Assuming all manufacturing costs for finished goods are known1 which of the following statements explains why the accountant's unit cost used in inventory valuation for the annual financial statements would differ from the economist's marginal unit cost?
Answer(s): D
The economist's marginal cost equals the cost to produce one additional unit no fixed costs are included in the computation. It is the equivalent of the accountants unit variable cost, which is an incremental unit cost. However, the accountant's unit cost for financial statement purposes includes an allocation of fixed costs.
A manufacturing firm planned to manufacture and sell 100,000 units of product during the year at a variable cost per unit of $4.00 and a fixed cost per unit of $2.00. The firm fell short of its goal and only manufactured 80,000 units at a total incurred cost of $515,000. The firm's manufacturing cost variance was
Answer(s): C
The company planned to produce 100,000 units at $6 each ($4 variable + $2 fixed cost), or a total of $600,000, consisting of $400000 of variable costs and $200,000 of fixed costs. Total production was only 80,000 units at a total cost of $515,000. The flexible budget for a production level of 80,000 units includes variable costs of $320,000 ($4 x 80,000 units). Fixed costs would remain at $200,000. Thus, the total flexible budget costs are $520,000. Given that actual costs were only $515,000, the variance is $5,000 favorable.
The relevance of a particular revenue to a decision is determined by
Relevance is the capacity of information to make a difference in a decision by helping users of that information to predict the outcomes of events or to confirm or correct prior expectations. Thus, relevant revenues are those expected future revenues that vary with the action taken.
Which concept of costs includes only explicit costs?
The accounting concept of costs includes only explicit costs, i.e., those that represent actual outlays of cash, the allocation of outlays of cash, or commitments to pay cash. Examples include the incurrence of payables and the satisfaction of payables.
BCD Corp. outsourced an order for shovel handles to RST Corp. because BCD could not fill the order. By having RST produce the order, BCD was able to realize $10000 in sales profits that otherwise would have been lost. The outsourcing cost added a cost of $1 .000, but BCD was ahead by $9000 when the order was completed. Which of the following statements is correct regarding BCD's action?
Answer(s): A
Opportunity cost is the maximum benefit forgone by using a scarce resource for a given purpose. It is the benefit, for example, the contribution to income, provided by the best alternative use of that resource. Thus, outsourcing involves opportunity cost. The outsourcer uses resources for purposes other than filling the order and therefore forgoes the benefits it would have received.Management accountants are frequently asked to analyze various decision situations, including the following.1. Alternative uses of plant space, to be considered in a make/buy decision.2. Joint production costs incurred, to be considered in a sell-at-split versus a process- further decision.3. Research and development costs incurred in prior months, to be considered in a product-introduction decision.4. The cost of a special device that is necessary if a special order is accepted.5. The cost of obsolete inventory acquired several years ago, to be considered in a keep- versus-disposal decision.
Post your Comments and Discuss Financial CMA exam prep with other Community members:
Our website is free, but we have to fight against AI bots and content theft. We're sorry for the inconvenience caused by these security measures. You can access the rest of the CMA content, but please register or login to continue.