CSAF Questions and Correct Solutions 2024
Contribution Margin - Answer -The difference between marginal revenue and marginal cost; Contribution margin goes toward supporting fixed costs; if it exceeds that, it goes to profit.Break-even point - Answer -Break-even point is the volume number of units when the marginal revenue covers the fixed cost opportunity; The break-even point is the level of sales volume of a product producing the exact amount of Contribution margin needed to cover fixed costs Overhead - Answer -Indirect costs; Examples may include administrative and general costs, maintenance, etc.Activity-Based costing - Answer -Activity-based costing (ABC) is a method of determining product costs using cost drivers or activity measures, that cause indirect costs to be incurred. Ideal cost drivers are activities that pertain to each procedure in varying amounts.
Activity-based costing is generally considered a more accurate costing method than the proportionate allocation method. It is, however, often more expensive to determine due to the necessary data collection.Service-Line Costing - Answer -Healthcare organizations have developed product lines based on major diagnostic categories (for example, diseases of the digestive system or obstetric procedures).
The advantage of analyzing results by diagnostic category is that it develops an estimate of total resources consumed, including resources consumed in shared departments Service Line Costing Profitability Analysis - Answer -Product-line costing can also be useful in assessing the profitability of a proposed managed care contract and in developing carve-out rates for specific types of cases (for example, open-heart surgeries and bone marrow transplants).Responsibility Accounting - Answer -Responsibility accounting is the assignment or allocation of cost to the individual manager who is primarily responsible for making decisions about those costs. Once the 1 / 4
primary responsibility for incurring a specific cost has been established, various management reports, such as departmental expense reports, can be developed to assess a manager's effectiveness.
An Example
The budget manager has provided you with your monthly responsibility report and has asked you to do
the following:
Analyze the unfavorable variances in wage expense and medical supplies.
Explain the reasons for these material variances between actual and budget.Standard Costing System (intro) - Answer -There are two principal uses for cost accounting: assist with price negotiations and identify opportunities to enhance financial performance. Cost accounting is used for management decision-making. The better the cost information, the better the decision-making. One of the best methods of developing cost information is to implement a standard costing system.
Standard costs are those costs that should be incurred to produce a product. There are three main types
of standards:
Predetermined or Synthetic Standard 2 / 4
Negotiated or Historical Standard
Customized or Engineered Standard Predetermined or Synthetic Standard - Answer -Advantages
Minimal development time and cost
Ease of development and implementation
Not based on specific items and not specific to an individual facility
Disadvantages
Not customized, thus less precise
Not as well accepted
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May not be applicable directly to an individual department within a specific facility Negotiated or Historical Standard - Answer -Advantages
Easy to develop
Less expensive
Less disruptive than a customized standard
Department involvement and understanding may be better than with a predetermined standard, but less than with a customized standard
Disadvantages
Less precise than customized standards
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