Accounting 101
What is a contribution margin income statement?
A statement showing how much of sales were spent on variable costs
Calculate the cost of goods sold given the following: Finished goods at the beginning of the period = $130,000. Cost of goods manufactured = $470,000. Finished goods at the end of the period = $120,000.
$480,000
It costs your company $12 per item in manufacturing costs. The rent on the warehouse is $40,000, and the administrative salaries are $52,000. What is the total cost to manufacture 100,000 units?
$1,292,000
A company has $10,000 in manufacturing overhead, $25,000 in raw materials, and $50,000 in labor. How much is the company's indirect costs?
$10,000
An analysis of the manufacturing process shows that $10,000 in raw materials will make 1,000 items. The advertising cost is set at $2,000, and the warehouse rent is $2,500. What is the variable cost per unit of this company based on this information?
$10.00
Tyler's Tires make 1,000 tires at $72 each. They want to make $25,000 and they need to pay rent of $5,000 during that time period. For how much should Tyler sell each tire?
$102
XYZ Furniture had a very good year financially in 2016. They did $1.6 million in total sales. They paid $475,000 in wages to their manufacturing employees, and they paid $300,000 for the wood and other materials used for production. What was their contribution margin in 2016?
$825,000
During the decision-making analysis, the relevant costs are calculated at $100,000 and the irrelevant costs at $10,000. What percentage of irrelevant costs are considered when making a decision?
0 percent
A company sells 5000 units at $25 each. If the variable costs are $35,000, what is the contribution margin ratio?
0.72
Calculate a company's break-even in units given the following information: fixed costs = $100,000; unit contribution margin = $20; variable cost per unit = $15.
5,000 units
If a company had fixed costs of $100,000, a selling price of $10 per unit and a variable cost of $8 per unit, what is its break-even point in units?
50,000
Calculate the contribution margin ratio given the following information: sales revenue = $200,000; variable costs = $75,000; fixed costs = $50,000.
62.5%
Which of the following is a tool that summarizes the status of different financial and operational metrics for executives?
A balanced scorecard
Which of the following is true of the debt ratio?
A number below one is best because the business has more than enough assets to cover its liabilities
John can use information on the Balance Sheet to calculate which of the following ratios?
Acid ratio
The Umbrella Factory makes 17 different kinds of umbrellas. Some are very simple while others have intricate gadgets. Which costing system should the Umbrella Factory use?
Activity based
The contribution margin is the best way to determine which of the following?
Allocation of constrained resources
In the mixed cost equation of 'y = a + b(x)', which of the letters represents the cost that will change with the number of units?
B
Jerry is interested in gathering some information about employee turnover rate and market share for Brown's Business. Which of the following is a strategic planning and management system that can help him summarize this information?
Balanced scorecard
Identify the company that has the highest operating leverage
Blyth Company Ltd, with high fixed costs, low variable costs and a high contribution margin ratio
Which of the following is a cost behavior?
Change in raw material prices
The difference between the selling price of an item and its variable cost is known as which of the following?
Contribution margin
What is the resource exchanged for another resource or advantage called?
Cost
Labor-hours would be used as:
Cost driver
Paul has a small manufacturing company that produces and sells its products to the public from a website. He calculates that the product costs $1.50 in raw materials to produce and he loses about 3% of the product in spoilage and waste. Shipping costs are passed through to the buyers. What other factor does he need to calculate the cost of goods sold?
Costs associated with ordering and maintaining the raw materials
An analysis of the economic barriers for your company's products would be part of which step in the strategic management process?
Environmental scanning
What is the first step of the strategic management planning process?
Environmental scanning
What are variable production expenses?
Expenses that were paid for production such as raw materials
In the mixed cost equation of 'y = a + b(x)', which of the letters represents the sum of the fixed and variable costs?
y
Which of the following is the cost gain in the production of a product?
Finished product
Sarah is the accountant for Brown's Business. Under which category would she put the insurance for the delivery trucks owned by Brown's Business?
Fixed cost
Identify a fixed cost and a variable cost that are involved in the operation of an automobile.
Fixed cost: insurance; variable cost: gas
The Sarbanes-Oxley Act did which of the following?
