CH 19 , 18, Ch.17 ACC2

If a company uses activity-based costing, the most appropriate cost driver for the production department would be the:

# of labor hours

The ABC Company had its highest level of production in May when they produced 4,000 units at a total cost of $110,000 and its lowest level of production in November when they produced 2,500 units at a total cost of $87,500. Using the high-low method, the estimated variable cost per unit is $

$ 15 Variable Cost per Unit High Low Method Formula = High $ - Low $ / High Vol. - Low Volume

RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. RST desires to earn a target income of $20,000. The sales level in dollars to achieve the desired target income is

$ 30K FC+ 20K TARGET INC / .4 (had to figure out CONT MARG Ration ) CONTR MARG per UNIT ($10 - $6) / ($10) Selling Price per unit = .4

A company uses the departmental overhead rate method. Total overhead costs are $6,000,000. Of this total, the machining department is assigned overhead costs of $4,000,000 and the assembly department is allocated the remainder. The machining department uses machine hours as their allocation base and has 80,000 machine hours. The assembly department uses direct labor hours as their allocation base and has 50,000 direct labor hours. Calculate the overhead rate for the assembly department.

$ 40 Direct Labor Hours $2,000,000/50,000 direct labor hours=$40 per direct labor hour. To get $2 it was $6M - $4m leaving the remainder of $2m

RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. The break-even point in sales dollars is

$ 75,000

RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. The company is considering purchasing a new manufacturing machine which would improve efficiency. The new machine would decrease the variable cost to $4, but increase fixed costs by $15,000. The revised break-even point in dollars is

$ 75,000 ( process in notes)

LMN Company produces a product that sells for $1. The company has production costs of $600,000, half of which are fixed costs. Assuming production and sales of 750,000 units, the contribution margin per unit is

$.60 Reason: given half of $600,000 is VARI Cost. So, 300,000 / 750,000 units = .4. Apply formula $1 Sales per unit - $.40 VARI cost per unit = $.60 Contribution MARG per Unit

Spring Company uses activity-based costing to allocate their overhead costs. Setup costs of $100,000 are based on number of setups. Factory services of $65,000 are based on square footage. Spring Company has identified 500 setups and has 10,000 square feet in their factory. What is the activity rate for the setup activity cost pool.

$100,000/500 setups =$200. Activity rate = budgeted cost / budgeted usage

Loudon Company has the following unit costs: direct materials $6, direct labor $3, variable overhead $2, fixed overhead $1. Under absorption costing, total unit cost is:

$12 All costs counted

Brother Company uses variable costing. Their direct materials are $8, direct labor is $6 and total overhead is $5 of which $3 is variable. What is Brother Company's total unit cost?

$17 Reason: $8 + $6 + $3. Total overhead did not count

Landen Company uses a single plantwide overhead rate based on direct labor hours. Total budgeted overhead costs are $200,000. Total budgeted direct materials are $50,000 and total budgeted direct labor hours are 80,000. What is the plantwide overhead rate per direct labor hour?

$2.50 Reason: $200,000 (TBOH) /80,000 (TBDLH)=$2.50 per direct labor hour.

RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. How many units must be produced to break-even

$30,000 / $4 (= $10 -$6) = 7500

A company uses the departmental overhead rate method. Total overhead costs are $5,000,000. Of this total, the machining department is assigned overhead costs of $4,000,000 and the assembly department is allocated the remainder. The machining department uses machine hours as their allocation base and has 80,000 machine hours. The assembly department uses direct labor hours as their allocation base and has 50,000 direct labor hours. Calculate the overhead rate for the machining department.

$4,000,000/80,000 machine hours=$50 per machine hour.

A company has a margin of safety of 20%. If expected sales are $50,000, then break-even sales are:

$40,000 Reason: (sales 50,000-x)/50,000=20%. x = $40,000.

