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Written Part

1. Write and explain each of the seven purposes of standard costs.

2. Write three fundamental activities in a standard cost system.

3. Define and describe the flexible budgeting process.

4. Write three characteristics of a flexible budget.

5. List at least five basic concepts of Cost-Volume-Profit Analysis (CVPA).

6. Name three approaches to break-even analysis.

7. "Contribution margin is the excess of sales over fixed costs." Do you agree? Explain.

8. What is meant by a product's CM-ratio?

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Final answer:

Explains seven purposes of standard costs, fundamental activities in a standard cost system, and the flexible budgeting process.


Explanation:

Seven Purposes of Standard Costs:

  1. Cost Control: Standard costs provide a benchmark to monitor and control costs.
  2. Performance Evaluation: They help assess individual and departmental performance.
  3. Inventory Valuation: Standard costs aid in valuing ending inventories.

Fundamental Activities in a Standard Cost System:

  1. Setting Standards: Establishing predetermined cost levels.
  2. Recording Variances: Analyzing differences between standard and actual costs.
  3. Performance Reporting: Communicating performance results.

Flexible Budgeting Process:

Flexible budgeting adjusts budgets based on actual activity, allowing for better performance evaluation.


Learn more about Standard Costs, Flexible Budgeting, Cost Analysis here:

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