Management Accounting

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

In a competitive, common-product environment the company must set a target selling price 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 approach provides a fairer allocation of the company’s contribution margin to each division than the cost-based approach.

In order to maximize income, and minimize income tax, companies can adjust the transfer prices they use on transfers between divisions located in different countries.

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 markup percentage is computed by dividing the

All of the following are steps in the time-and-material pricing approach except calculating the

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

 Absorption-cost pricing

Budgeting is the process of establishing company-wide objectives that serve as a deter rent to waste and inefficiency.

The effectiveness of the budget program is directly related to its acceptance by all levels of management.

Budgeting always has the effect on human behavior of inspiring managers to higher levels of performance.

One disadvantage of budgeting is that it does not facilitate the coordination of activities within a business.

The sales budget is the first budget prepared and each of the other budgets depends on it.

The quantities of direct materials in the direct materials budget are derived from the formula: Desired Ending Direct Materials Units + Direct Materials Units Required for Production – Beginning Direct Materials Units = Required Direct Materials Units to be Purchased.

The manufacturing overhead budget shows only the expected indirect labor costs for the year.

The budgeted income statement indicates the expected profitability of operations for the next year and provides the basis for evaluating company performance.

Long-range planning differs from budgeting in the time period involved, emphasis, and the amount of detail presented.

Budgeting is not used in not-for-profit organizations because it is not necessary for these organizations to engage in profit planning.

A formal written statement of management’s plans for a specified future time period, expressed in financial terms is a(n)

Which of the following is not a benefit of budgeting?

All of the following are financial budgets except the

The master budget includes all of the following except

If required production units are 75,000, budgeted sales units are 65,000, required direct materials purchases units are 3,000, and beginning finished goods units are 5,000, then desired ending finished goods units would be