12 Questions
What is the primary purpose of the Traditional Format?
External reporting
Which management tool primarily utilizes the Contribution Format?
Budgeting
How are differential costs defined?
Costs incurred between any two alternatives
What is the nature of opportunity costs in decision-making?
Potential benefits given up by selecting an alternative
Which type of costs must be ignored when making decisions?
Sunk Costs
Which type of analysis uses the Contribution Format as a planning tool?
Budgeting
What is the main purpose of job-order costing systems?
To allocate costs to each job based on the specific job requirements
Why is an allocation base used to assign manufacturing overhead to individual jobs?
It is impossible or difficult to trace overhead costs to particular jobs
What is the purpose of computing a predetermined overhead rate in job-order costing?
To apply overhead to jobs before the period begins
How are job cost sheets used in job-order costing?
To provide an underlying set of financial records that explain specific job costs
Why do job-order costing systems allocate manufacturing overhead to all jobs using predetermined rates?
To prevent under or overcharging specific jobs with actual overhead costs
What is the significance of using an activity-based approach for determining multiple predetermined overhead rates?
To align overhead cost allocations more accurately with specific activities
Learn about the traditional format primarily used for external reporting and the contribution format utilized by management for internal decision-making. Explore how these formats are essential for cost-volume profit analysis, segmented reporting, budgeting, and special decisions like pricing and make-or-buy analysis. Understand the concept of differential or incremental costs and revenues.
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