ACC 222 Exam 1 (CH. 1, 2 & 7)
Timchak Corporation reports that at an activity level of 9,900 units, its total variable cost is $919,116 and its total fixed cost is $259,974. What would be the total cost, both fixed and variable, at an activity level of 10,100 units? Assume that this level of activity is within the relevant range.
$1,197,658
In a small manufacturing facility, one welder is needed for every 200 hours of machine-hours or fewer in a month. The welder is paid a monthly salary of $2,500. If the total monthly requirement is 1,300 machine-hours, the total salaried employee expense is ________.
$17500
Audio Corporation purchased $20,000 of DVDs during the current year. The company had DVD inventory of $15,000 at the beginning of the year. An end of the year audit revealed that the company had DVD inventory of $10,000. The amount that would be reported as cost of goods sold in the income statement for the current year is ________.
$25,000
Spartan Corporation estimates that it will incur $200,000 of total manufacturing overhead cost at an estimated activity level of 10,000 direct labor-hours. What is the amount of manufacturing overhead that would be applied to a job that required 200 direct labor-hours?
$4,000
Davidson Company has a product with a selling price per unit of $100, the unit variable cost is $60, and the total monthly fixed costs are $30,000. If the company sells 1,000 units, how much is Davidson's contribution margin per unit?
$40
Cyber Devices manufactures PCTV products that enable people to watch television content on their computers. It sells its product to retailers for $50. A tuner component that goes into each of these devices costs $5 to acquire. The total variable cost at an activity level of 1,000 units equal
$5,000
the total cost of the job includes:
- applied MOH - direct materials cost - direct labor cost
Examples of fixed costs
- factory rent - factory insurance - admin salaries
Manufacturing costs include:
1. manufacturing overhead 2. direct labor 3. direct materials
Why do we classify or categorize costs?
1.To assign costs to cost objects 2.To account for costs in manufacturing environments 3.To prepare financial statements 4.To predict costs at different levels of production 5.To help managers make strategic decisions
A cost system determines the cost of a cost object by
Accumulating and then assigning costs
Examples of period costs
All selling and administrative: sales commissions, advertising, executive salaries, public relations and the rental cost of administrative offices
The traditional income statement uses which cost categories?
Cost of goods sold Selling and Admin expenses
Variable cost examples
Direct materials, direct labor, variable MOH, supplies, electricity, sales commissions, shipping expense
Within the relevant range, if there is a change in volume then:
Fixed cost per unit will change and variable cost per unit will remain the same
Companies can improve job cost accuracy by using ________.
Multiple POHRs
Which of the following items is a direct cost?
Printing costs incurred for payroll check processing when payroll check processing is the cost object
Cost allocation is
The assignment of indirect costs to the chosen cost object
A fixed cost is a cost whose cost per unit varies as the activity level rises and falls. True or false?
True
indirect cost
a cost that cannot be easily and conveniently traced to a specified cost object.
product costs
all costs involved in acquiring or making a unit of product - capitalized on the balance sheet until they are sold and then appear on the income statement as cost of goods sold - are manufacturing costs
Period costs
all of the costs that are not product costs - not included as part of the cost of either purchased or manufactured goods - expensed on the income statement in the period incurred
The direct materials required to manufacture each unit of product are listed on a ________.
bill of materials
Sales revenue - variable expenses =
contribution margin
direct cost
cost that can be easily and conveniently traced to a specified cost object
What is not a management report that is normally prepared with ABC data?
customer margins
The adjustment for overapplied overhead ________.
decreases cost of goods sold and increases net operating income.
difference in costs between two alternatives is called an _______ cost
differential
materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are _________ materials
direct
Adventure holiday sells thousands of tour packages each month through its various branches. A branch manager's salary could be a __________ cost of the branch
direct cost
What is not allocated using ABC?
direct labor
direct manufacturing cost =
direct materials + direct labor
Fixed costs expressed on a per unit basis do not change with changes in activity. True or False?
false
Adventure holiday sells thousands of tour packages each month through its various branches. A branch manager's salary could be a __________ cost of selling a tour package
indirect cost
minor items such as nails and glue are usually considered to be:
indirect materials
Product costs are also called ________ costs
inventoriable
contribution margin
is the amount remaining from sales revenues after all variable expenses have been deducted. - amount contributes toward covering fixed expenses and then toward profits for the period.
