ACCT225
For cost control purposes, the ______ method is better than the ______ method.
FIFO, weighted-average
Which of the following help companies channel their resources into the most profitable growth opportunities?
Product and customer profitability reports
Operations costing is similar to job-order costing because ______.
each batch is charged for its own specific materials
The cost of jobs still unfinished at the end of a period are included in ______.
ending Work in process inventory
When computing equivalent units, FIFO and weighted-average treat ______ the same.
ending inventory
In process costing, manufacturing overhead costs are ______.
generally applied using a predetermined overhead rate
A journal entry debiting Cost of goods sold and crediting Finished goods is made when ______.
goods are sold
The best fitting line minimizes the sum of the squared errors when using ______.
least-square regression
A method that uses all the available data points to divide a mixed cost into its fixed and variable components is called ______.
least-squares regression
A measure of how sensitive net operating income is to a given percentage change in sales dollars is known as operating ______.
leverage
When using process costing, a separate ______ account is maintained for each processing department.
work in process
When using process costing, each processing department has a ______ ______ ______separate account.
work in process
When making decisions using ABC data ______.
unavoidable fixed costs should be ignored
A debit balance in Manufacturing overhead means overhead was
underapplied
The activity in a processing department is performed ______.
uniformly on all units
Power to run production equipment is a(n) -level activity.
unit
Selling and administrative expenses ______.
are always treated as period costs
The journal entry to record the transfer of partially completed products from processing Department #1 to processing Department #2 is to debit Work in Process Department ______.
#2 and credit Work in Process-Department #1
LPM Industries has two service departments (Administration and Maintenance) and two operating departments. Departmental costs before allocations are $950,000 for Administration and $1,650,000 for Maintenance. Maintenance costs are allocated on the basis of the number of employees. Administration has 450 employees; Maintenance has 750 employees; Operating Department 1 has 1,350 employees and Operating Department 2 has 1,200 employees. Using the direct method,the cost allocated from Maintenance to Administration is ______.
$0
Company A has a contribution margin ratio of 35%. For each dollar in sales, contribution margin will increase by ______.
$0.35
Candle Central has $1,440 of total variable expense for a sales level of 600 units and $2,160 of total variable expense for a sales level of 900 units. If Candle Central sells 500 units ______.
$1,200 $2.4 1,440 ÷ 600 = $2.40 per unit × 500 units = $1,200 total variable cost.
Seth's Speakers had actual sales of $1,630,000 If break-even sales equals $935,000, Seth's margin of safety in dollars is ______.
$1,630,000 - $935,000 = $695,000
LPM Industries has two service departments (Administration and Maintenance) and two operating departments. Departmental costs before allocations are $950,000 for Administration and $1,650,000 for Maintenance. Maintenance costs are allocated on the basis of the number of employees. Administration has 450 employees; Maintenance has 750 employees; Operating Department 1 has 1,350 employees and Operating Department 2 has 1,200 employees. Using the step-down method, how much of the cost from the Maintenance Department will be allocated to Operating Department 2?
$1,650,000 × 1,200 ÷ (450 + 1,350 + 1,200) = $660,000
LPM Industries has two service departments (Administration and Maintenance) and two operating departments. Departmental costs before allocations are $950,000 for Administration and $1,650,000 for Maintenance. Maintenance costs are allocated on the basis of the number of employees. Administration has 450 employees; Maintenance has 750 employees; Operating Department 1 has 1,350 employees and Operating Department 2 has 1,200 employees. Using the direct method, Maintenance cost allocated to Operating Department 1 is ______.
$1,650,000 × 1,350 ÷ (1,350 + 1,200) = $873,529
LPM Industries has two service departments (Administration and Maintenance) and two operating departments. Departmental costs before allocations are $950,000 for Administration and $1,650,000 for Maintenance. Maintenance costs are allocated on the basis of the number of LPM employees. Administration has 450 employees; Maintenance has 750 employees; Operating Department 1 has 1,350 employees and Operating Department 2 has 1,200 employees. Using the step-down method, how much of the cost from the Maintenance Department will be allocated to Administration?
