Accounting Exam 1

what is the CM if the per unit if the unit price is $125 and the variable cost is $60

$65

net operating income can be calculated as:

(unit sales - unit sales to break even) x contribution margin

when tool can be used to easily calculate the change in profit resulting from a change in sales price, sales variable, variable costs, or fixed costs

CVP analysis

the statistic R^2 is:

a measure of goodness of fit

cost behavior is considered linear whenever:

a straight line approximates the relationship between cost and activity

Cost objectives include:

anything for which cost data is desired customers organizational subunits

maintenance and depreciation of test equipment are examples of ____________ costs

appraisal

costs incurred to identify defective products before they are shipped to customers are called ______ or ______ costs

appraisal or inspection

The more effective a company's ________ activities, the greater the level of _________ failure costs

appraisal; internal

CVP analysis is based on some _______________ that may be violated in practice, but the tool is generally still useful

assumptions

when using the high low method, if the high or low levels of cost do not match the high or low levels of activity:

choose the periods with the highest and lowest level of activity and their associated costs

costs that are shared by multiple cost objects in a company are known as ________ costs

common

Nonmanufacturing costs include which of the following: company president's salary assembly-line worker wages sales commissions insurance on plant equipment

company presidents salary; sales commissions

after reaching the break even point, a company's net operating income will increase by the ___________ ___________ per unit for each additional unit sold

contribution margin

to estimate the effect on profits for a planned increase in sales, multiply the increase in units sold by the unit ____________ _____________

contribution margin

how do you calculate the degree of operating leverage

contribution margin/net operating income

direct labor and overhead cost incurred to change raw materials into finished products are known as _________ costs

conversion

how individual costs react to changes in activity level is:

cost behavior

any item for which cost data is desired is called:

cost object

the relative proportion of each type of costs in an organization is known as the company's ____________ __________.

cost structure

CVP is an acronym for

cost volume profit

which of the following is not an example of a typical external failure costs: debugging system errors product recalls defective product liability warranty repairs

debugging system errors

differential costs, opportunity costs, and sunk costs are all cost classifications used in:

decision making

the measure of how a percentage change in sales affects profits at any given level of sales is the:

degree of operating leverage

A change in revenues between two alternatives is known as ______ revenue or incremental revenue

differential

The difference in costs between two alternatives is called a _______ cost

differential

Materials that become an important component of the finished product whose costs can be easily and conveniently traced back to the finished product are _____ materials

direct

which of the following is not a category of quality costs: direct costs prevention costs internal failure costs appraisal costs

direct costs

Labor costs that can be easily and conveniently traced to a specific product are called _______ costs

direct labor

in an automobile manufacturing plant, the assembly-line workers are classified as ______ _____ costs

direct labor

prime costs are:

direct labor and direct materials

manufacturing costs can be divided into three categories:

direct labor, direct materials, and manufacturing overhead

How do you find prime costs?

direct materials+direct labor

total variable manufacturing costs:

direct materials+directlabor+variable manufacturing overhead

Fixed costs that usually arise from annual spending decisions by management are ________ fixed costs

discretionary

when constructing a CVP graph, the vertical axis represents:

dollars

estimating the fixed and variable components of a mixed cost using the __________________ approach involves a detailed analysis of what cost behavior should be

engineering

a company has reached its break-even point when the CM ________ fixed expenses

equals

When company recalls a defective product, a _____ _______ cost is incurred

external failure

True/False: removing expenses that do not differ between alternatives could alter a decision

false

prior to being recorded on the income statement, manufacturers' product costs flow through:

finished goods work in process raw materials

in a least-squares regression line, the intercept (a) of the line represents the total _____________ costs

fixed

how do you calculate the dollar sales to break even

fixed expenses/cm ratio

contribution margin is first used to cover ___________ expesnes. once the break even point has been reached, CM becomes _______________

fixed; profit

which of the following are assumptions of cost volume profit analysis

in multi product companies, the sales mix is constant AND costs are liear and can be accurately divided into variable and fixed elements

the purpose of statistical process control is to identify processes that are ____ or _____ of control

in or out

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

income statement

differential costs are also known as ________ costs

incremental

when the analysis of a change in profits only considers the costs and revenues that will change as a result of the decisions, the decision is being made using _________ analysis

incremental

Labor costs that cannot be easily and conveniently traced back to a specific cost object are _______ costs

indirect

minor items such as nails and glue are usually considered to be:

indirect materials

manufacturing overhead costs include:

indirect materials, factory supervisors' salaries, and factory depreciation

the contribution margin statement is primarily used for:

internal decision making

costs that result from identifying defects before products are shipped to customers and include the costs of scrap and rework are ________ costs

internal failure

the degree of operating leverage:

is the greatest at sales levels near the break even point is not a constant decreases as sales and profits rise

a method that uses all the available data points to divide a mixed costs into its fixed and variable costs is called:

least square regression

what are the two broad classifications of costs

manufacturing and nonmanufacturing

indirect materials and indirect labor are classified as:

manufacturing overhead

the amount by which sales can drop before losses are incurred is the:

margin of safety

The cost of producing one more unit is called the _____ cost

marginal

the revenue obtained from selling one additional unit of product is called _________ revenue

marginal

the accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is known as the __________ principle

matching

a cost that contains both variable and fixed cost elements are __________ costs

mixed

a measure of how sensitive net operating income is to a given percentage change in sales dollars

operating leverage

Benefits that are given up when selecting one alternative over another

opportunity costs

which of the following is not a name for manufacturing overhead prime manufacturing costs factory overhead factory burden indirect manufacturing costs

prime manufacturing costs

Which of the following are not internal failure costs: product recalls net cost of scrap rework labor and overhead depreciation of test equipment

product recalls depreciation of test equipment

typical prevention costs include (2): depreciation of test equipment quality circles debugging software errors statistical process control

quality circles stastical process control

small groups of employees that meet regularly to discuss ways to improve quality are referred to as _________ ______________-

quality cirlces

prevention, appraisal, internal failure, and external failure costs incurred are detailed on a:

quality costs report

products that meet or exceed their expectations and are free from defects that mar or degrade their performance are said to have high:

quality of conformance

The materials that go into the final product are called _______ materials

raw

what is found above the CM on a CM format income statement

sales and variable expenses

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

sales mix

the term used for the relative proportion in which a company's products are sold is:

sales mix

when preparing a multi-product break even analysis, the assumption is ordinarily made that the ____________ will not change

sales mix

contribution margin is:

sales revenue minus vaiable costs

high low or least squares regression analysis should only be done if a __________ plot depicts linear cost behavior

scattergraph

What type of costs is never relevant and should be disregarded when making decisions: opportunity sunk marginal incremental

sunk

to prepare a CVP graph, lines must be drawn representing what three things

total revenue, total expense, and total fixed expense

how do you calculate margin of safety in dollars

total sales - break even sales

true/false: presenting fixed costs on an average per unit basis makes it look like they are variable costs

true

COGS for a merchandising company, direct material's, and commissions are all examples of _______ costs

variable

Mixed costs are also commonly known as _________ costs

variable

when using the high low method, the slope of the line equals the _________ cost per unit of activity

variable

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

variable and fixed

variable expenses/sales is the calculation for what ration

variable expense

what does an activity base measure

whatever causes costs to vary

the break even point is the level of sales at which the profit equals _________-

zero