1 POINT 2 POINTS 3 POINTS 4 POINTS 5 POINTS BUDGETING 1 POINT 4 POINTS 3 POINTS 2 POINTS2 POINTS 3 POINTS 2 POINTS 5 POINTS 2 POINTS 3 POINTS 4 POINTS 5 POINTS 4 POINTS 3 POINTS 4 POINTS 5 POINTS COST ALLOCATION & ABC DIFFERENTIAL ANALYSIS DECENTRALIZED OPERATIONS VARIANCES

THIS TYPE OF BUDGETING MAINTAINS A 12 MONTH PROJECTION INTO THE FUTURE 1 POINT

WHAT IS CONTINUOUS BUDGETING?

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

WHAT IS DIRECTING?

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

WHAT IS ZERO-BASED BUDGETING?

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

WHAT IS A VARIANCE BUDGET?

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: JANUARYFEBRUARYMARCH $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

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

THE VARIANCE COMPUTED BY THE FORMULA: (ACTUAL PRICE – STANDARD PRICE) * ACTUAL QUANTITY 1 POINT

WHAT IS THE DIRECT MATERIALS PRICE VARIANCE?

DAILY DOUBLE!

THE TERM USED FOR ACCOUNTING SYSTEMS THAT USE PERFORMANCE GOALS FOR DIRECT MATERIALS, DIRECT LABOR, AND FACTORY OVERHEAD 2 POINTS

WHAT ARE STANDARD COST SYSTEMS?

THE TERM USED FOR STANDARDS THAT ARE ACHIEVED UNDER PERFECT OPERATING CONDITIONS – FOR EXAMPLE, NO MATERIALS SPOILAGE, NO IDLE TIME, NO BREAKDOWNS 3 POINTS

WHAT ARE IDEAL STANDARDS?

THE TERM USED WHEN A COMPANY MEASURES RESULTS SUCH AS CUSTOMER SATISFACTION 4 POINTS

WHAT IS NON-FINANCIAL PERFORMANCE MEASURE?

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$10,400 FIXED FACTORY OVERHEAD$12,000 STANDARD FIXED OVERHEAD RATE$2.40/dlh STANDARD VARIABLE OVERHEAD RATE$3.60/dlh 100% OF NORMAL CAPACITY5,000 dlh STANDARD ACTUAL PRODUCTION4,000 dlh 5 POINTS

WHAT IS $2,400 U? 100% OF NORMAL CAPACITY5,000 dlh STANDARD ACTUAL PROD4,000 dlh CAPACITY NOT USED1,000 dlh STANDARD FIXED OVERHEAD RATE* 2.40 / dlh VOLUME VARIANCE$2,400 U

IN THIS TYPE OF RESPONSIBILITY CENTER, THE MANAGER ONLY HAS THE RESPONSIBILITY AND AUTHORITY FOR CONTROLLING THE COSTS INCURRED 1 POINT

WHAT IS A COST CENTER?

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

WHAT ARE SERVICE DEPARTMENTS?

IN AN INVESTMENT CENTER, THE RESPONSIBLE MANAGER IS RESPONSIBLE FOR PROFITS, COSTS, AND THESE BALANCE SHEET ITEMS 3 POINTS

WHAT ARE ASSETS?

THE ANALYSIS FOR RETURN ON INVESTMENT CAN BE EXPANDED VIA A FORMULA, NAMED FOR THIS COMPANY THAT DEVELOPED NYLON IN POINTS

WHAT IS DuPONT?

THE NAMES OF THE TWO RATIOS IN THE EXPANDED ROI FORMULA 5 POINTS

WHAT ARE PROFIT MARGIN AND INVESTMENT TURNOVER?

THIS TYPE OF COST IS NOT RELEVANT IN DIFFERENTIAL ANALYSIS, AND SOUNDS LIKE IT BELONGS IN A GAME OF “BATTLESHIP” 1 POINT

WHAT IS A SUNK COST?

WHEN SETTING NORMAL PRODUCT SELLING PRICES, COMPANIES CAN CHOOSE BETWEEN COST-PLUS METHODS AND THESE? 2 POINTS

WHAT ARE MARKET METHODS?

IN THIS COST-PLUS METHOD, ONLY THE COSTS OF MANUFACTURING ARE INCLUDED IN THE COST AMOUNT TO WHICH THE MARKUP IS APPLIED 3 POINTS

WHAT IS THE PRODUCT COST CONCEPT?

DAILY DOUBLE!

THE TERM USED FOR THE AMOUNT OF INCOME FOREGONE FROM AN ALTERNATIVE USE OF AN ASSET 4 POINTS

WHAT IS OPPORTUNITY COST?

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 RIBBONSTALE ALE COLT.47 SALES PRICE$20 $15$30 VARIABLE COST$10 $ 8$15 HOURS IN THE FERMENTER POINTS

WHAT IS RED RIBBON? RED RIBBONSTALE ALE COLT.47 SALES PRICE$20 $15$30 VARIABLE COST$10 $ 8$15 CONT. MARGIN $10 $ 7 $15 HOURS IN THE FERMENTER ÷ 5 ÷7 ÷ 10 CM PER BOTTLE- NECK HOUR$2 $1$1.50

THE THREE FACTORY OVERHEAD ALLOCATION METHODS ARE ACTIVITY- BASED COSTING, A SINGLE PLANTWIDE RATE, AND THIS 1 POINT

WHAT IS MULTIPLE PRODUCTION DEPARTMENT RATE?

TERM USED FOR THE TYPE OF COSTING SYSTEM USED TO DETERMINE THE PROFITABILITY OF A MANUFACTURED ITEM 2 POINTS

WHAT IS PRODUCT COSTING?

USING A MULTIPLE PRODUCTION DEPARTMENT OR ACTIVITY-BASED COSTING RATE HELPS PREVENT THIS FROM OCCURRING 3 POINTS

WHAT IS DISTORTING THE PRODUCT COST (AND ULTIMATELY THE SELLING PRICE)?

WHEN USING ACTIVITY-BASED COSTING, FACTORY OVERHEAD COSTS ARE GROUPED TOGETHER IN THESE 4 POINTS

WHAT ARE ACTIVITY POOLS?

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: VOLUMEDLH/UNIT DIAPERS2,800 UNITS0.6 DRINK WALKERS1, POINTS

WHAT IS $32/DLH? DIAPERS2,800 * 0.6 = 1,680 DRINK 700 * 1.8 = 1,260 WALKERS1,400 * 1.4 = 1,960 TOTAL DLH 4,900 FACTORY OVERHEAD RATE: $156,800 ÷ 4,900 DLH = $32/DLH

CATEGORY: DIFFERENTIAL ANALYSIS AND ACTIVITY-BASED COSTING MAKE YOUR WAGER!

ANSWER: THE COSTING METHOD THAT COMBINES MARKET-BASED PRICING WITH A COST- REDUCTION EMPHASIS

QUESTION WHAT IS TARGET COSTING?