Accounting Exam 2

profit

A simpler form of the CVP graph is called the _________ graph.

CVP analysis

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

fixed manufacturing overhead

Absorption and variable costing net income are usually different due to the accounting for ______.

$380,000

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 ______.

activity-based

Overhead includes both manufacturing and nonmanufacturing costs under Blank______ costing.

are always treated as period costs

Selling and administrative expenses ______.

True

Some manufacturing costs may be excluded from product cost when using ABC.

zero

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

variable expenses

The contribution margin is equal to sales minus ______.

false

True or false: CVP analysis investigates company personnel policies, business values, and performance measures for a specific company.

period

Under both variable costing and absorption costing, variable and fixed selling and administrative costs are treated as ______ costs.

variable cost per unit multiplied by quantity of units sold

When a company only produces a single product, the total variable cost can be calculated with the equation ______.

true

True or False: Under absorption costing, fixed overhead is treated like a variable cost because a portion of the total cost is allocated to each unit produced, rather than being expensed as one large sum.

true

True or false: In an automated environment, using traditional allocation bases based on volume may distort unit product costs.

traditional or absorption

Costs of unused or idle capacity are assigned to products when using a(n) _________ costing system

contribution margin ÷ sales

The calculation of contribution margin (CM) ratio is ______.

inside the company only

The contribution margin statement is ordinarily used by those ______.

internal decision making

The contribution margin statement is primarily used for ______.

absorption, variable

The two general costing approaches used by manufacturing companies to prepare income statements are _________ costing and __________ costing.

false

Simple CVP analysis can be relied on for changes in volume outside the relevant range.

contribution margin

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

selling price

To simplify CVP calculations, it is assumed that Blank______ will remain constant.

fixed expenses plus net operating income

Total contribution margin equals ______.

more

Compared to traditional systems, activity-based costing uses ______ cost pools and unique measures of activity.

profit after fixed expenses are covered.

Contribution margin becomes:

absorption, variable

For external reporting, income statements are generally prepared using _____________ costing, while ________________ costing is used for internal decision making purposes.

$2,200 Profit = 300 × ($20 - $7) - $1,700 = $2,200.

Marjorie's Mugs sold 300 mugs last year for $20 each. Variable costs were $7 per mug and total fixed costs were $1,700. Marjorie's Mugs' profit was ______.

expensed in the period incurred

When using variable costing, fixed manufacturing overhead is ______.

Traditional absorption costing

Which costing method assigns only manufacturing costs to products?

may be allocated to products based on cause

Under activity-based costing, nonmanufacturing costs _____.

all indirect costs

Under activity-based costing, overhead includes ______.

contribution margin, fixed

Variable costing net income may be computed by multiplying the number of units sold by the _______________ per unit and subtracting total _____________ expenses.

only variable

Variable costing treats ______ manufacturing costs as product costs.

period

Variable costing treats fixed manufacturing overhead as a(n) __________ cost.

$99,000 (CM - FE = NOI or NOL)

Vivian's Violins has sales of $326,000, contribution margin of $184,000 and fixed costs total $85,000. Vivian's Violins net operating income is ______.

dollars.

When constructing a CVP graph, the vertical axis represents:

increase by $7,750 Reason: (($735,000 - $700,000) × 45%) - $8,000 = $7,750 increase

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 ______.

equals

A company has reached its break-even point when the contribution margin ___________ fixed expenses

$100 For each unit sold above break-even, profit increases by the contribution margin per unit ($100,000 - $80,000) ÷ 200 or $100.

A company reported $100,000 in sales and $80,000 in variable costs at the breakeven point of 200 units. If the company sells 201 units, net profit will be ______.

$198,000

A company's break-even point is 17,000 units. If the contribution margin is $22 per unit and 26,000 units are sold, net operating profit will be ______.

$17,483 ($11.50 * 842) + $7,800

Blissful Breeze manufactures and sells ceiling fans. Variable selling and administrative expense is $11.50 per fan and fixed selling and administrative expense is $7,800 per month. If Blissful Breeze produces 900 fans and sells 842 fans this month, total selling and administrative expenses will be $

cost-volume-profit (CVP) analysis

CVP is the acronym for _________________

activity

In ABC, any event that causes consumption of overhead resources is a(n)

Manufacturing only

In a traditional cost accounting system, what type of costs are assigned to products even if the costs are not caused by the products?

cause-and-effect

In activity-based costing, nonmanufacturing and manufacturing costs are assigned to products on a(n) ______ basis.

