ACC 241 DALLMUS UPDATED COMPLETE EXAM QUESTIONS AND VERIFIED ANSWERS 100% SOLVED 2025

Constraint - -A constraint is anything that prevents an organization or individual from getting more of what it wants. Or a limitation under which a company must operate, such as limited machine time available or limited raw materials available that restricts the company's ability to satisfy demand. Cost-Plus Pricing - -A costing approach used by price-setters, where the price of a product is set at the cost of production plus a certain profit margin. Opportunity Cost - -The potential benefit that is given up when one alternative is selected over another. Outsourcing - -A make-buy decision: Managers decide whether to buy a product or service or produce it in-house. Shifting a company's operations to a third-party may be done to lower costs, achieve better quality, manage fluctuations in volume or quickly respond to opportunities and / or threats. Relevant Information - -The predicted future costs and revenues that will differ among alternatives. Although past data may be helpful in predicting future costs and revenues, past data is irrelevant in making future decisions. Sunk Cost - -Any cost that has already been incurred and cannot be changed by any decision made now or in the future. Target Costing - -A costing approach used by price-takers, where product development is based on what the market will pay for it, not on what it costs to produce it. In other words, market price less a desired profit margin becomes the determinant of a product's target cost and not the other way around, as is the case with Cost-Plus Pricing. Breakeven Point - -The break-even point in any business is that point at which the volume of sales or revenues exactly equals total expenses -- the point at which there is neither a profit nor loss. The break- even point tells the manager what level of output or activity is required before the firm can make a profit; reflects the relationship between costs, volume and profits. Contribution Margin - -The difference between total sales revenue and total variable costs. ACC241 ACC241 Contribution Margin Per Unit - -Contribution margin per unit is the difference between the price of a product and the sum of the variable costs of one unit of that product. Contribution Margin Income Statement - -ncome statement that organizes cost by behavior. It shows the relationship of variable costs and fixed costs, regardless of the functions a given cost item is associated with. Contribution Margin Ratio - -Ratio of contribution margin to sales revenue (Contribution Margin ÷ Sales Revenue) Cost-Volume-Profit (CVP) Analysis - -Analysis that deals with how profits and costs change with a change in volume. More specifically, it looks at the effects on profits of changes in such factors as variable costs, fixed costs, selling prices, volume, and mix of products sold. By studying the relationships of costs, sales, and net income, management is better able to cope with many planning decisions. For example, CVP analysis attempts to answer the following questions: (1) What sales volume is required to break even? (2) What sales volume is necessary in order to earn a desired (target) profit? (3) What profit can be expected on a given sales volume? (4) How would changes in selling price, variable costs, fixed costs, and output affect profits? (5) How would a change in the mix of products sold affect the break-even and target volume and profit potential? See also breakeven analysis; target income sales. Margin of Safety - -The excess of budgeted or actual sales over the break even volume of sales. It states the amount by which sales can drop before losses begin to be incurred. The higher the margin of safety, the lower the risk of not breaking even. Operating Leverage - -A measure of how sensitive net operating income is to percentage changes in sales. Operating leverage acts as a multiplier. If operating leverage is high, a small percentage increase in sales can produce a much larger percentage increase in net operating income. It is high near the breakeven point and decreases as the sales and profit increase. (Contribution Margin ÷ Net Operating Income) Operating Leverage Factor - -Indicates the percentage change in operating income that will result from a 1% change in sales volume. Sales Mix - -Proportion of total sales which each product or product line generates, and which needs to be appropriately balanced to achieve the maximum amount of gross profit. Absorption Costing - -A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - as part of the cost of a finished unit of product. This term is synonymous with full costing method. ACC241 ACC241 Account Analysis - -A method for analyzing cost behavior in which each account under consideration is classified as either variable or fixed based on the analyst's prior knowledge of how the cost in the account behaves. Committed Fixed Costs - -Committed fixed costs are those fixed costs that are difficult to adjust and that relate to the investment in facilities, equipment, and the basic organizational structure of a firm. Contribution Margin - -The difference between total sales revenue and total variable costs. Contribution Margin Income Statement - -Income statement that organizes cost by behavior. It shows the relationship of variable costs and fixed costs, regardless of the functions a given cost item is associated with. Cost Behavior - -Cost behavior refers to how a cost will react or respond to changes in the level of business activity or volume. As the level of activity rises and falls, a particular cost may rise and fall as well--or it may remain constant. Cost Equation - -A mathematical equation for a straight line that expresses how a cost behaves. Curvilinear Costs - -A cost that changes with volume but not at a constant rate. A cost function that cannot be represented with a straight line but instead is represented with a curve that reflects either increasing or decreasing marginal costs. Discretionary Costs - -A cost changed easily in the short-run by management decision such as advertising, repairs and maintenance, and research and development; also called managed cost. Fixed Costs - -A cost that does not vary depending on production or sales levels, such as rent, property tax, insurance, or interest expense. High-Low Method - -An algebraic procedure used to separate a semivariable cost or mixed cost into the fixed and the variable components. The high-low method, as the name indicates, uses two extreme data points to determine the values of a (the fixed cost portion) and b (the variable rate) in the cost - volume formula y = a + bx. The extreme data points are the highest and lowest x - y pairs. For example, if at the highest volume of processing items there were 10,000 items processed at a total cost of $35,000 and at the lowest volume there were 6,000 items processed at a total cost of $27,000, the high-low method indicates the variable rate was $2 per unit. ($35,000 - $27,000) divided by (10,000 - 6,000). The fixed amount will be $15,000 [$27,000 - $2(6,000)]. ACC241 ACC241 Mixed Cost - -A cost that has both a variable and a fixed component; it varies with changes in activity, but not proportionately. Regression Analysis - -A statistical procedure for determining the line that best fits the data by using all of the data points, not just the high and low data points. Relevant Range - -The band of volume for which cost-behavior assumptions (fixed cost, fixed cost, variable cost) remain valid. Scatter Plot - -The scatter plot method (also called scatter graph or scatter chart method)involves estimating the fixed and variable elements of a mixed cost visually on a graph by plotting historical cost and volume data. Step Costs - -Costs that are approximately fixed over a small volume range, but are variable over a large volume range. For example, supervision costs are fixed for a given range of production volume, but increased production often requires additional work shifts leading to added supervisory costs in a lump- sum fashion. Outliers - -Abnormal data points; data points that do not fall in the same general pattern as the other data points in a data set. Variable Costs - -A cost that is directly proportional to the volume of output produced. Variable Costing - -A costing method in which the costs to be inventoried include only variable manufacturing costs (direct materials, direct labor and variable manufacturing overhead). Fixed factory overhead is treated as a period cost and is deducted along with selling and administrative expenses in the period incurred. Equivalent Units - -The product of the number of partially completed units and their percentage of completion with respect to a particular cost. Equivalent units are the number of complete whole units one could obtain from the materials and effort contained in partially completed. Production Cost Report - -A process costing document that details all operating and cost information, shows the computation of cost per equivalent unit, and indicates cost assignment to goods produced during the period. Transferred-in Costs - -The cost that a product accumulates during its tenure in upstream departments in a process costing environment. Thus, it is the accumulated cost of a product when it first arrives in a department for further processing. Weighted Average Method of Process Costing - -The method of cost assignment that computes n average cost per equivalent unit of production for all units completed during the current period; it combines beginning inventory units and costs with current production and costs, respectively, to compute the average.