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Managerial Accounting; Test 3 (ch20/21); Study Guide

Quiz yourself by thinking what should be in each of the black spaces below before clicking on it to display the answer.
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Question
Answer
Management should continually review...   show
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At any level of units sold:   show
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show is the study of the effects of changes in costs and volume on a company’s profit  
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CVP is important to profit planning & is a critical factor in determining:   show
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show classifies costs and expenses as variable or fixed and reports contribution margin in the body of the statement.  
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show Sales Var. Exp. COGS Sell Exp. Adm. Exp. Tot. Var. Exp. CM Fix Exp. COGF Sell. Exp. Adm. Exp. Tot. Fix Exp. NI  
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Contribution Margin (CM):   show
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CM is often stated both as...   show
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CM can be expressed as...   show
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show variable & fixed  
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Sales mix is...   show
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show different products often have substantially different contribution margin.  
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show Product units / Total units sold = Sales Mix  
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When finding sales mix with limited resources, it is necessary to find the...   show
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To find sales mix with limited resources...   show
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show the product with the highest contribution margin per unit of limited resource.  
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show refers to the relative proportion of fixed vs. variable costs that a company incurs.  
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Cost Structure can have...   show
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show reduced their fixed costs & increased their variable costs  
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show refers to the degree to which a company's net income reacts to a change in sales.  
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show relative use of fixed vs. variable costs.  
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Companies with high fixed costs relative to variable costs have...   show
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show a sharp increase (decrease) in net income with a given increase (decrease) in sales.  
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show measure of a company's earning volatility and can be used to compare companies  
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show Contribution Margin / Net Income = Degree of Operating Leverage  
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show 1.) Identity the problem and assign responsibility. 2.) Determine and evaluate possible courses of action. 3.) Make a decision. 4.) Review results of the decision.  
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show the process used to identify the financial data that change under alternative courses of action  
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show the probable effects of the decision on future earnings.  
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show estimates and uncertainty.  
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show market analysts, engineers, and accountants.  
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show both costs and revenues may change.  
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In some cases of incremental analysis,   show
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show 1.) Accept an order at a special price. 2.) Make or buy component parts or finished products. 3.) Sell products or process further. 4.) Retain or replace equipment. 5.) Eliminate an unprofitable business segment.  
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An order at a special price should be accepted when...   show
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show not be affected by the special order.  
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If the units can be produced within existing plant capacity...   show
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In a make or buy decision, management must determine...   show
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show there is an opportunity to use the productive capacity for another purpose.  
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show the potential benefit that may be obtained by following an alternative course of action.  
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show additional cost of making the component.  
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Three important cost concepts are used to perform incremental analysis:   show
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Relevant costs are the:   show
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Cost and revenues that do not differ across alternative can be ___ when trying to choose between alternatives.   show
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show give up the opportunity to benefit from some other course of action  
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show Opportunity Cost.  
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show costs that have already been incurred and will not be changed or avoided by any present or future decisions.  
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show are NOT  
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show have no  
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In a decision to retain or replace equipment, management compares   show
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Generally, the costs that are affected by the two alternatives are..   show
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The book value of the old machine is a __ __ which does not affect the decision.   show
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A sunk cost is a:   show
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Sales Mix sheet; BE 20-9 part a   show
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show 1.) Fixed Costs / Total Weighted-Average Contribution Margin Ratio = Total Break-Even Sales in Dollars. 2.) Sales Mix (x) Total Break-Even Sales in Dollars (=) Sales Dollars Needed per Product. ****CHECK!: add the last column to get the TBESI$  
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show b.) Contribution Margin / Total Units = Contribution Margin per Unit. c.) Contribution Margin / Sales = Contribution Margin Ratio  
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show 1.) (Row 1) Make --> Buy --> Net Income 2.)(Column 1) Direct Materials --> Direct Labor --> Variable Manu. Costs --> Fixed Manu. Costs (subtract Make from Buy for NI) --> Purchase Price (negative in NI). 3.) Total all  
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Make or Buy; DO IT 21-2; part b   show
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P21-1A; part a   show
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show Fixed Costs / Contribution Margin Ratio  
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The formula for Break-even Points in Units is?   show
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