Increased the requirements on internal financial control
Your company is worried about being destroyed by a hurricane. What type of risk is this?
Insurable risk
Which of the following is an indirect cost?
Insurance on warehouse inventory
COGS/Total value of average inventory is the formula to calculate which of the following?
Inventory turnover
Sunk costs are an example of which type of cost?
Irrelevant
Which of the following is true about standard costing?
It can be used in other financial analysis
Talia is an executive for Alpine Furniture Works and updates the company's balanced scorecard every 3 months. Which of the following is true about this process?
It is the most appropriate timing for her needs
Which of the following is a fixed cost?
Loan debt
The form of accounting that uses financial information to reach company goals is which of the following?
Managerial accounting
Burt realizes that he made a mistake with the sales budget. Which other budget will be affected by this mistake?
Master budget
Which of the following is the capital budgeting technique of comparing outgoing cash now with incoming cash in the future?
Net present value
A company has a turnover ratio of 1. How can this be interpreted?
No interpretation since it depends on the type of company
How much of a sunk cost, such as the purchase price of a machine used in the production of a product, is used in an activity-based costing calculation?
None
The income sheet can be used to calculate which of the following?
Operating profit ratio
An implicit cost is a specialized form of which type of cost?
Opportunity cost
An investor is deciding if they should sell their mutual funds that earn 3% to buy stock that may earn a greater return. What kind of cost is the loss of the 3% return?
Opportunity cost
You have the option of selling stock that you hold but then you will not get the $2,000 dividends, or you can hold the stock and earn the dividends. If you sell, what type of costs are the loss of the dividend revenue?
Opportunity costs
John the stock clerk spends 3 hours per week earning minimum wage stocking new raw materials for the manufacturing process. What type of cost is John's salary?
Ordering costs
Which of the following is NOT one of the four managerial accounting functions?
Organizing
Which of the following would NOT be considered a cost driver in a cost pool for materials to make sun rooms?
Paying the necessary amount of employees
John is thinking of investing $100,000 and has two investment opportunities to choose from. He has already determined their net present values are basically the same. Which of the following would be helpful to see which investment gives him the most bang for his buck?
Project profitability index
The PCAOB was created under the Sarbanes-Oxley Act. What does the acronym PCAOB stand for?
Public Company Accounting Oversight Board
A service company has a parts inventory or supplies account. What would the equivalent account be called for a manufacturing company?
Raw materials inventory
Which of the following would be a direct cost?
Screws used in manufacturing
Which financial statement tells how much money came in and was paid out in a specific time period?
Statement of cash flow
How do you find the unit contribution margin?
Subtract variable cost per unit from price per unit
Which of the following are insignificant in investment decisions?
Sunk costs
What is the point where total costs are equal to total revenue?
The break-even point
What must be true about profit to use it in the cost-volume-profit model?
The exact dollar figure of profits must be known
Warren bought a jet airplane three years ago with a loan. Fuel costs have stayed the same over the years. If the terms of the loan changes so that the rate increases by 3%, how will this affect the cost behavior analysis?
The mixed cost will increase as the fixed cost component increase
Costing is when a manager does which of the following?
Uses overhead to estimate cost
What information does the statement of retained earnings provide?
The profit that was reinvested in the company
Your company wants to outsource its IT department so that if a hurricane hits your main office, the company will not lose its databases. This is a form of what type of risk mitigation?
Transferring risk
A company finds that the actual cost is $10,000 greater than the standard cost. The $10,000 is an example of which of the following?
Variance
What are variable labor expenses?
Wages that were paid for production
In the mixed cost equation of 'y = a + b(x)', which of the letters represents the cost that will not change with the number of units produced?
a
In the mixed cost equation of 'y = a + b(x)', which of the letters represents the cost that will change with the number of units?
b
Alpha Company Ltd is looking to lease a photocopier. The monthly lease for the photocopier is $65 and an additional charge of $0.05 per copy. Calculate the lease cost of the photocopier during the month of July if the expected number of copies is 50,000.
$2565
Calculate the total cost of a product if the fixed costs are $5,000 and the variable costs are $2.00 per each of the 20,000 units produced.
$45,000