$1,650,000 ×450 ÷ (450 + 1,350 + 1,200) = $247,500
Given sales of $100,000 a contribution margin of $40,000, and fixed expenses of $50,000, the result is a ______.
$10,000 net operating loss Contribution margin of $40,000 - fixed expenses of $50,000 = a $10,000 loss.
A company reports the following for a sales volume of 200 units: $100,000 in sales and $80,000 in variable costs. If the break-even point is 200 units and the company sells 201 units, net profit will be:
$100 For each unit sold above break-even, profit increases by the contribution margin per unit which is ($100,000 - $80,000)/200 or $100.
Carlisle, Inc. had Sales of $500,000, Cost of goods sold of $400,000, and Selling and administrative expenses of $50,000. Gross margin is ______.
$100,000 $500,000 - $400,000 = $100,000
SPS Products has two divisions—Catalog Sales and Online Sales. For the last quarter the Catalog Sales segment margin was ($5,000). Online sales were $100,000. Online Sales contribution margin was $60,000, and its segment margin was $40,000. If Catalog Sales are discontinued, it is estimated that online sales will increase by 10%. Discontinuing Catalog Sales should increase company profits by ______.
$11,000 Increased online sales contribution margin ($100,000 10% ($60,000 / $100,000)) is $6,000 + $5,000 saved from stopping catalog sales = $11,000.
Blink sells and manufactures frames for eyeglasses. The unit product cost for frame #47320 is $76.35. Last period, Blink produced 200 frames and sold 155 of them. Total cost of goods sold equals ______.
$11,834.25
Franklin, Inc. had costs in beginning work in process inventory of $4,730. During the period a total of $12,900 costs were added. Franklin uses FIFO costing and had 860 equivalent units. The cost per equivalent unit is ______.
$12,900 ÷ 860 = $15
Job #4260 consisted of 1,000 units at a total cost of $200,000. The cost transferred to Cost of Goods Sold for the sale of 600 of the units is ______.
$120,000 $200,000 ÷ 1,000 × 600 = $120,000
JPL Company has two segments - Retail and Commercial. The Retail segment has a contribution margin ratio of 40% and traceable fixed expenses of $70,000. Commercial has traceable fixed expenses of $50,000 and a contribution margin ratio of 55%. The company also has $30,000 of common fixed expenses. The break-even point in dollar sales for the Retail segment equals ______.
$175,000
Given the following, calculate total manufacturing costs: Direct materials cost: $62,000 Direct labor cost: $78,000 Manufacturing overhead applied: $46,000 Actual manufacturing overhead: $51,000 Beginning Work in process inventory: $32,000 Ending Work in process inventory: $35,000
$186,000 $62,000 +$78,000 + $46,000 = $186,000. Adjust for work in process when calculating the cost of goods manufactured.
Company A sells its product for $10 per unit. If Company A has variable expenses of $5 per unit and fixed expenses of $200,000, the break-even point in units and dollars is ______.
$200,000 ÷ 5 = 40,000 units ×$10 each = $400,000
The total cost in the Product Design cost pool is $200,000 with a total activity of 1,600 designs. The total cost assigned to a customer who had 7 designs done is $ .
$200,000/1600 = $125 $125*7= $875
Estimated manufacturing overhead $500,000 Estimated direct labor hours 200,000 Actual manufacturing overhead $625,000 Actual direct labor hours 260,000 The company applies overhead using direct labor hours as the cost driver. Calculate the amount that overhead was overapplied or underapplied.
$25,000 overapplied ($500,000 ÷ 200,000) = $2.50 × 260,000 = $650,000 applied. Actual overhead = $625,000, so overhead is $25,000 overapplied.
Given the following, calculate the cost of goods available for sale. Cost of goods manufactured of $234,000 Beginning Finished goods inventory of $18,000 Ending Finished goods inventory of $24,000
$252,000 Goods available for sale = $234,000 + $18,000 = $252,000
Based on the following information, compute the cost of goods sold for Spengler Merchandising Corporation. Sales $400,000 Purchases $300,000 Beginning inventory $50,000 Ending inventory $90,000 Selling expenses $70,000 Administrative expenses $30,000 Accounts receivable $110,000
$260,000
Meep Industries had unadjusted cost of goods sold of $300,000. Overhead was overapplied by $20,000. Adjusted cost of goods sold is ______.