-Unused capacity -Organization-sustaining

In activity-based costing, what costs are not assigned to products?

contribution margin

Users 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

Variable costing income statements are based upon a ______ format.

absorption costing only

Fixed manufacturing overhead costs are included as part of Work in Process inventory under ______.

$180,000 Contribution margin = 20,000 × ($20 - $11) = $180,000.

A company sold 20,000 units of its product for $20 each. Variable cost per unit is $11. Fixed expenses total $150,000. The company's contribution margin is ______.

segments

A company's operations can be divided by product lines, geographical area, manufacturing plants, service centers or sales territories, which are known as

selling prices, sales volume, unit variable costs, total fixed costs, mix of products sold

CVP analysis allows companies to easily identify the change in profit due to changes in ______.

assumptions

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

$6,472.14

Citrus Scents produces body sprays. Each bottle has a unit product cost of $5.38. This month 1,490 bottles were produced and 1,203 bottles were sold. Total cost of goods sold is ______.

$5,763.15 Reason: ($1.05 × 1,203) + $4,500 = $5,763.15

Citrus Scents produces body sprays. Variable selling and administrative expense is $1.05 per bottle and fixed selling and administrative expense is $4,500 per month. If 1,490 bottles are produced and 1,203 are sold in July, total selling and administrative expense for the month will be ______.

-sales commission -warranty repair costs -shipping costs

Costs that can be easily traced to individual products include ______.

$101,000

Sleep Tight manufactures pillows. The company incurred $42,000 of fixed manufacturing overhead cost this year. Variable unit product cost was $17. Variable selling and administrative cost was $9 per unit and fixed selling and administrative expenses totaled $59,000. The company manufactured 28,000 pillows and sold 15,408. Total fixed expenses on the variable costing contribution format income statement equal ______.

$124,020 Reason: ($140 + $19) × 780 quilts sold = $124,020

The Quaint Quilt produces and sells handmade quilts. Variable manufacturing costs total $140 per quilt. Fixed manufacturing overhead totals $68,250 per quarter. Variable selling and administrative costs are $19 per quilt sold, and fixed selling and administrative costs are $50,000 per quarter. Last quarter, the company produced 910 quilts and sold 780 quilts. The total variable cost reported on Quaint Quilt's variable costing income statement is ______.

Set-up labor wages

Which of the following is NOT an organizational sustaining cost?

period

Activity-based costing treats organization-sustaining costs as __________ expenses.

$137,500 $250,000 × 55% = $137,500 increase

Adam's Sports Store has a contribution margin ratio of 55% and has already passed the break-even point for the year. If Adam's generates additional sales of $250,000 by year-end, net operating income will increase by ______.

contribution margin

After reaching the break-even point, a company's net operating income will increase by the ___________________ per unit for each additional unit sold.

supplements

An ABC system usually ______ a traditional cost system.

increase $18,000 Change in net operating income = 2,000 × ($15 - $6) = $18,000.

Fantastic Frames sells units for $15 each. Variable costs total $6 per unit, and fixed costs total $90,000. If the number of units being sold increases by 2,000, net operating income will ______.

$47.00

Put'er There manufactures baseball gloves that require $22 of direct materials and $18 of direct labor. Variable manufacturing overhead cost is $7 per glove and fixed manufacturing overhead cost is $19,000 in total. Variable selling and administrative costs are $11 per unit sold and fixed selling and administrative costs are $13,200. Last period, 800 gloves were produced, and 585 gloves were sold. The unit product cost using variable costing is Blank______.

$10,000 net operating loss (CM - FE = NOI or NOL)

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

-machine hours -labor hours

In the 19th and 20th centuries, cost systems relied on allocation bases such as ______.

unit volume.

When preparing a CVP graph, the horizontal axis represents:

Activity-based

Which costing system charges products only with the costs of the capacity used by those products and not with the cost of unused capacity?

(unit sales - unit sales to break even) × unit contribution margin.

Net operating income equals:

-selling price is constant. the price or service will not change as volume changes -costs are linear and can be accurately divided into variable and fixed components. the variable costs are constant per unit and the fixed costs are constant in total over the entire relevant range -in multiproduct companies, the mix of products sold remains constant

Which of the following are assumptions of cost-volume-profit analysis?

segment

A part or activity within an organization about which managers would like cost, revenue or profit data is called a(n)

product

Absorption costing treats fixed manufacturing overhead as a ______ cost.

increase

In recent years, direct labor as a percentage of total cost began declining, which caused overhead to

direct labor hours was a satisfactory overhead allocation base

In the 19th and 20th centuries ______.