Managerial Accounting Exam Review

These flashcards cover key concepts of managerial accounting, including cost classification, cost behavior, and financial statements, to aid in exam preparation.

What is the primary purpose of managerial accounting?

To provide useful information for determining costs, planning activities, and comparing actual results to planned results.

What are the two main types of costs discussed in managerial accounting?

Product costs and Period costs.

How is a product cost characterized?

Product costs are included in Inventory and expensed as cost of goods sold when sold.

What distinguishes direct costs from indirect costs?

Direct costs can be traced directly to a cost object, while indirect costs cannot be traced cost-effectively to a cost object.

Define fixed costs in the context of cost behavior.

Fixed costs do not change as production volume changes.

What is a variable cost?

A cost that varies directly with the number of units produced.

Describe mixed costs.

Mixed costs contain both a fixed and a variable component.

What is the Contribution Margin formula?

CM = Sales Revenue - Variable Expenses.

How do you determine the break-even point in units?

Break-even point = Fixed Costs / Contribution Margin per Unit.

What are period costs?

Costs that are expensed as incurred and are not linked to specific products.

Which statement best differentiates managerial accounting from financial accounting?

Managerial accounting focuses on internal decision-making, while financial accounting focuses on external reporting.

What is an example of a period cost for a manufacturer?

Rent on the office building or administrative salaries.

How is cost of goods sold calculated for a manufacturer?

Beginning finished goods inventory + Cost of goods manufactured - Ending finished goods inventory.

What does cost-volume-profit analysis help determine?

It helps predict how changes in production and sales levels affect profit.

What does the break-even point represent in managerial accounting?

The level of sales at which total revenues equal total costs, resulting in no profit or loss.

What happens to contribution margin once fixed expenses are covered?

Any remaining contribution margin contributes to net operating income.

If a product sells for $150 and has variable costs of $60, what is the contribution margin per unit?

$90.

In the context of CVP analysis, what assumptions are typically made about selling price?

Selling price is constant and does not change with volume.

What type of cost cannot change with changes in production volume?

Fixed cost.