$280,000 $300,000 - $20,000 = $280,000
A company assigns overhead using a plantwide rate. If total estimated manufacturing overhead is $900,000 and the total estimated activity is 30,000 machine-hours, the overhead cost assigned to a product using 12,000 machine-hours is ______.
$360,000 ($900,000/30,000)
Shonda's Shoes sell for $95 per pair. If Shonda must sell a total of 284 pairs of shoes to break-even, and a total of 450 pairs to achieve her target profit, sales dollars needed to earn the target profit equals ______.
$42,750
If the activity rate for the customer order cost pool is $250 per order and the total for this cost pool is $425,000, the total number of customer orders is ______.
$425,000 ÷ $250 = 1,700
Martin Industries had unadjusted cost of goods sold of $450,000. Overhead was underapplied by $30,000. Adjusted cost of goods sold is ______.
$480,000 $450,000 + $30,000 = $480,000.
Citrus Scents produces body sprays. Variable selling and administrative expense is $1.05 per bottle and fixed selling and administrative expense is $4,500 per month. The company produced 1,490 bottles this month, and sold 1,203 of those bottles. Total selling and administrative expense for the month was ______.
$5,763.15
The customer orders cost pool uses 25% of indirect factory wages. If total indirect factory wages are $500,000, the amount allocated to this cost pool in the first-stage allocation is:
$500,000 × 0.25 = $125,000
Luver Corporation's Gross margin is $100,000, Cost of goods sold equals $70,000, and Selling and administrative expenses total $45,000. Net operating income is ______.
$55,000 $100,000 - $45,000 = $55,000
A company reports Gross margin of $100,000, Cost of goods sold of $70,000, and Selling and administrative expenses of $45,000. Net operating income (loss) is ______.
$55,000 Gross margin - Selling & administrative expenses: $100,000 - $45,000 = $55,000
Company A has fixed costs of $564,000 and a contribution margin of 62%. Sales dollars to break-even rounded to the nearest whole dollar equals ______.
$564,000 ÷ 0.62 = $909,677
Costs in beginning work in process inventory totaled $1,200 and $6,000 in costs were added during the period. If there are 75 equivalent units, the cost per equivalent unit using FIFO is ______.
$6,000 ÷75=$80
A company has two activity cost pools—Customer Orders and Product Design. The activity rates are $300 per order for Customer Orders and $500 per design for Product Design. How much overhead cost would be assigned to a customer placing 4 orders and requiring 10 designs?
$6200 ($300 × $4) + ($500 × 10) = $6,200
Raw materials inventory was $27,000 at the beginning of the year and $25,000 at the end of the year. During the year, $100,000 in raw materials were purchased, including $28,000 of indirect materials that were put into manufacturing overhead during the period. Calculate the cost of direct materials used during the period.
$74,000 Beginning Inventory + Purchases - Indirect Materials - Ending Inventory ($27,000 + $100,000 - $28,000 - $25,000 = $74,000)
A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and total activity of 20,000 development hours. Using activity-based costing, calculate the appropriate activity rate(s).
$8 per customer call and $15 per development hour Reason: $200,000 ÷ 25,000 = $8 per customer call and $300,000 ÷ 20,000 = $15 per development hour.
Based on the following information, calculate net income for Dana's Dress Shop using the traditional format. Sales $360,000 Gross Margin $140,000 Contribution Margin $110,000 Total Selling & Administrative Exp. $60,000
$80,000
JVL Enterprises has set a target profit of $126,000. The company sells a single product for $50 per unit. Variable costs are $15 per unit and fixed costs total $98,000. How many units does JVL have to sell to BREAK-EVEN?
