Acc 341 workshop 3 3 review questions

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ACC 341 WORKSHOP 3.3 REVIEW QUESTIONS

Download What is meant by a product’s contribution margin ratio? How is this ratio useful in planning business operations? Often the most direct route to a business decision is an incremental analysis. What is meant by an incremental analysis? In all respects, Company A and Company B are identical except that Company A’s costs are mostly variable, whereas Company B’s costs are mostly fixed. When sales increase which company will tend to realize the greatest increase in profits? Explain. What is meant by the term operating leverage? What is meant by the term break-even point? What is meant by the margin of safety? What is meant by the term sales mix? What assumption is usually made concerning sales mix in CVP analysis? What is meant by a product’s contribution margin ratio? How is this ratio useful in planning? What is meant by the term break-even point? What is meant by the term operating leverage? How is the degree of operating leverage calculated? What is the basic difference between absorption costing and variable costing? Are selling and administrative expenses treated as product costs or as period costs under variable costing? Explain how fixed manufacturing overhead costs are shifted from one period to another under absorption costing. What are the arguments in favor of treating fixed manufacturing overhead costs as product costs? What are the arguments in favor of treating fixed manufacturing overhead costs as period costs? If the units produced and the unit sales are equal, which method would you expect to show the higher net operating income, variable costing or absorption costing? Why? If fixed manufacturing overhead costs are released from inventory under absorption costing, what does this tell you about the level of production in relation to the level of sales? Under absorption costing, how is it possible to increase net operating income without increasing sales? What costs are assigned to products when absorption costing is used? How does this approach differ when variable costing is used?


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