Cost Accounting Exam 3

Margin of Safety

When an organization is operating above the break even point the degree or amount that revenues may decline before losses are incurred is the

Increase in selling price per unit

Will decrease the break even point in units?

Variable costs, as activity increases will

Remain constant per unit.

by-product

Secondary product recovered in the course of manufacturing a primary product during a joint process-

joint products

two or more products that are produced from a common input

Gross Margin Percentage

1st step in constant gross margin percentage, NRV method is to allocate joint, to compute

Which would decrease unit contribution margin the most?

A 15% decrease in selling price.

Variable

A ____ cost is a cost whose total amount changes in direct proportion to a change in volume.

True

A company's break even point can be decreased by increasing the contribution margin ratio.

Not acceptable method of accounting for by-products?

All the above are acceptable

True

At the break even point total contribution margin is equal to total fixed costs.

fixed costs

At the breakeven The contribution margin equals total

False

Contribution margin income statement classified costs by function but a traditional income statement classified costs by Cost behavior

False

Contribution margin is the amount of revenue left over to cover selling and administrative costs after manufacturing costs have been deducted.

Total costs are linear

Cost volume profit analysis assumes over the relevant range that-

Selling prices are unchanged

Cost volume profit analysis assumes that over the relevant range-

net realizable value

Difference between final sales value and separable cost is equal to-

Characteristic of a contribution income statement

Fixed expenses are listed separately from variable expenses

variable costs per unit

In order to decrease a company's break even point what should be decreased?

fixed costs

Increase per unit as total production decreases.

sales value at split off method

Joint cost allocation method is based on relative value of total sales, at point of split off is classified as-

net realizable value method

Joint cost allocation method that assigns joint production costs based on the proportionate share of eventual revenues less further processing costs is the -

constant gross margin percentage method

Joint cost allocation method that yields the same gross margin percentage for each product is the-

What would be costs of a joint process that would be allocated to the joint products?

Materials, labor, and overhead. Production cost.

True regarding joint costs

Primary reason for allocating joint costs is for inventory valuation for Financial reporting. GAAP!!!

Inventory Costing

The allocation of joint costs to individual products is useful primarily for purposes of-

Unit Contribution Margin

The excess of the unit sales price over the variable cost per unit

False

The margin of safety is the difference between actual profit and target net income.

most likely strategy to reduce breakeven point?

decrease fixed costs and increase contribution margin

split-off point

the point in the production process at which the joint products can be recognized as individual products