A company sells two models of a product—basic and premium. The basic model has a variable cost of $75 and sells for $100. The premium model has a variable cost of $100 and sells for $150. If the company usually sells 2,500 basic models and 7,500 premium models, then the weighted-average contribution margin per unit is

$43.75 To find weight Contr margin, 1st find it for each product Basic = 100 (sell) - 75 (VC) = 25 PREM = 150 (sell) - 100 (VC) = 50 then weight each w % and add up

A company has sales of $125,000, variable costs of $45,000 and fixed costs of $30,000. The break-even point in sales dollars is

$46,875 reason 1) TC $125,000 - VARI Cost $40,000 = $80,000 CONTR MARG 2) CONTR MARG $80,000 / TC$125,000 = .64 Contribution MARG ratio Step 3 for Break- even pt.) FC $30,000 / .64 = B-E pt

The ABC Company had its highest level of production in May when they produced 4,000 units at a total cost of $110,000 and its lowest level of production in November when they produced 2,500 units at a total cost of $87,500. Using the high-low method, the estimated fixed costs are $

$50,000

The Production Department incurs costs of $250,000 while working 12,500 direct labor hours. If Job 421 requires 25 direct labor hours to assemble, the amount of overhead allocated to the job will be $

$500 Reason: ( 250,000 / 12,500 ) * 25 = 500

Jackson Company uses activity-based costing to allocate their overhead costs. Setup costs of $850,000 are based on number of batches. Design modification costs of $155,000 are based on number of design changes. Jackson Company has identified 40,000 batches and has 5,000 design changes in their factory. What is the activity rate for setup.

$850,000 cost / 40,000 batches = $21.25. activity for set up

Phillip Company uses activity-based costing. Phillip Company produces two types of lamps, floor lamps and table lamps. The floor lamp requires 15 setup activities at $60 per setup and 5 design changes at $50 per design. If Phillip Company produces 1,200 floor lamps, what is the total overhead cost per floor lamp? Round your answer to two decimal places.

(15x$60) + (5x$50) = $1,150 $1,150 cost / 1,200 units=.9583 rounded = 0.96.

A company that sells multiple types of products has a combined selling price per unit of $150, combined variable cost per unit of $50 and total fixed costs of $25,000. The weighted-average contribution margin per unit is

*** Trick - weight is not given they are using totals 150 - 50 = CONT MARG per unit= $100

The FIRST step in applying activity-based costing is

1 ) Identify the activates 2) Compute 3) allocate

The margin of safety (MOS) is a concept used in financial analysis. What is it?

1) The difference between expected sales and break-even sales divided by expected sales. 2) The amount sales can drop before the company incurs a loss.

The departmental overhead rate method uses a three-step process to allocate cost objects. List these steps in the correct order

1. Assign 2. Select 3. Allocate

List the three steps of activity-based costing in the correct order

1. Identify 2. Compute 3. Allocate

What overhead costs are included in activity-based costing? (4)

1. Production 2. Setup 3. Design 4. Factory services

What are teh 4 types of Activities?

1. Unit level 2. batch 3. Product 4. facility

The margin of safety is:

1. the difference between expected sales and break-even sales divided by expected sales. 2. the amount of sales can drop before the company incurs a loss. 3. expressed in $ or % of expected sales

RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. RST desires to earn a target income of $20,000. The sales level in units to achieve the desired target income is

12500

The ACC Tutoring Service provides tutoring to accounting students. The volume of tutoring is low at the beginning of the semester and increases before exams. ACC had its highest level of service in May when they provided 4,300 hours of tutoring at a total cost of $125,000 and it lowest level of service in January when they provided 1,500 hours of tutoring at a total cost of $55,000. Using the high-low method, the estimated fixed costs are $

17,500 Fixed = Total Cost (cost at highest or lowest amount) - (cost per unit found variable way x lowest or highest amount, matching high /low choice in TC)

The Factory Services Department incurs costs of $130,000 while maintaining machinery that is operated 1,000,000 machine hours. If Job 276 requires 1,500 machine hours, the amount of costs allocated to the job will be

195

The high-low method uses ___ points to estimate the cost equation.

2

The ACC Tutoring Service provides tutoring to accounting students. The volume of tutoring is low at the beginning of the semester and increases before exams. ACC had its highest level of service in May when they provided 4,300 hours of tutoring at a total cost of $125,000 and its lowest level of service in January when they provided 1,500 hours of tutoring at a total cost of $55,000. Using the high-low method, the estimated variable cost per hour is $

25 Reason: Variable Cost per Unit High Low Method Formula = High $ - Low $ / High Vol. - Low Volume

A company sells two models of a product—basic and premium. If the company sells 5,000 basic models and 2,500 premium models, then the sales mix can be expressed as:

2:1. Reason: 5,000/2,500=2:1

A company sells two models of a product—Alpha and Omega. If the company sells 10,000 Alpha models and 2,500 Omega models, then the sales mix can be expressed as:

4:1

A company has fixed costs of $50,000 while manufacturing a product that has variable costs of $4 per unit and sells for $14 per unit. The break-even point per unit is

