A306 exam 1

Company Dept. A Dept B. Estimated manufacturing overhead $500,000 $338,000 $162,000 Estimated direct labor cost $250,000 $130,000 $120,000 Actual manufacturing overhead $720,000 $400,000 $320,000 Actual direct labor cost $300,000 $160,000 $140,000 Based on this information, the predetermined overhead rate per direct labor dollar for Dept. B is $

$1.35

Given sales of $100,000 a contribution margin of $40,000, and fixed expenses of $50,000, the result is a ______.

$10,000 net operating loss

Anne's Antique Store has a contribution margin ratio of 29%. The break-even point has been reached. If the store generates an additional $600,000 of sales for the year, net operating income will increase by

$174,000

a company incurred $12,000 of maintenance cost for 6,500 machine hours in june and $14,250 of maintenance costs for 8,000 hours in august. assuming these are the high and low months of activity, the estimated fixed maintenance costs using the high-low method is

$2,250

Estimated manufacturing overhead $500,000 Estimated direct labor cost $250,000 Actual manufacturing overhead $720,000 Actual direct labor cost $300,000 Based on this information, the predetermined overhead rate per direct labor dollar is Blank

$2.00 ($500,000 / $250,000)

Given a sales price of $100, variable costs of $70 and a break-even point of 500 units, net operating profit for sale of 501 units will be $

$30 ($100- $70)

Chrissy's Cupcakes has $832,000 in sales and $265,000 in fixed expenses. Given a contribution margin ratio of 72%, Chrissy's profit (loss) is

$334,040

Daisy's Dolls sold 30,000 dolls this year. Each doll sold for $40 and had a variable cost of $19. Fixed expenses were $250,000. Net operating income for the year is

$380,000

Murphy Manufacturing estimated total manufacturing overhead for the year to be $100,000 and that 5,000 direct-labor hours would be used. Actual overhead was $120,000 and actual direct labor-hours were 7,500. The overhead applied to a job completed during the year that used 200 direct labor-hours was

$4,000 Reason: The predetermined overhead rate = $100,000 ÷ 5,000 direct labor-hours = $20 per direct labor-hour × 200 direct labor-hours = $4,000.

Given: Sales of $360,000, Gross Margin of $140,000, Contribution Margin of $110,000, and Total Selling & Administrative Exp. of $60,000, net income using the traditional income statement format equals

$80,000 (140,000 - 60,000)

job XYZ has a total manufacturing cost of $600. if the markup percentage is 40% the job will sell for

$840

A company's selling price is $90 per unit, variable cost per unit is $28 and total fixed expenses are $320,000. The number of unit sales needed to earn a target profit of $200,800 is

($320,000 + $200,800) ÷ ($90 - $28) = 8,400 units.

Blissful Blankets' target profit is $520,000. Each blanket has a contribution margin of $21. Fixed costs are $320,000. The number of blankets that must be sold to achieve the target profit is

($520,000+$320,000)/$21 = 40,000

product costs

- "attach" to units of product as they are purchased for resale or produced - are also called inventoriable costs

Company A sold 200,000 units. Selling price is $7 per unit, contribution margin is $4 per unit, and the fixed expenses total $632,000. Company A's profit (loss) is

- $168,000 (200,000*$4-$632,000)

Jones Company uses a job-order costing system with a predetermined overhead rate of 120% of direct labor cost. The job cost sheet for Job #420 listed $4,000 in direct materials cost and $5,000 in direct labor cost to manufacture 7,500 units. The unit cost of Job #420 is:

- $2.00 (direct materials + direct labor + overhead (predetermined overhead rate x direct labor cost)) o Unit product cost = $15,000 / 7,500 = 2.00 per unit

JVL Enterprises has set a target profit of $126,000. The company sells a single product for $50 per unit. Variable costs are $15 per unit and fixed costs total $98,000. How many units does JVL have to sell to BREAK-EVEN?

- $98,000 ÷ ($50 - $15) = 2,800 to break-even. 6,400 units is needed to earn the target profit.

A company's current sales are $300,000 and fixed expenses total $85,000. The contribution margin ratio is 30%. The company has decided to expand production which is expected to increase sales by $70,000 and fixed expenses by $15,000. If these results occur, net operating income will

- ($70,000 × 30%) - $15,000 = $6,000 increase

the appeal of using predetermined departmental overhead rates is they presumably provide

- a more accurate accounting of costs - enhanced information for decision making

differential cost is

- also known as incremental cost - the difference in cost between two alternatives

when compared to a company with higher fixed costs and lower variable costs, a company with lower fixed costs and higher variable costs, has

- better protection from loss in bad years - lower net income in good years - greater profit stability

cost behavior

- categorizes costs as fixed, mixed, and variable - refers to how a cost will change as activity level changes

cost objects include

- customers - anything which cost data is desired - organizational subunits

widely used allocation bases in manufacturing include

- direct labor cost - units of product - machine hours - direct labor hours

manufacturing costs include

- direct materials - direct labor - manufacturing overhead

which of the following are most likely fixed costs?

