TASK OF CO-ORDINATING OPERATIONS TO ACHIEVE THE

BUDGET’S GOALS FALLS WITHIN THIS STEP OF THE MANAGEMENT CYCLE –

LIGHTS, CAMERA, ACTION!

2 POINTS

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WHAT IS DIRECTING?

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THIS BUDGETARY APPROACH REQUIRES MANAGERS TO ESTIMATE

SALES, PRODUCTION, AND OTHER OPERATING DATA AS THOUGH

OPERATIONS WERE BEING STARTED FOR THE FIRST TIME

3 POINTS

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WHAT IS ZERO-BASED BUDGETING?

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OF THE FOLLOWING, WHICH IS NOT A TYPE OF BUDGET DISCUSSED IN THE

CHAPTER?

• COST OF GOODS SOLD BUDGET• PRODUCTION BUDGET• VARIANCE BUDGET• DIRECT MATERIALS BUDGET• DIRECT LABOR BUDGET• FACTORY OVERHEAD BUDGET

4 POINTS

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WHAT IS A VARIANCE BUDGET?

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GIVEN THE FOLLOWING, THE AMOUNT OF CASH EXPECTED TO BE COLLECTED IN FEBRUARY:

ACME PRODUCTS HAS THE FOLLOWING BUDGETED SALES FOR THE FIRST QUARTER, 2009:

JANUARY FEBRUARY MARCH

$1,000,000 $1,200,000 $900,000

10% OF EACH MONTH’S SALES ARE FOR CASH. OF THE REMAINING SALES, 60% ARE COLLECTED IN THE MONTH OF SALE, AND THE REMAINDER IN THE MONTH AFTER.

5 POINTS

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WHAT IS $1,128,000?

FEBRUARY CASH SALES $1,200,000 * 10% $120,000

FEBRUARY CREDIT SALES COLLECTIONS$1,200,000 * 90% * 60% $648,000

JANUARY CREDIT SALES COLLECTIONS$1,000,000 * 90% * 40% $360,000

$1,128,000

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THE VARIANCE COMPUTED BY THE FORMULA:

(ACTUAL PRICE – STANDARD PRICE) * ACTUAL QUANTITY

1 POINT

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WHAT IS THE DIRECT MATERIALS PRICE

VARIANCE?

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DAILY DOUBLE!

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THE TERM USED FOR ACCOUNTING SYSTEMS THAT USE PERFORMANCE

GOALS FOR DIRECT MATERIALS, DIRECT LABOR, AND FACTORY

OVERHEAD

2 POINTS

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WHAT ARE STANDARD COST SYSTEMS?

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THE TERM USED FOR STANDARDS THAT ARE ACHIEVED UNDER PERFECT OPERATING CONDITIONS – FOR

EXAMPLE, NO MATERIALS SPOILAGE, NO IDLE TIME, NO BREAKDOWNS

3 POINTS

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WHAT ARE IDEAL STANDARDS?

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THE TERM USED WHEN A COMPANY MEASURES RESULTS SUCH AS

CUSTOMER SATISFACTION

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WHAT IS NON-FINANCIAL PERFORMANCE MEASURE?

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GIVEN THE FOLLOWING, THE AMOUNT (AND DIRECTION) OF THE FACTORY OVERHEAD VOLUME

VARIANCE, GIVEN THAT FACTORY OVERHEAD IS APPLIED BASED ON DIRECT LABOR HOURS:

ACTUAL COSTS:VARIABLE FACTORY OVERHEAD $10,400FIXED FACTORY OVERHEAD $12,000

STANDARD FIXED OVERHEAD RATE $2.40/dlhSTANDARD VARIABLE OVERHEAD RATE $3.60/dlh

100% OF NORMAL CAPACITY 5,000 dlhSTANDARD HRS @ ACTUAL PRODUCTION 4,000 dlh

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WHAT IS $2,400 U?

100% OF NORMAL CAPACITY 5,000 dlhSTANDARD HRS @ ACTUAL PROD 4,000 dlhCAPACITY NOT USED 1,000 dlhSTANDARD FIXED OVERHEAD RATE * 2.40 / dlhVOLUME VARIANCE $2,400 U

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IN THIS TYPE OF RESPONSIBILITY CENTER, THE MANAGER ONLY HAS THE RESPONSIBILITY AND AUTHORITY FOR CONTROLLING THE COSTS INCURRED

1 POINT

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WHAT IS A COST CENTER?

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IN A PROFIT CENTER, THE RESPONSIBLE MANAGER’S

PERFORMANCE REPORT INCLUDES NOT ONLY REVENUES AND OPERATING

EXPENSES, BUT CHARGES FROM THESE INTERNAL ORGANIZATIONS

2 POINTS

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WHAT ARE SERVICE DEPARTMENTS?

