Accounting Review
A normal job-order costing system is a system that uses
Actual costs for direct materials and direct labor and estimated costs for overhead
Using normal costing requires that
Actual overhead costs are not assigned directly to jobs
Which of the following costs is not included on a job-order cost sheet
Actual plantwide overhead costs
To determine contribution margin use
Both variable manufacturing costs and variable nonmanufacturing costs
The margin of safety is the difference between
Budgeted revenues and breakeven revenues
Degree of operating leverage is calculated as
Contribution margin/operating income
If the selling price per unit increases, the break-even point in units will
Decrease
If variable costs per unit decrease, sales volume at the break-even point will
Decrease
Time tickets are filled out for
Direct laborers
The margin of safety in dollars
Expected sales minus sales at break-even
Actual overhead is reconciled with applied overhead at the beginning of the period
False
If fixed costs increase, the break-even point decreases
False
If one increases variable costs per unit, the break-even point will decrease
False
If the break-even point increases, the margin of safety increases
False
If variable costs per unit increase, then the breakeven point will decrease.
False
The use of normal costing means that actual overhead costs are assigned directly to jobs
False
Total revenues less total fixed costs equal the contribution margin
False
Using a time ticket, the cost accounting department can enter the cost of direct materials onto the correct job-order cost sheet
False
Breakeven point is
Fixed costs divided by contribution margin per unit
If fixed costs increase, the break-even point in units will
Increase
Which of the following will increase a company's breakeven point
Increasing variable cost per unit
The document that lists the total cost for a single job is a
Job-order cost sheet
Which of the following can be considered a measure of risk in cost-volume-profit analysis
Margin of safety
Which of the following statements is true about overhead?
Overhead costs are not incurred uniformly throughout the year
The cost-volume-profit graph
Plots the total revenue line and the total cost line
A profit-volume graph visually portrays the relationship between
Profits and units sold
Contribution margin equals
Revenues minus variable costs
The contribution margin is
The difference between sales and variable costs
If actual sales equal break-even sales
The margin of safety equals zero
On a cost-volume-profit graph, the break-even point is where
The revenue line intersects the total cost line
Operating leverage is
The use of fixed costs to extract higher percentage changes in profits as sales activity
The breakeven point decreases if
Total fixed cost decrease
The break-even point is when
Total revenues equal total cost
Companies with a greater proportions of fixed costs have a greater risk of loss that companies with a greater proportion of variable
True
If variable expenses decrease and the price increases, the break-even point decreases
True
Managers can use CVP analysis to handle risk and uncertainty
True
Production costs consist of direct materials, direct labor, and overhead
True
The break-even point is where total sales revenue equals total cost
True
The contribution margin income statement provides a good check to determine if the sale of a certain number of units really results in operating income of the given amount
True
The contribution margin ration can be calculated by subtracting the variable cost ratio from one.
True
The cost-volume profit graph depicts the relationship among cost, volume, and profits, by plotting the total revenue line and the total cost line on the graph
True
The difference between total revenues and total variable costs is called contribution margin
True
The margin of safety measures the units sold or the revenue earned above the break-even volume
True
The profit-volume graph shows the relationship between operating income and the number of units sold
True
The profit-volume graph shows the relationship between profits and units sold
True
The contribution income statement highlights
Variable and fixed costs