Management Accounting 2

Contribution margin per unit of limited resource is obtained by dividing the contribution margin per unit of each prduct by the number of units of the limited resource required for each product. 

operating leverage refers to the extent to which a company's net income reacts to a given change in production

Companies that have higher fixed costs relative to variable costs have higher operating leverage. 

Under variable costing, all variable costs are considered product costs. 

Fixed manufacturing costs are a product cost under absorption costing but are a period cost under variable costing. 

For a company selling multiple products, the break.even piint in dollars is computed by dividing fixed costs by the 

In order to maximize net income a company should produce and sell the product with the higherst: 

operating leverage refers to the extent to which a company's net income reacts to a given change in 

under variable costing, all of the following are considered product costs EXEPT

all of the following are potential advantages of variable costing EXEPT that

Determining and evalutating possible courses of action is a step in management's decision.making process. 

In incremental analysis fixed costs may not change under alternative courses of atio, while variable costs may change.

the relevant data to consider in accepting an order at a special price are the additional manufacturing costs incurred and expected revenues. 

The basic decision rule to sell or process furhter is: process furhter as long as the incremental revenue form such processing exceeds the incremental processing costs

Book value is a sunk cost and is therefore relevant in incremental analysis of retain or replace equipment

fixed manufacturing costs will NEVER be relevant in a make or buy decsion. 

Opportunity costs are costs thathave already been incurred and will NOT be avoided by any future decsion

In deciding on the future staturs of an unprofitable segment, management should consider the effect of elimination on the remaining product lines. 

Joint product costs are relevant for any sell-or-process further decision

Any trade-in allowance or cash disposal value of the old asset is relevant in a retain or replace equipment decision

Which of the following is NOT a step in management's decision-making process?

if revenues are 315' under alternative A and 324' under alternative B, and costs are 285' for A and 306' for B then using the bais appraoch in incremental analysis, incrementalrevenues, costs and net income, in comparing B to A are respectively

the cost to manufacture an unfinished unit is $120 ($90 variable, $30 fixed). The selling price per unit is $150. the company has unused productive capacity and has determined that units could be finished and sold for $195 with an increase in variable costs of 40%. What is the additional net income per unit to be gained by finishing the unit?

the potential benefit that may be obtained form following an alternative course of action is called

in a make or buy decision, the relevant costs include each of the following EXCEPT

Once a company has determined the target price, it can deteremine its target cost by setting a desired profit.

In a competitive, common-product envirionment the company must set a target selling preice using cost-plus pricing. 

Under cost-plus pricing, the markup percentage is computed by dividing desired ROI per unit by variable cost per unit. 

The labor charge includes the direct labor cost of employees, selling, administrative, and similar overhead costs; and an allowance for a desired profit per hour. 

the charges for any particular job are the sum of the labor charge, the materials charge, and the material loading charge

An appropriate transfer price should assist the company in making proper purchasing decisions.

An advantage of the cost-based transfer price approach is that it can increase a division manager's control over the division's performance

The market-based transfer price appraoch provides a fairer allocation of the company's contribution margin to each dividsion than the cost-based approach. 

Absorption cost pricing is more consistent with cost-volume-profit analysis used to measure the profit implications of changes in price and volume.

The target cost of a product

in the cost-plus pricing approach, the amrkup percentage is computed by dividing the 

all of the following are steps in the time-and-material pricing approach EXCEPT calcuating the 

The total contribution margin to a company in the market-based transfer price approach is 

Absorption-cost pricing

The primary difference between standards and budgets is that a standard is a unit amount, whereas a budget is a total amount