Accounting chapter 4 review

Selling price less variable cost equals

Contribution Margin

Wages of employees who put the equipment together

DL (Direct Labor)

Cost of cables used in equipment

DM (direct materials) and U (Unit related)

If only selling price increase the breakeven point...

Decreases

Cost of office supplies

NP (Non Product cost)

Depreciation on salespersons cars

NP (Non Product cost)

The president of the corporations salary

NP (Non Product cost)

Cost of shipping equipment to customers

NP (Non Product costs)

Research Cost incurred to develop new types of equipment

NP (Non Product costs) and P (Product sustaining)

Cost of fabric used in recliners

P (Product cost)

Cost of the glue used to assemble the chairs

P (Product cost)

Cost of the wood used in chairs

P (Product cost)

The point where the total revenue line intersects the total cost line is called the

breakeven point

Short term decision making differs from long term because short term

Assumes capacity is fixed, quantity is stable Does NOT assume selling price is fixed or that accounting data is fixed, or that variable cost is fixed

Beta co makes 350,000 units of product Gamma along with its other products. Its production occurs per unit are direct materials; $5. Direct Labor; $4. Unit related overhead; $2. Faculty sustaining overhead $700,000 per year. A co has made beta an offer to supply all units of gamma its needs for $12 per unit. Should beta co buy gamma from the supplier.

Cost per unit for making themselves is $11, should not by gamma from supplier

Salary of warehouse foremen where raw material is stored

MOH (Manufacturing Overhead)

Salary of the quality control inspector

MOH (Manufacturing Overhead) and B (Batch related)

Insurance on factory equipment

MOH (Manufacturing Overhead) and F (Facility sustaining)

Cost of oil used to cut metal tubing

MOH (Manufacturing Overhead) and U (Unit related)

Set up cost to change from one piece of equipment to another

MOH (manufacturing overhead) and B (batch related)

Which of the following is a short term operating decision

Make or buy Accept or reject Keep or drop

Cost of the utilities incurred to run the manufacturing plant

P (Product cost)

The salary of the foreman who oversees the raw materials in the warehouse

P (Product cost)

Wages paid to employees who assemble their chairs

P (Product cost)

ABC Company produces and sells Product A. The selling price is $15 per unit. It costs $4 per unit to make Product A and $2 per unit to sell it. Fixed manufacturing costs are $600,000 per year and fixed selling and administrative costs are $300,000 per year. ABC Company's tax rate is 25%. Round all answers to the nearest whole number. What is the breakeven point in units?

What is break even point in units: 100,000 What is break even point in dollars: $150,000