- factory insurance - administrative salaries - factory rent

period costs

- include all costs that are not product costs - are expensed in the period incurred

the following are true

- period costs are expensed when incurred - period costs do not flow through the inventory accounts

nonmanufacturing costs include

- sales commissions - company president's salary

selling costs include

- sales salaries - sales commissions - advertising

the unit product cost is the same as the

- total job cost divided by number of units - average product cost per unit

at the break-even point

- total revenue equals total cost - net operating income is zero

the total cost of a job includes

-Direct Materials Cost -Direct Labor Cost -predetermined Manufacturing Overhead

A company has a target profit of $204,000. The company's fixed costs are $305,000. The contribution margin per unit is $40. The BREAK-EVEN point in unit sales is

12,725

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $

2

A company's selling price is $90 per unit, variable cost per unit is $28 and total fixed expenses are $320,000. The number of unit sales needed to earn a target profit of $200,800 is ______.

8,400 ($320,000+$200,800)/($90-$28)

Estimated manufacturing overhead $450,000 Estimated direct labor hours 150,000 Actual manufacturing overhead $405,000 Actual direct labor hours 180,000 Based on this information, the amount of overhead allocated to a job that used 300 direct labor hours is $

900

an allocation base should be

a cost driver (an ideal allocation base should really drive or cause overhead costs. machine hours/labor hours are not always an appropriate allocation base

cost-plus pricing occurs when

a markup percentage is added to the cost of a job

companies use a predetermined overhead rate rather than an actual overhead rate because

an actual rate is not known until the end of the period

companies use a predetermined overhead rate than an actual overhead rate because

an actual rate is not known until the end of the period

overhead application is the process of

assigning manufacturing overhead cost to jobs

user can easily judge the impact on profits of changes in selling price, cost or volume when using an income statement constructed under the ____ approach

contribution margin

according to the CVP analysis model and assuming all else remains the same, profits would be increased by a(n)

decrease in the unit variable cost

when a company uses a departmental approach rather than a plantwide approach to applying overhead, the selling price of the product will always be

different

categories of manufacturing costs include

direct materials, direct labor, manufacturing overhead

selling and administrative costs are ___ costs

direct or indirect

to calculate unit product cost using the job cost sheet _____ by the number of units produced

divide by the total job cost

which of the following is only true in a multiple predetermined overhead rate system?

each production department may have its own predetermined rate

the formula for a predetermined overhead rate is

estimated total manufacturing overhead cost/estimated total amount of the allocation base

costs that remain constant in total are ___ costs

fixed

Average manufacturing overhead cost per unit usually varies from one period to the next because:

fixed manufacturing overhead remains constant in total even when production changes

product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the

income statement

A company currently has sales of $700,000 and a contribution margin ratio of 45%. As a result of increasing advertising expense by $8,000, the company expects to increase sales to $735,000. If this is done and these results occur, net operating income will

increase by $7,750

the difference in revenues between two alternatives is called

incremental revenue

salaries of factory supervisors and factory maintenance personnel are examples of ___ labor costs

indirect

a company of high ratio of fixed costs

is more likely to experience greater profits when sales are up than a company with mostly variable costs - is more likely to experience a loss when sales are down than a company with mostly variable costs

the best fitting line minimizes the sum of the squared errors when using

least-square regression

direct materials and direct labor are both ___ costs

manufacturing

manufacturing overhead consists of

many different kinds of indirect costs

the amount of which sales can drop before losses are incurred is the ______

margin of safety

an allocation base is a(n)

measure of activity used to assign overhead costs to products and services

The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find

overhead applied to the job

the predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find

overhead applied to the job

a single predetermined overhead rate is called a

plantwide overhead rate

the total cost of a job is calculated by adding the total of direct labor cost, direct materials cost, and

predetermined manufacturing overhead cost

the formula for applying overhead to a specific job is: ____ amount of allocation base incurred by job

predetermined overhead rate *

total manufacturing costs tend to

remain fairly constant

total manufacturing overhead costs tend to

remain fairly constant

the variable expense ratio is the ratio of variable expense to

sales

the relative proportions in which a company's products are sold is referred to as

sales mix

to calculate profit, multiply the ____ per unit by sales volume and subtract total fixed cost

sales price

the rise-over-run formula for the slope of a straight line is the basis of

the high-low method

What is true about margin of safety?

the higher the margin of safety, the lower the risk of incurring a loss

a cost driver

the primary factor that causes a cost

why is the unit product cost different from the cost that would be incurred if another (additional) unit were produced?

the unit product cost is an average, not an incremental cost

the document used to record the hours workers spend on each job and task is called a

time ticket

one reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors

true

when a company assumes direct-labor hours is the only manufacturing overhead cost driver, they are likely to use a plantwide overhead rate

true

the contribution margin equals sales minus all ____ expenses

variable

the term "cost structure" refers to the relative proportion of ___ and ___ costs in an organization

variable and fixed

CM ratio is equal to 1 - ______ ______ ratio.

variable expense

the average manufacturing overhead cost per unit tends to

vary from one period to the next

allocation bases that do not drive overhead costs

will not accurately measure the cost of overhead used