accounting exam 2 study guide
What is usually plotted as a horizontal line on the CVP graph?
Fixed expenses
What type of predetermined overhead rate is used in activity-based absorption costing?
Multiple
The profit graph is based on the following linear equation:
Profit = Unit CM x Q - Fixed Expenses.
What is represented on the X axis of a cost-volume-profit (CVP) graph?
Sales volume
What does the green line in the CVP graph indicate?
Total expenses
What is the term used when a company applies less overhead to production than it actually incurs?
Underapplied
An activity measure is like a(n) ________.
allocation base
The direct materials required to manufacture each unit of product are listed on a____
bill of materials
A normal cost system applies overhead to jobs ________.
by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job
A shift in the sales mix from high-margin items to low-margin items can cause total profit to ________.
decrease
The adjustment for overapplied overhead ________.
decreases cost of goods sold and increases net operating income.
Companies can improve job cost accuracy by using ________.
multiple predetermined overhead rates
The measure of how sensitive net operating income is to a given percentage change in dollar sales is called _______.
operating leverage
Design work and engineering changes are examples of ________.
product-level activities
contribution margin ________.
sales - variable cost
When all of a company's job cost sheets are viewed collectively they form what is known as a ________.
subsidiary ledger
Break-even point is the level of sales at which ______.
total revenue equals total costs
Once the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit sold.
unit contribution margin
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 ________.
y- estimated total manufacturing overhead cost a-estimated total fixed manufacturing overhead cost b-estimated variable manufacturing overhead cost per unit of allocation base x-estimated total amount of allocation base