Accounting Exam 1
what is the CM if the per unit if the unit price is $125 and the variable cost is $60
$65
net operating income can be calculated as:
(unit sales - unit sales to break even) x contribution margin
when tool can be used to easily calculate the change in profit resulting from a change in sales price, sales variable, variable costs, or fixed costs
CVP analysis
the statistic R^2 is:
a measure of goodness of fit
cost behavior is considered linear whenever:
a straight line approximates the relationship between cost and activity
Cost objectives include:
anything for which cost data is desired customers organizational subunits
maintenance and depreciation of test equipment are examples of ____________ costs
appraisal
costs incurred to identify defective products before they are shipped to customers are called ______ or ______ costs
appraisal or inspection
The more effective a company's ________ activities, the greater the level of _________ failure costs
appraisal; internal
CVP analysis is based on some _______________ that may be violated in practice, but the tool is generally still useful
assumptions
when using the high low method, if the high or low levels of cost do not match the high or low levels of activity:
choose the periods with the highest and lowest level of activity and their associated costs
costs that are shared by multiple cost objects in a company are known as ________ costs
common
Nonmanufacturing costs include which of the following: company president's salary assembly-line worker wages sales commissions insurance on plant equipment
company presidents salary; sales commissions
after reaching the break even point, a company's net operating income will increase by the ___________ ___________ per unit for each additional unit sold
contribution margin
to estimate the effect on profits for a planned increase in sales, multiply the increase in units sold by the unit ____________ _____________
contribution margin
how do you calculate the degree of operating leverage
contribution margin/net operating income
direct labor and overhead cost incurred to change raw materials into finished products are known as _________ costs
conversion
how individual costs react to changes in activity level is:
cost behavior
any item for which cost data is desired is called:
cost object
the relative proportion of each type of costs in an organization is known as the company's ____________ __________.
cost structure
CVP is an acronym for
cost volume profit
which of the following is not an example of a typical external failure costs: debugging system errors product recalls defective product liability warranty repairs
debugging system errors
differential costs, opportunity costs, and sunk costs are all cost classifications used in:
decision making
the measure of how a percentage change in sales affects profits at any given level of sales is the:
degree of operating leverage
A change in revenues between two alternatives is known as ______ revenue or incremental revenue
differential
The difference in costs between two alternatives is called a _______ cost
differential
Materials that become an important component of the finished product whose costs can be easily and conveniently traced back to the finished product are _____ materials
direct
which of the following is not a category of quality costs: direct costs prevention costs internal failure costs appraisal costs
direct costs
Labor costs that can be easily and conveniently traced to a specific product are called _______ costs
direct labor
in an automobile manufacturing plant, the assembly-line workers are classified as ______ _____ costs
direct labor
prime costs are:
direct labor and direct materials
manufacturing costs can be divided into three categories:
direct labor, direct materials, and manufacturing overhead
How do you find prime costs?
direct materials+direct labor
total variable manufacturing costs:
direct materials+directlabor+variable manufacturing overhead
Fixed costs that usually arise from annual spending decisions by management are ________ fixed costs
discretionary
when constructing a CVP graph, the vertical axis represents:
dollars
estimating the fixed and variable components of a mixed cost using the __________________ approach involves a detailed analysis of what cost behavior should be
engineering
a company has reached its break-even point when the CM ________ fixed expenses
equals
When company recalls a defective product, a _____ _______ cost is incurred
external failure
True/False: removing expenses that do not differ between alternatives could alter a decision
false
prior to being recorded on the income statement, manufacturers' product costs flow through:
finished goods work in process raw materials
in a least-squares regression line, the intercept (a) of the line represents the total _____________ costs
fixed
how do you calculate the dollar sales to break even
fixed expenses/cm ratio
contribution margin is first used to cover ___________ expesnes. once the break even point has been reached, CM becomes _______________
fixed; profit
which of the following are assumptions of cost volume profit analysis
in multi product companies, the sales mix is constant AND costs are liear and can be accurately divided into variable and fixed elements
the purpose of statistical process control is to identify processes that are ____ or _____ of control
in or out
product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the:
income statement
differential costs are also known as ________ costs
incremental
when the analysis of a change in profits only considers the costs and revenues that will change as a result of the decisions, the decision is being made using _________ analysis
incremental
Labor costs that cannot be easily and conveniently traced back to a specific cost object are _______ costs
indirect
minor items such as nails and glue are usually considered to be:
indirect materials
manufacturing overhead costs include:
indirect materials, factory supervisors' salaries, and factory depreciation
the contribution margin statement is primarily used for:
internal decision making
costs that result from identifying defects before products are shipped to customers and include the costs of scrap and rework are ________ costs
internal failure
the degree of operating leverage:
is the greatest at sales levels near the break even point is not a constant decreases as sales and profits rise
a method that uses all the available data points to divide a mixed costs into its fixed and variable costs is called:
least square regression
what are the two broad classifications of costs
manufacturing and nonmanufacturing
indirect materials and indirect labor are classified as:
manufacturing overhead
the amount by which sales can drop before losses are incurred is the:
margin of safety
The cost of producing one more unit is called the _____ cost
marginal
the revenue obtained from selling one additional unit of product is called _________ revenue
marginal
the accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is known as the __________ principle
matching
a cost that contains both variable and fixed cost elements are __________ costs
mixed
a measure of how sensitive net operating income is to a given percentage change in sales dollars
operating leverage
Benefits that are given up when selecting one alternative over another
opportunity costs
which of the following is not a name for manufacturing overhead prime manufacturing costs factory overhead factory burden indirect manufacturing costs
prime manufacturing costs
Which of the following are not internal failure costs: product recalls net cost of scrap rework labor and overhead depreciation of test equipment
product recalls depreciation of test equipment
typical prevention costs include (2): depreciation of test equipment quality circles debugging software errors statistical process control
quality circles stastical process control
small groups of employees that meet regularly to discuss ways to improve quality are referred to as _________ ______________-
quality cirlces
prevention, appraisal, internal failure, and external failure costs incurred are detailed on a:
quality costs report
products that meet or exceed their expectations and are free from defects that mar or degrade their performance are said to have high:
quality of conformance
The materials that go into the final product are called _______ materials
raw
what is found above the CM on a CM format income statement
sales and variable expenses
the relative proportions in which a company's products are sold is referred to as ___________ __________
sales mix
the term used for the relative proportion in which a company's products are sold is:
sales mix
when preparing a multi-product break even analysis, the assumption is ordinarily made that the ____________ will not change
sales mix
contribution margin is:
sales revenue minus vaiable costs
high low or least squares regression analysis should only be done if a __________ plot depicts linear cost behavior
scattergraph
What type of costs is never relevant and should be disregarded when making decisions: opportunity sunk marginal incremental
sunk
to prepare a CVP graph, lines must be drawn representing what three things
total revenue, total expense, and total fixed expense
how do you calculate margin of safety in dollars
total sales - break even sales
true/false: presenting fixed costs on an average per unit basis makes it look like they are variable costs
true
COGS for a merchandising company, direct material's, and commissions are all examples of _______ costs
variable
Mixed costs are also commonly known as _________ costs
variable
when using the high low method, the slope of the line equals the _________ cost per unit of activity
variable
the term "cost structure" refers to the relative proportion of ____________ and ____________ costs in an organization
variable and fixed
variable expenses/sales is the calculation for what ration
variable expense
what does an activity base measure
whatever causes costs to vary
the break even point is the level of sales at which the profit equals _________-
zero