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IN AN INVESTMENT CENTER, THE RESPONSIBLE MANAGER IS

RESPONSIBLE FOR PROFITS, COSTS, AND THESE BALANCE SHEET ITEMS

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WHAT ARE ASSETS?

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THE ANALYSIS FOR RETURN ON INVESTMENT CAN BE EXPANDED VIA A FORMULA, NAMED FOR THIS COMPANY

THAT DEVELOPED NYLON IN 1935

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WHAT IS DuPONT?

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THE NAMES OF THE TWO RATIOS IN THE EXPANDED ROI FORMULA

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WHAT ARE PROFIT MARGIN AND INVESTMENT TURNOVER?

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THIS TYPE OF COST IS NOT RELEVANT IN DIFFERENTIAL ANALYSIS, AND

SOUNDS LIKE IT BELONGS IN A GAME OF “BATTLESHIP”

1 POINT

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WHAT IS A SUNK COST?

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WHEN SETTING NORMAL PRODUCT SELLING PRICES, COMPANIES CAN

CHOOSE BETWEEN COST-PLUS METHODS AND THESE?

2 POINTS

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WHAT ARE MARKET METHODS?

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IN THIS COST-PLUS METHOD, ONLY THE COSTS OF MANUFACTURING ARE

INCLUDED IN THE COST AMOUNT TO WHICH THE MARKUP IS APPLIED

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WHAT IS THE PRODUCT COST CONCEPT?

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DAILY DOUBLE!

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THE TERM USED FOR THE AMOUNT OF INCOME FOREGONE FROM AN ALTERNATIVE USE OF AN ASSET

4 POINTS

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WHAT IS OPPORTUNITY COST?

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THE PRODUCT WHICH WILL MAXIMIZE INCOME UNDER THE FOLLOWING SCENARIO:

STUDGEYSER BREWING MAKES THREE FERMENTED BEVERAGES: RED RIBBON, STALE ALE, AND COLT .47

THE FERMENTING PROCESS HAS LIMITED CAPACITY AND QUALIFIES AS A BOTTLENECK.

RED RIBBON STALE ALE COLT .47

SALES PRICE $20 $15 $30VARIABLE COST $10 $ 8 $15HOURS IN THEFERMENTER 5 7 10

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WHAT IS RED RIBBON?

RED RIBBON STALE ALE COLT .47

SALES PRICE $20 $15 $30VARIABLE COST $10 $ 8 $15CONT. MARGIN $10 $ 7 $15HOURS IN THEFERMENTER ÷ 5 ÷7 ÷10

CM PER BOTTLE-NECK HOUR$2 $1 $1.50

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THE THREE FACTORY OVERHEAD ALLOCATION METHODS ARE ACTIVITY-BASED COSTING, A SINGLE PLANTWIDE

RATE, AND THIS

1 POINT

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WHAT IS MULTIPLE PRODUCTION DEPARTMENT

RATE?

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TERM USED FOR THE TYPE OF COSTING SYSTEM USED TO DETERMINE

THE PROFITABILITY OF A MANUFACTURED ITEM

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WHAT IS PRODUCT COSTING?

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USING A MULTIPLE PRODUCTION DEPARTMENT OR ACTIVITY-

BASED COSTING RATE HELPS PREVENT THIS FROM OCCURRING

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WHAT IS DISTORTING THE PRODUCT COST (AND

ULTIMATELY THE SELLING PRICE)?

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WHEN USING ACTIVITY-BASED COSTING, FACTORY OVERHEAD

COSTS ARE GROUPED TOGETHER IN THESE

4 POINTS

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WHAT ARE ACTIVITY POOLS?

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THE SINGLE PLANT-WIDE FACTORY OVERHEAD RATE FOR THE FOLLWING SCENARIO:

ACTIVE ADULTS, INC. MAKES THREE PRODUCTS: ADULT DIAPERS, ADULT NUTRITION DRINK, AND WALKERS. BUDGETED FACTORY OVERHEAD IS $156,800, AND OVERHEAD IS APPLIED BASED ON DIRECT LABOR HOURS. FOLLOWING ARE THE BUDGETED PRODUCTION VOLUMES AND DLH PER UNIT:

VOLUME DLH/UNITDIAPERS 2,800 UNITS 0.6DRINK 700 1.8WALKERS 1,400 1.4

5 POINTS

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WHAT IS $32/DLH?

DIAPERS 2,800 * 0.6 = 1,680DRINK 700 * 1.8 = 1,260WALKERS 1,400 * 1.4 = 1,960TOTAL DLH 4,900

FACTORY OVERHEAD RATE:

$156,800 ÷ 4,900 DLH = $32/DLH

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CATEGORY:

DIFFERENTIAL ANALYSIS AND ACTIVITY-BASED

COSTING

MAKE YOUR WAGER!

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ANSWER:

THE COSTING METHOD THAT COMBINES MARKET-BASED

PRICING WITH A COST-REDUCTION EMPHASIS

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QUESTION

WHAT IS TARGET COSTING?