Managerial Accounting Test 4

What is the purpose of the sales budget?

Determine whether sales goals are met, determine future sales

What is a static budget?

A projection of budget data at a single level of activity before actual activity occurs

Management's reaction to the difference between budgeted and actual sales often depends on what?

The significance of the difference, and whether it is controllable or uncontrollable

What is a flexible budget?

A projection of budget data for various levels of activity.

When a company sells 60,000 units of a product, what level of activity should the budget be based on?

If a company sells 60,000 units, the budget should be based on 60,000 units (actual activity level) when using a flexible budget.

How do you calculate the total budgeted costs based on a particular activity level?

New Cost=Fixed Costs+(Variable Cost per Unit×New Activity Level)

How do you calculate the controllable margin?

Controllable Margin=Contribution Margin−Controllable Fixed Costs

What are normal standards?

Standards based on an efficient level of performance that is attainable under expected operating conditions.

What is a standard cost card?

A document showing the standard quantities and costs of materials, labor, and overhead needed to produce one unit.

What types of organizations will use standard costs?

• Manufacturing companies (most common)

• Also used by service and nonprofit organizations for cost control