5000 units

A company sells two models of a product—basic and premium. The basic model has a contribution margin per unit of $25 and unit sales of 750. The premium model has a contribution margin per unit of $40 and unit sales of 250. Fixed costs are $15,000. The weighted average break-even in units is

521.739 rounded to 522 (75% * 25) + (25% * 40) = 18.75 + 10 = 28.75 weighted av contr margin per unit 15000 {TC} / 28.75 {above} = 521.739

RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. How many units must be produced to break-even

7500

In order for a service provider to use activity-based costing, they should classify costs by _______ level

ACTIVITY

Which costing method can be helpful to management in setting prices because it reflects full costs that sales must exceed for the company to be profitable?

Absorption costing shows the full cost.

Commonwealth Company has the following unit costs: direct materials $2, direct labor $4, variable overhead $1, fixed overhead $3. Under the absorption costing method, what is the total unit cost?

Add them all together since they all calculate absorption costing Reason: $2 + $4 + $1 + $3.

Maker's Company produces a product that has a variable cost of $4 per unit. The company's fixed costs are $40,000. The product sells for $12 per unit. The company is considering purchasing a new manufacturing machine which would improve efficiency. The new machine would decrease the variable cost to $3, but increase fixed costs by $5,000. The revised break-even point in dollars is

Answer= $60,000 USED Formula for revised B-E in$ $40K + $5 K = $45KFC Find CONT MARG ratio (per unit) --> 12-3 = 9 then 9 / 12 = gives.75 CONTR RATIO FC of 45 / .75 = 60,000 new B-E

The sales level at which total sales equal total costs, resulting in zero income, is called_______

Break-even point

An income statement which shows the excess of sales over variable costs is referred to as a

Contribution Margin

Sales minus variable costs is called

Contribution Margin

____________________ format income statement reports variable costs separately from fixed costs.

Contribution Margin

RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. RST desires to earn a profit of $20,000. The contribution margin per unit is

Contribution Margin per unit = sell $ per unit - VARI Cost per unit $10- $6 = $ 4

Because of its usefulness in CVP analysis, managers generally use an income statement in which format?

Contribution margin income statement

The plantwide and departmental overhead rate methods are based on readily available information such as direct______ hours or________ hours.

Direct labor hours & machine hours

Hamilton Company has decided to use variable costing and has identified the following costs: direct materials $5, direct labor $10, variable overhead $3, fixed overhead $2. What is Hamilton Company's total unit cost?

Don't count fixed overhead $ 18

If management incentives are tied to income under absorption costing, which of the following may occur (select all that apply):

Due to over production: possible obsolescence increased financing costs increased storage costs.

(Facility, Product, Batch) level activities are focused on the whole facility.

Facility

True or false: The plantwide overhead rate method uses multiple rates to allocate overhead costs to products.

False Reason: The plantwide method uses a single rate to allocate overhead.

True or false: On a scatter diagram, costs are plotted on the horizontal axis.

False Reason: Costs are plotted on the vertical axis. Units are plotted on the horizontal axis.

Office Salaries are what type of cost?

Fixed

The key difference between absorption and variable costing is

Fixed Overhead

The main difference between absorption and variable costing is their treatment of

Fixed Overhead Costs

Contribution margin per unit contributes to covering ______ costs and then generating _____ on a per unit basis.

Fixed cost & generating profit (income) per unit

Which of the following is not a product cost under variable costing?

Fixed overhead.

A company produces a product with variable costs of $2.50 per unit. The product sells for $5.00 per unit. The company has fixed costs of $3,000 and desires a target income of $10,000. The sales level in dollars to achieve the desired target income is

Formula used $ sales at target Inc = FC + Target Inv. / Contr Marg Ratio = $3K + $10K / .5 (calc as {( 5- 2.5 ) / 5}

A company produces a product with a contribution margin per unit of $36. If the company incurs $62,000 in total fixed costs and expects to sell 2,500 units their income would be

From the CONT MARG Income Statement - given to 3rd line (Given CONTR MARG) $36 x 2500 units = CTR MARG $ 90,000 -FC 62,000 = $28000

Under absorption costing, fixed overhead is allocated to products sold, so when production is greater than units sold, net income will be (greater, less) __________________than income calculated under variable costing.

Great bc under Absorption fixed Overhead would be a lesser cost bc there is less sold.

A method that estimates cost behavior by using just the highest and lowest volume levels is called the:

High-low method.