$98,000 ÷ ($50 - $15) = 2,800
Budgeted sales are $982,000, break-even sales are $932,200, and fixed expenses are $429,000. The company's budgeted margin of safety in dollars is ______.
$982,000 - $932,200 = $49,800.
Canners Company uses weighted-average costing. Beginning work in process inventory had $3,650 of material costs. During the period, $5,000 of materials and $9,250 in conversion costs were added. If there are 250 equivalent units of production for materials, the cost per equivalent unit for materials is ______.
($3,650 + $5,000) ÷ 250 = $34.60
The formula for the cost per equivalent unit using the weighted-average method is ______.
(Cost of beginning work in process inventory + Cost added during the period) ÷ Equivalent units of production
Dollar break-even for a company is calculated as ______.
(Traceable fixed expenses + Common fixed expenses) ÷ Overall CM ratio
Solving for the sales level needed to attain a target profit of $ ______ is the same process as solving for the sales level needed to break-even.
0
A company has four cost pools—customer relations, order size, product design and customer orders. Indirect labor is used 15% for customer relations, 30% for order size, and 35% for product design. The percentage is used for customer orders is:
100% - (15% + 30% + 35%) = 20%
Sleep Tight manufactures pillows. The company incurred $42,000 of fixed manufacturing overhead cost this year. Variable unit product cost was $17. Variable selling and administrative cost was $9 per unit and fixed selling and administrative expenses totaled $59,000. The company manufactured 28,000 pillows and sold 15,408. Total fixed expenses on the variable costing contribution format income statement equal ______.
101000
Lance, Inc. has sales of 9,000 units. The contribution margin per unit is $32 and fixed costs total $120,000. Lance's profit is $ .
168000
Fill in the blanks to complete the sentence. When ending work in process contains 500 units that are 34% completed, there are ______ equivalent units.
170 (500 x 0.34)
Steel, Inc. has a margin of safety in dollars of $559,740. If actual sales were $2,946,000, Steel's margin of safety percentage is ______%.
19
A company has an opportunity to make a bulk sale that would not impact regular sales or total fixed expenses. The variable cost per unit is $11 and the company desires a total profit of $4,500. The quoted selling price per unit for 500 units should be $ .
20
If sales increase by 5% and the degree of operating leverage is 4, net operating income should increase by ______.
20% Increase in net operating income = 5% × 4 = 20%.
The unit product cost of a blender is $24. If 900 blenders are produced and 849 blenders are sold, the total cost of goods sold is $
20376
A company incurred $12,000 of maintenance cost for 6,500 machine hours in June and $14,250 of maintenance costs for 8,000 hours in August. Assuming these are the high and low months of activity, the estimated fixed maintenance costs using the high-low method is $ .
2250
A company incurred $12,000 of maintenance cost for 6,500 machine hours in June and $14,250 of maintenance costs for 8,000 hours in August. Assuming these are the high and low months of activity, the estimated fixed maintenance costs using the high-low method is $.
2250
Shonda's Shoes sell for $95 per pair. If Shonda must sell 284 pairs of shoes to break-even, sales dollars needed to break-even equals $ .
26,980
Adams, Inc. has sales of $100,000 with a contribution margin of $60,000 and net income of $20,000. Baron, Inc. has sales of $110,000 with a contribution margin of $44,000 and net income of $22,000. Thus, the degree of operating leverage is for Adams, Inc. and for Baron, Inc.
3 2
Given a sales price of $100, variable costs of $70 and a break-even point of 500 units, net operating profit for sale of 501 units will be $.
30
Total estimated manufacturing overhead is $900,000 and total estimated activity is 30,000 machine-hours. The plantwide overhead rate is $ per machine hour.
30($900,000 / 30,000 = $30)
If ending work in process contains 300 units that are 40% complete the number of equivalent units is ______.
300 × 0.4=120
Using the weighted-average method, if work in process inventory has 100 units that are 40% complete and 300 units were transferred to the next department during the period, there are a total of ______ equivalent units of production.
