ACTG 244 FINAL EXAM QUESTIONS WITH VERIFIED
ANSWERS
Financial Accounting - Answers - - focus (external)
- format (rules)
- purpose (landing, investing)
- covers (whole entity)
Managerial Accounting - Answers - - focus (internal)
- format (varied)
- purpose (decision-making, analysis)
- covers (products, divisions, etc.)
Observe Past Costs - Answers - observe and measure cost behavior
Cost Behavior - Answers - also called cost driver; determine the relationship between
cost and level of some activity
Cost Prediction - Answers - use knowledge of cost behavior to forecast future costs at
particular activity levels
Factors That Make Estimating More Difficult - Answers - - repetitive vs. one-time
products/services
- multiple products vs. single product/service
- unstable vs. stable costs
Cost Classifications - Answers - - variable costs
- fixed costs
- mixed costs
Variable Costs - Answers - increase proportionally with activity
Fixed Costs - Answers - do not change with activity levels
Mixed Costs - Answers - partly fixed and partly variable
Estimating Costs - Answers - - process
- factors that make estimating more difficult
- cost classification
Summary of Variable and Fixed Cost Behavior - Answers - - variable and fixed costs in
total
- variable and fixed costs per unit
, Variable Costs in Total - Answers - - changes as activity level changes
Fixed Costs in Total - Answers - - remains the same even when the activity level
changes
Variable Costs Per Unit - Answers - - remains the same over wide range of activity
Fixed Costs Per Unit - Answers - - goes down as activity level goes up
Visual Fit Method - Answers - - scatter diagram of past observations with fitted line
Least Square Regression - Answers - - estimate based on all available activity levels
- calculates a line that minimizes the differences between the actual data points and the
estimated regression line
TC = F + V(X) - Answers - equation form of least squares regression line
TC - Answers - total cost; the dependent variable
F - Answers - fixed cost; the intercept term; estimate of fixed costs
V - Answers - variable cost; the estimate of variable cost per unit of activity; the slope of
the cost line
(X) - Answers - the activity is the level of cost driver
Contribution Margin - Answers - sales revenue (price) - variable cost
Contribution Margin Income Statement - Answers - - emphasizes cost behaviors
- the excess of revenue over variable costs
- covers fixed costs and provides the profits
- used as internal planning and decision making tool (cost-volume profit analysis;
budgeting; special decisions such as pricing, special orders and make-or-buy analysis)
Contribution Approach - Answers - - sales
- less variable expenses
- contribution margin
- less fixed expenses
- net operating income
Calculating Break-Even Point - Answers - Fixed Cost per Month / Contribution Margin
Target Profit - Answers - (Fixed cost + Profit) / Contribution Margin
Different Ways to Classify Costs - Answers - - behavior (variable and fixed)
ANSWERS
Financial Accounting - Answers - - focus (external)
- format (rules)
- purpose (landing, investing)
- covers (whole entity)
Managerial Accounting - Answers - - focus (internal)
- format (varied)
- purpose (decision-making, analysis)
- covers (products, divisions, etc.)
Observe Past Costs - Answers - observe and measure cost behavior
Cost Behavior - Answers - also called cost driver; determine the relationship between
cost and level of some activity
Cost Prediction - Answers - use knowledge of cost behavior to forecast future costs at
particular activity levels
Factors That Make Estimating More Difficult - Answers - - repetitive vs. one-time
products/services
- multiple products vs. single product/service
- unstable vs. stable costs
Cost Classifications - Answers - - variable costs
- fixed costs
- mixed costs
Variable Costs - Answers - increase proportionally with activity
Fixed Costs - Answers - do not change with activity levels
Mixed Costs - Answers - partly fixed and partly variable
Estimating Costs - Answers - - process
- factors that make estimating more difficult
- cost classification
Summary of Variable and Fixed Cost Behavior - Answers - - variable and fixed costs in
total
- variable and fixed costs per unit
, Variable Costs in Total - Answers - - changes as activity level changes
Fixed Costs in Total - Answers - - remains the same even when the activity level
changes
Variable Costs Per Unit - Answers - - remains the same over wide range of activity
Fixed Costs Per Unit - Answers - - goes down as activity level goes up
Visual Fit Method - Answers - - scatter diagram of past observations with fitted line
Least Square Regression - Answers - - estimate based on all available activity levels
- calculates a line that minimizes the differences between the actual data points and the
estimated regression line
TC = F + V(X) - Answers - equation form of least squares regression line
TC - Answers - total cost; the dependent variable
F - Answers - fixed cost; the intercept term; estimate of fixed costs
V - Answers - variable cost; the estimate of variable cost per unit of activity; the slope of
the cost line
(X) - Answers - the activity is the level of cost driver
Contribution Margin - Answers - sales revenue (price) - variable cost
Contribution Margin Income Statement - Answers - - emphasizes cost behaviors
- the excess of revenue over variable costs
- covers fixed costs and provides the profits
- used as internal planning and decision making tool (cost-volume profit analysis;
budgeting; special decisions such as pricing, special orders and make-or-buy analysis)
Contribution Approach - Answers - - sales
- less variable expenses
- contribution margin
- less fixed expenses
- net operating income
Calculating Break-Even Point - Answers - Fixed Cost per Month / Contribution Margin
Target Profit - Answers - (Fixed cost + Profit) / Contribution Margin
Different Ways to Classify Costs - Answers - - behavior (variable and fixed)