______ (Identifying, Assigning,Tracing) activities is the first step in applying activity-based costing.

Identifying

Which of the following statements is true regarding absorption costing?

It assigns all manufacturing costs to products.

Which of the following statements is true with regard to the departmental overhead rate method? Multiple Choice It is especially accurate in assigning overhead costs that are not driven by production volume. It uses a different overhead rate for each department. Each department has the same rate for the same activity pool. It requires one overhead cost pool and one rate. It is the same as activity-based costing.

It uses a different overhead rate for each department.

A company has a margin of safety of 20%. If expected sales are $50,000, then break-even sales are:

Margin of safety = Expected Sales - B-E Sales/ Expected Sales 20% = 50,000- BE / 50,000 {multiple both sides by 50,000} 50,000 * .20 = 50,000- BE 10,000 = 50,000 - BE BE = 50,000 - 10,000 book Reason: (50,000-x)/50,000=20%. x = $40,000.

Water and electricity are _________

Mixed Cost expense

Sales Reps are what types of costs?

Mixed {bc the get sales + commission}

Given net income of $900,000 based on variable costing. Beginning and ending inventories were 55,000 units and 52,000 units, respectively. Assume the fixed overhead per unit was $1.25 for both the beginning and ending inventory. What is net income under absorption costing?

Net income under absorption = = N.I. under variable costing - {(Beginning Inventory - Ending Inventory) * Fixed overhead } = 896,250 One must assume there are no units produced since it is not given.

Under Absorption costing, fixed overhead is EXPENSED when units are sold {as part of the cost of goods sold}. Under Variable Costing fixed overhead is e EXPENSED when units are ____________

Produced

A statistical method for identifying cost behavior is called _______

Regression

Under Variable Costing fixed overhead is e EXPENSED when units are produced. Under Absorption costing, fixed overhead is EXPENSED when units are ___________ {as part of the cost of goods sold}.

SOLD

Contribution margin is the excess of

Sales - Variable Costs Reason: Contribution margin is sales minus variable costs.

A contribution margin income statement shows:

Sales - Variable Costs A contribution margin income statement shows sales minus variable costs.

Sales mix is the proportion of _____ for various products

Sales mix is the ratio of sales dollars for various products.

A graph of unit volume and cost data is called a:

Scatter diagram

True or false: The departmental overhead rate method uses a three-step process where costs are assigned to cost pools in the first step and overhead is allocated to cost objects in the last step.

T

True or false: The usefulness of the single plantwide overhead rate method depends on assuming that overhead costs change with the allocation base and all products use overhead costs in the same proportions.

T

A company has the following activities and costs: machine setup of $5,000 per setup and factory services of $100 per square foot. If product 1 uses 2 setups and has 10,000 square feet, overhead allocated to product 1 is $ ________

TC machine setup for product 1 = 2 setups x $5,000 per setup = $10,000 TC factory services for product 1 = 10,000 square feet x $100 per square foot = $1,000,000 The total overhead cost for product 1 is: $10,000 + $1,000,000 = $1,010,000

Which of the following is the correct statement about fixed costs?

The fixed cost per unit will decrease when volume increases.

Which of the following is the correct statement about fixed costs?

The fixed cost per unit will decrease when volume increases. selected does not change per the book. Reason: Fixed costs in total will not change with volume increases but fixed cost per unit will decrease as volume increases.

True or false: The cost object of the plantwide overhead rate method is the unit of product.

True Reason: This true. The unit of product is the target of cost assignment under the plantwide method.

True or false: When units produced are less than units sold, net income under absorption costing will be less than net income computed under variable costing.

True Reason: Net income under absorption costing will be less than net income under variable costing when units produced are less than units sold.

True or false: The usefulness of the single plantwide overhead rate method depends on assuming that overhead costs change with the allocation base and all products use overhead costs in the same proportions.

True Reason: The usefulness of the single plantwide overhead rate method depends on assuming that overhead costs change with the allocation base and all products use overhead costs in the same proportions.

True or false: One of the advantages of the departmental overhead rate method over the plantwide overhead rate method is that in the departmental overhead rate method, individual departments can have their own overhead rate and allocation base.

True Reason: This is an advantage of the departmental method over the plantwide method as the plantwide method uses a single rate for all products.

The absorption costing approach assigns all manufacturing costs to products.

True = The absorption costing method applies all the costs of manufacturing to the products irrespective of their nature as variable or fixed.