For a cost to be included in manufacturing overhead it must be _________&__________
manufacturing and indirect
Total indirect manufacturing costs =
manufacturing overhead
factory materials, such as cleaning supplies, that are NOT components of finished products are classified as:
manufacturing overhead
The ________ __________ requires that the costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized
matching principle
An allocation base is a:
measure of activity used to assign overhead costs to products and services
compared to a plantwide overhead rate system, a multiple predetermined overhead rate system is:
more complex, but more accurate
property taxes associated with a company's administrative facility are considered:
non-manufacturing costs
Managerial accounting focuses on decisions affecting current and future periods, while financial accounting emphasizes the outcomes of __________ events
past
expensed (as SG&A) in full in the period in which they are incurred
period costs
Managerial accounting emphasizes the relevance of information, while financial accounting emphasizes the __________ or precision of information
reliability
if a firm increases its activity level:
some costs will change, others will remain the same
When all of a company's job cost sheets are viewed collectively they form what is known as a ________.
subsidiary ledger
How do you calculate the predetermined overhead rate?
total estimated manufacturing overhead / total estimated allocation base
In the cost formula (Y = a + bX) that is used to estimate the total manufacturing overhead cost for a given period, the letter "a" refers to the estimated ________.
total fixed manufacturing overhead cost
What is the term used when a company applies less overhead to production than it actually incurs?
underapplied
Cost of goods sold for a merchandising company, direct materials and commissions are all examples of ________ costs
variable
Remain constant per unit and vary in total
variable costs
Vary per unit and remain constant in total
fixed costs
companies that make many different products each period use ______ ______ costing
job order
Items such as indirect materials, indirect labor, maintenance and repairs on production equipment, depreciation, and insurance on manufacturing facilities are included in ________
manufacturing overhead costs
Managerial accounting provides information for users inside the organization, while financial accounting reports information for users _________ the organization
outside
________ best describe the wages of a sheet metal worker in a fabrication plant
product costs
The management of Blue Ocean Company estimates that 50,000 machine-hours will be required to support the production planned for the year. It also estimates $300,000 of total fixed manufacturing overhead cost for the coming year and $4 of variable manufacturing overhead cost per machine-hour. What is the predetermined overhead rate?
$10 per machine hour
Wofril Corporation uses the cost formula Y = $5,300 + $0.60X for the maintenance cost, where X is machine-hours. The August budget is based on 8,000 hours of planned machine time. Maintenance cost expected to be incurred during August is:
$10,100
Activity-based costing accumulates costs for each __________.
Activity
If each car requires a belt that costs $20 and 2,000 cars are produced for the period, then the total cost for belts is:
Considered to be a direct variable cost
Advertising is an example of a __________activity.
Product-level
manufacturing overhead:
- contains fixed costs - is an indirect cost - consists of many different types of costs
indirect labor costs include:
- factory security guard wages - assembly-line supervisor salary
non-manufacturing costs include
- sales commissions - company president's salary
selling costs include:
- sales commissions - sales salaries - advertising
differential cost is:
- the difference in cost between two alternatives - also known as incremental cost
differences between ABC and traditional absorption costing
ABC system may assign nonmanufacturing costs to products ABC system uses many cost pools ABC system may exclude some manufacturing costs, such as organization-sustaining costs
fixed cost examples
Rent, depreciation, property taxes, management salaries, equipment lease
in the mixed cost equation Y= a+bX, Y= a= b= X=
Y = total mixed cost a = fixed cost b = variable cost per unit of activity X = level of activity
what is managerial accounting
a management control system that measures, records, and reports the outcomes of economic events in organizations for use by managers in their cost-based judgments and decisions
cost object
anything for which cost data are desired -- including products, customers and organizational subunits - classified as either direct or indirect
How do you calculate the overhead applied to a particular job?
applied OH = predetermined OH rate * amount of the allocation base incurred by a job
Shipping orders to a grocery store would be considered a(n) ________.
batch-level activity
Activity-based costing estimates the costs of the resources consumed by _________.
cost objects
In the first-stage allocation of overhead costs, products, customer orders and customers are examples of ________.
cost objects
common cost
cost that is incurred to support a number of cost objects but cannot be traced to them individually - type of direct cost - example: factory manager's salary (indirect cost of manufacturing a product)
What is an allocation base commonly used under the traditional methods for allocation of overhead costs?
direct-labor hours
A decrease in production will ordinarily result in a decrease in fixed production costs per unit. True or false?
false
The variable cost per unit depends on how many units are produced. True or false?
false
incurred to produce units of inventory and therefore become part of inventory until the unit is sold (when expensed as COGS)
product costs
