ACC FINAL (P2)

Favorable Cost Variance

Occurs when standard cost are more than actual costs

Flexible Budget

Allows for adjustments in activity levels

Opportunity Cost

The revenue that is forgone from an alternative use of an asset, such as cash

Under Absorption Costing, what costs would be included in Finished Goods Inventory

Direct labor, direct materials, and all manufacturing overhead costs

Under Variable Costing, what costs would be included in Finished Goods Inventory

Direct materials, direct labor, and variable manufacturing overhead costs

Average Rate of Return (Capital Investment Proposal)

Divides the estimated average annual income by the average investment

What are two methods of Analyzing Capital Investment proposals that both ignore present value

Average Rate of Return and Cash Payback

Calculating the Net Cash Flows from Operating Activities (Indirect Method)

ADD Net Income, ADD Depreciation Expense, SUBTRACT increase in Account Receivable, SUBTRACT Decrease in Account Payable

Computing the break-even sales in unit after fixed costs are increased

Find the Unit Contribution Margin (Unit Selling Price - Unit Variable Cost)

Break-Even Sales = (Fixed Cost + Price Increase) / Unit Contribution Margin