A company produces a product with variable costs of $2.50 per unit. The product sells for $5.00 per unit. The company has fixed costs of $3,000 and desires a target income of $10,000. The sales level in units to achieve the desired target income is

Unit sales @ target income = FC + Target INC / CONT MARG per Unit {3,000 + 10,000}/ $2.50 = 5200

When graphing cost-volume-profit data on a CVP chart:

Units are plotted on the horizontal axis; costs on the vertical axis.

A ________cost changes in proportion to changes in volume of activity.

Variable

Service firms should focus on _____ costs in managerial decisions.

Variable Reason: Service firms should focus on variable costs.

Which of the following is the correct statement about variable costs?

Variable costs per unit will remain the same. {Variable costs in total will increase with volume increases.}

Using absorption costing, which of the following manufacturing costs are assigned to products?

Variable overhead, direct materials, direct labor, and fixed overhead.

The plantwide overhead rate method is most appropriate for companies which have

a single product

Select all that apply Advantages of the activity-based costing include: Check all that apply. Multiple select question----> accurate assignment of costs to products product cost distortion may occur more effective overhead cost control better production and pricing decisions lower costs to implement and maintain

accurate assignment of costs to products more effective overhead cost control better production and pricing decisions

The third step in activity-based costing is to

allocate costs to cost objects.

(unit, batch, product, facility) level activity are those that are performed on each group of units.

batch

Cost information from _______ (neither, both) costing method(s) is helpful to management in setting prices.

both

Cost information from _____________________ (neither, both) costing method(s) is helpful to management in setting prices.

both

A _______ format income statement reports variable costs separately from fixed costs.

contribution

An income statement which separately reports variable costs from fixed costs is known as a(n)

contribution format

Makum Company is using variable costing. Which of the items below would you see on Makum's income statement?

contribution margin variable expenses net income

The amount by which a product's unit selling price exceeds its total unit variable cost is the:

contribution margin per unit

The percent by which a product's unit selling price exceeds its total unit variable cost is the:

contribution margin ratio

Cost-volume-profit analysis helps managers predict how changes in ___ & ____ levels affect income.

cost and sales

When preparing a scatter diagram, the estimated line of cost behavior is drawn on a scatter diagram to show the relation between:

cost and unit volume

Managers make assumptions in CVP analysis. These assumptions include: (Check all that apply.)

costs can be classified as variable or fixed. costs are linear within the relevant range.

All of the following are types of activities which cause overhead except:

customer-level

Assuming all other factors remain constant, if sales price per unit increases, then the break-even point will:

decrease

The ________ overhead rate method uses a different overhead rate per production department.

departmental

The overhead rate method which uses a different overhead rate for each department is the

departmental method

Regardless of whether variable costing or absorption costing is used, if quantity produced differs from quantity sold, income will be ___________ (similar, different, indeterminable).

different

The variable costing method includes all of the following costs (select all that apply):

direct labor direct materials variable overhead

Costs to implement an activity-based system are considered a _______ (advantage, disadvantage) of this system.

disadvantage

The break-even point can be expressed as sales in

dollars OR Units

The contribution margin ratio is interpreted as the percent of:

each sales dollar that remains after deducting unit variable cost

When using absorption costing when production is greater than sales, a portion of fixed overhead is allocated to:

ending inventory

When units produced equals units sold, income under absorption costing will be ________ (>,<,=) net income under variable costing.

equal Production = sales

When units produced equals units sold, income under variable costing as compared to net income under absorption costing will be

equal to

Production planning is important because producing too much can lead to _________ (excess, insufficient) inventory.

excess

A system of rewarding managers by linking bonuses to income computed under absorption costing may result in:

excess inventory buildup

_____level activities are focused on the whole facility and are not caused by units.

facility

In the (first/second) stage of activity-based costing the activities and overhead costs are identified.

first

______cost remains unchanged when the volume of activity changes within the relevant range.

fixed

When units produced are less than units sold, net income computed under variable costing will be ________ (greater, less) than net income computed under absorption.

greater

Activity cost pools are:

group of costs related to the same activity

The break-even point is the sales level at which a company: (Check all that apply.)

has income of $0. contribution margin equals fixed costs.

