Cost Accounting Test 2
variable expense ratio
1 - CM ratio
equivalent units
number of partially completed units x percentage completion
profit
sales - var. expense - fixed expense
Cost of ending wip inventory (weighted average)
# of equivalent units in ending WIP for materials x cost per equivalent units for materials PLUS # of equivalent units in ending WIP for conversion x cost per equivalent units in ending WIP for conversion
decrease, even though total sales may increase
A shift in the sales mix from high-margin items to low-margin items can cause total profit to
variable and fixed cost distinctions
Absorption costing income statements ignore
proccessing department
In process costing, a separate work in process account is kept for each:
debit: WIP shaping department credit: manufacturing overhead
Manufacturing overhead was applied to the Shaping Department, $10,000.
sales mix
The relative proportions in which a company's products are sold. - computed by expressing the sales of each product as a percentage of total sales.
Units transferred to the next department × Cost per equivalent unit
Under the weighted-average method, the cost of units transferred out of a department is computed as follows for a cost category:
unit volume (activity)
What is represented on the X axis of a cost-volume-profit (CVP) graph?
operating leverage
a measure of how sensitive net operating income is to a given percentage change in dollar sales
cost transferred in
costs transferred out to the next department will be accounted for in the next department as ______
change in net operating income (operating leverage)
degree of leverage x percent of sales
conversion cost
direct labor cost + manufacturing overhead cost
unit product cost (variable costing)
direct materials + direct labor + variable manufacturing overhead
debit: finished goods credit: shaping department
finished snowboards worth $80,000 were transferred from the Shaping Department to the finished goods warehouse.
two: the FIFO and the weighed average
how many methods for computing departmental unit costs and what are they
operation costing
hybrid system that includes characteristics of job order and process costing -used in situations where products have some common and some individual characteristics
equal to variable (no change in inventory)
if number of units produced equals number of units sold, then, absorption is
greater than variable (inventory increases)
if number of units produced greater than number of units sold, then, absorption is
less than variable (inventory decreases)
if number of units produced is less than number of units sold, then, absorption is
Margin of Safety Percentage
margin of safety in dollars / total budgeted (or actual) sales in dollars
weighted average method
process costing method of computing using combined costs and outputs from current and prior periods
fifo method
process costing method of computing using costs and outputs from current period
contribution margin
sales revenue - variable expenses
sales
selling price per unit x quantity sold
cost reconciliation report
shows that costs in beginning inventory and costs added during the period have been properly accounted for -costs of inputs = costs of outputs
contribution margin
the amount available to cover fixed expenses and then to provide profits for the period
complex
the breakeven for a multi product company is more _______ than the break even for a single profit company
break-even point
the point at which the costs of producing a product equal the revenue made from selling the product
period cost
under the variable costing approach, variable selling and administrative expenses
period cost
under the variable costing approach, what is Fixed selling and administrative expenses
product cost
under the variable costing approach, what is Variable manufacturing overhead
product cost
under the variable costing approach, what is direct labor
period cost
under the variable costing approach, what is fixed manufacturing overhead
process costing
used by a company that produces a continuous flow of units that are indistinguishable from eachother
job order costing
used by a company that produces many different products in one facility
variable expense ratio
variable expenses/sales
Unit Contribution Margin
when break even has been reached, the net operating income will increase by the amount of the ______ for each unit sold
contribution margin ratio
1 - variable expense ratio
fixed manufacturing overhead
The difference between absorption costing net operating income and variable costing net operating income can be explained by the way these two methods account for
contribution margin ration
Contribution Margin / Sales
cost assigned to units transferred out (weighted average)
(# of equivalent units transferred out for materials x cost per equivalent unit) plus (# of equivalent units transferred out for conversion x cost per equivalent unit)
unit sales to attain target profit
(Target Profit + Fixed Expenses) / Unit CM
dollars to attain target profit
(target profit + fixed expenses) / CM ratio
margin of safety in dollars
total budgeted (or actual) sales - break even sales
change in contribution margin
CM ratio x change in sales
profit
CM ratio x sales - fixed expenses
degree of operating leverage
Contribution Margin / Net Operating Income
debit: costs of goods sold credit: finished goods
Finished snowboards that cost $100,000 were sold to customers.
dollar sales to break even
Fixed Expenses / CM Ratio
unit sales to break even
Fixed Expenses / Unit CM
false
T/F: Raw material costs are added only to the first processing department.
debit: WIP cutting department credit: raw materials
Raw materials worth $12,000 were issued for use in the Cutting Department.
equivalent units of production (weighted average)
The units transferred to the next department (or to finished goods) during the period + the equivalent units in the department's ending work in process inventory.
sales, profit and costs
What is represented on the Y axis of a cost-volume-profit (CVP) graph?
fixed expenses
What is usually plotted as a horizontal line on the CVP graph?
process costing is used when a company produces a continuous flow of units that are distinguishable from one another
Which of the following statements about processing costing is false? -Process costing accumulates costs by department. -Process costing assigns departmental costs uniformly to all identical units that pass through the department during a period. -Process costing systems compute unit costs by department. -Process costing is used when a company produces a continuous flow of units that are distinguishable from one another
partially completed units
______ must be translated into an equivalent number of fully completed units
cost per equivalent unit of production (weighted average)
cost of beginning WIP inventory + cost added during period / equiv units of production
contribution margin ratio
this can compute change in contribution margin for change in sales volume
cost volume profit graph
this illustrates the relationships among revenue, profit, and costs over different levels of activity
margin of safety
tool to help management see how much sales can change before the company incurs a net lost