ACC 241 DALLMUS Exam
Questions and Answers 100%
Accurate
Constraint - ANSWER - 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 - ANSWER - 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 - ANSWER - The potential benefit that is given up when one
alternative is selected over another.
Contribution Margin - ANSWER - The difference between total sales revenue and
total variable costs.
Contribution Margin Per Unit - ANSWER - 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.
Discretionary Costs - ANSWER - 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.
Outsourcing - ANSWER - 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 - ANSWER - 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 - ANSWER - Any cost that has already been incurred and cannot be
changed by any decision made now or in the future.
Target Costing - ANSWER - 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 - ANSWER - 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.
Fixed Costs - ANSWER - A cost that does not vary depending on production or sales
levels, such as rent, property tax, insurance, or interest expense.
Contribution Margin Income Statement - ANSWER - 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 - ANSWER - Ratio of contribution margin to sales revenue
(Contribution Margin ÷ Sales Revenue)
Cost-Volume-Profit (CVP) Analysis - ANSWER - 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 - ANSWER - 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.
Account Analysis - ANSWER - 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 - ANSWER - 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 - ANSWER - The difference between total sales revenue and
total variable costs.
Operating Leverage - ANSWER - 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 - ANSWER - Indicates the percentage change in
operating income that will result from a 1% change in sales volume.
Sales Mix - ANSWER - 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 - ANSWER - A costing method that includes all manufacturing
costs - direct materials, direct labor, and both variable and fixed overhead - as part
Questions and Answers 100%
Accurate
Constraint - ANSWER - 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 - ANSWER - 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 - ANSWER - The potential benefit that is given up when one
alternative is selected over another.
Contribution Margin - ANSWER - The difference between total sales revenue and
total variable costs.
Contribution Margin Per Unit - ANSWER - 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.
Discretionary Costs - ANSWER - 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.
Outsourcing - ANSWER - 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 - ANSWER - 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 - ANSWER - Any cost that has already been incurred and cannot be
changed by any decision made now or in the future.
Target Costing - ANSWER - 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 - ANSWER - 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.
Fixed Costs - ANSWER - A cost that does not vary depending on production or sales
levels, such as rent, property tax, insurance, or interest expense.
Contribution Margin Income Statement - ANSWER - 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 - ANSWER - Ratio of contribution margin to sales revenue
(Contribution Margin ÷ Sales Revenue)
Cost-Volume-Profit (CVP) Analysis - ANSWER - 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 - ANSWER - 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.
Account Analysis - ANSWER - 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 - ANSWER - 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 - ANSWER - The difference between total sales revenue and
total variable costs.
Operating Leverage - ANSWER - 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 - ANSWER - Indicates the percentage change in
operating income that will result from a 1% change in sales volume.
Sales Mix - ANSWER - 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 - ANSWER - A costing method that includes all manufacturing
costs - direct materials, direct labor, and both variable and fixed overhead - as part