Name 3 methods used to separate mixed costs into their fixed and variable components

high-low method {not low-high} scatter diagram regression

CVP analysis looks at how ______ is affected by sales price per unit, variable costs per unit, volume, and fixed costs.

income or profit

Assuming all other factors remain constant, if fixed costs increase, then the break-even point will:

increase

Managers should accept special orders if the special-order price

is greater than variable cost

The main advantage of the plantwide overhead rate method is:

it is easy to implement

A statistical method of identifying cost behavior that is computed using spreadsheet programs or calculators is:

least-squares regression

When units produced are greater than units sold, variable costing net income will be ________ (greater / less) than net income calculated under absorption costing.

less

When units produced are greater than units sold, variable costing net income will be ________ (less, greater) than net income calculated under absorption costing.

less

Over the __________, selling prices must cover both fixed and variable costs.

long-run

When units produced are greater than units sold under variable costing, fixed overhead is an expense and results in _______________ (lower, higher) net income than under absorption costing.

lower

Jack works on the production line at an assembly plant. Jack receives a base salary plus $1.25 per unit assembled. This is an example of a ____ cost

mixed

________________ cost includes both fixed and variable components.

mixed

CVP analysis relies on all of the following assumptions except:

mixed costs can be used Reason: Costs must be classified as variable or fixed, so mixed costs must be separated into their fixed and variable components. Sales mix is assumed to be constant. Inventory levels are assumed constant. costs must be linear within the relevant range

Makum Company is using a traditional (absorption) costing system. Which of the items below would you see on Makum's income statement?

net income gross profit cost of goods sold

Makum Company is using variable costing. Which of the items below would you see on Makum's income statement?

net income variable expenses contribution margin

Under the plantwide overhead rate method, total budgeted overhead costs are divided by the chosen allocation base to determine the

one overhead cost rate

Each of the following are types of _________ allocation methods: plantwide rate method, departmental overhead rate method and activity-based costing method

overhead

The weakness of the departmental and the plantwide overhead rate methods is that

overhead cost is often too complex to be explained by direct labor hours or machine hours.

The two assumptions regarding the usefulness of the single plantwide overhead rate method includes:

overhead costs change with the allocation base all products use overhead costs in the same proportion

Using a single overhead rate to apply overhead to products is called the

plant-wide rate

Which of the following are a type of overhead allocation method? (Check all that apply).

plantwide overhead rate method activity-based costing method departmental overhead rate method

An activity cost ________ is a group of costs that are related to the same activity.

pool

If management incentives are tied to income under absorption costing, which of the following may occur:

possible inventory obsolescence

A company sells two models of a product—basic and premium. Fixed costs are $150,000. The basic model has a variable cost of $75 and sells for $100. The premium model has a variable cost of $100 and sells for $150. If the company usually sells 5 basic models to 3 premium models, then the weighted-average break-even in units is

printed this with steps (answer = rounded to 4364 units)

Disadvantages of using activity-based costing includes (3)

product cost can be distorted. cost to implement. not GAAP compliant so can't be used for Financial Reporting

An activity which focuses on product lines and are not affected by number of units is a ______ level activity

product level activity

Sales mix is the (volume/proportion/mix) of the sales volume for each product.

proportion

The formula used in a contribution margin income statement is:

sales - variable costs = contribution margin - fixed costs = income

The three methods used to classify costs into their fixed and variable components includes

scatter diagrams regression high-low method

In activity-based costing, activities in each cost pool should be (similar / dissimilar)

similar

When using activity-based costing, it is very important that the activities in each cost pool are _____

similar

Mobile Company uses activity-based costing. One of their products, a phone, requires 20 setup activities at $50 per setup and 15 design changes at $1,000 per design. If Mobile Company produces 2,000 phones, what is the total overhead cost per unit?

step 1) (20x$50)+(15x$1,000)=$16,000 TC step2) 16,000 total cost / 2000 phones

When using the high-low method, the slope represents:

the variable cost per unit

The departmental overhead rate method allows individual departments to have

their own overhead rate and allocation base.

Differences in income between variable costing and absorption costing is due to

timing

Activities which are focused at the unit level are called

unit level activities

The cost object of the cost assignment under the plantwide overhead rate method is the

unit of product

RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. RST desires to earn a target income of $20,000. The sales level in units to achieve the desired target income is

unit sales @ Target INC = FC + Target INC / CONTR MARG per unit $30k + $20K / 4 ( = 10 - 6) !!! Not the ratio !!!! = 12,500

Since service firms do not produce inventory, they should focus primarily on _________________________

variable costs

A contribution margin income statement shows sales minus variable costs.

variable overhead direct materials direct labor