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26 Cards in this Set
- Front
- Back
Absorption Costing
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COGS=DM, DL, v & f O/H
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Variable Costing
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COGS=DM, DL and VARIABLE o/h
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Absorption Costing Advantages
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required for taxes and GAAP, more prevalent, better meets matching principle
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Absorbtion Costing Disadvantages
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not suited for CVP because fixed costs are in product, treats fixed o/h as a variable cost by assigning a per unit amount of fixed o/h to each unit, produces positive NOI even when units sold is less than the break even point
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Variable costing advantages
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more useful for managers, better suited for c-v-p, easier to understand, produces NOI figures that are more consistent with expectations
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Variable Costing Disadvantages
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Must prepare diff income statement for taxes and GAAP, not acceptable for GAAP
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(TOC) Theory of Constraints treats ____ as a period cost
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DL
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If Sales > Production, then NOI will be ______ in variable costing than absorption costing
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greater
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Draw out NOI For Variable and Absorption Costing
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yeah
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Advantages of (ABC) Activity Based Costing
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weeds out non-value added activities, provides better cost data to support managers decisions such as unprofitable product lines, delivers more useful information than traditional when a company has a lot O/H and a diverse set of products
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Unit-Level Cost Examples:
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power to run processing plant
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Batch-Level Cost ex
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Set up equipment; ship orders
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product-level costs ex
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design or advertise a product
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customer-level costs
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sales calls; catalog mailings
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organization-wide costs
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facility costs, heat and cleaning of offices
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ABC limitations
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expensive, potential to misinterpret unfamiliar #'s, does not conform to GAAP
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A budget is used for
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Planning and Control. also helps direct and motivate and make decisions
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Planning:
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develop objectives; prepare various budgets to achieve these objectives
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Control:
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Take steps to ensure the objectives are attained
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Communication Tool:
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ex Dashboards & Balanced Scorecards
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Motivational:
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Influence Employees behavior
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The performance indicator is
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profit not NOI
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General Model For Price Variance Analysis
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Actual Quantity (Actual Price-Standard Price)
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General model for Quantity Variance
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Standard Price (Actual Quantity-Standard Quantity)
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Draw out the chart version of finding variance
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check on p69 of coursepack
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Denominator hours:
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the standard number of hours per unit times the planned production units
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