340
A company has 50,000 square foot building. Square footage is used as follows: 5,000 feet by Service Dept. #1, 10,000 feet by Service Dept. #2 and 35,000 feet by the two operating departments. Under the direct method, ______ square feet will be used in the allocation of Service Dept. #2's costs.
35,000
A company occupies a building that has 50,000 square feet. Of the total square footage, 5,000 is used by Service Dept. #1, 10,000 is used by Service Dept. #2 and 35,000 is used by the two operating departments. Under the direct method of service department allocation, square footage used in the allocation of Service Dept. #1's costs will be ______.
35000
Daisy's Dolls sold 30,000 dolls this year for $40 each. Each doll's variable cost was $19. If Daisy incurred $250,000 of fixed expenses, net operating income for the year is ______.
380,000 Net operating income =30,000 × ($40 - $19) - $250,000 = $380,000
If equivalent units of production using weighted-average is 4,650 units and there were 500 units in beginning inventory that were 45% complete, equivalent units of production under FIFO equals
4,425
The activity rate for the Customer Orders activity pool is $20 per order. If there are 400 customer orders for a product, the total overhead cost assigned to this product for customer orders is $ .
400 x 20 = 8000
Sales total $500,000, and fixed costs total $300,000. The contribution margin ratio is 68%. Profit = $
40000
A company has two segments with total sales of $500,000 and total variable costs of $343,750. Traceable fixed expenses are $50,000 and common fixed expenses are $80,000. The break even in dollars for the company as a whole equals $
416,000
Seating Galore sells high-end desk chairs. The variable expense per chair is $85.05 and the chairs sell for $189.00 each. The variable expense ratio for Seating Galore's chairs is %.
45 $85.05/$189
Methods to calculate departmental unit costs include ______.
FIFO weighted-average
A product has a selling price of $10 per unit, variable expenses of $6 per unit and total fixed costs of $35,000. If 10,000 units are sold, net operating income will be $.
5000
Given the following, calculate the cost of goods available for sale. Cost of goods manufactured of $410,000 Beginning Finished goods inventory of $110,000 Ending Finished goods inventory of $125,000
52000
Costs in beginning work in process inventory was $4,500 and $37,800 in costs were added during the period. If there are 7,050 equivalent units, the cost per equivalent unit under the weighted-average method is $ .
6 or 6.00 (4,500 + 37800/7050)
If a company has a variable expense ratio of 35%, its CM ratio must be %
65
If the activity rate is $65 per order with a total of 120 orders for a product, the overhead cost assigned to the product is $.
65x120=$7800
A company needs to sell 90,000 units to reach the target profit of $180,000. If each unit sells for $7.50, the total sales dollars needed to reach the target profit is $.
675000
A company's products had sales of $750,000 and total costs of $360,000. If the net operating income for the company was $215,000, total overhead costs not assigned to products was $
750,000 - 360,000 = 390,000 390,000 - 215,000 = 175,000
Polly's Day Planners sells its planners for $35 each. Sales this year equals $927,500. The margin of safety is $27,300. The margin of safety in units is
780
If equivalent units of production using weighted-average is 8,125 units and there were 1,200 units in beginning inventory that were 30% complete, equivalent units of production under FIFO equals ______.
8,125 - (1,200 × 30%) = 7,765
If sales increase by 15% and the degree of operating leverage is 6, net operating income should increase by ______ %
90
Citrus Fruits sells oranges for $20 per crate. If the company's margin of safety is $180,000, the margin of safety in units is ______ crates.
9000
What are some of the limitations of activity-based costing systems?
ABC requires substantial resources. Managers and employees may resist the change to ABC. ABC procedures produce numbers that do not match traditional costing.
When inventory increases, which costing method generally results in higher net income?
Absorption costing
The journal entry to record the purchase of materials credits ______.
Account Payable
Which costing system charges products only with the costs of the capacity used by those products and not with the cost of unused capacity?
Activity-based
Adams, Inc. has sales of $100,000 with a contribution margin of $60,000 and net income of $20,000. Baron, Inc. has sales of $110,000 with a contribution margin of $44,000 and net income of $22,000. Which of the following statements are correct?
Adams has a higher degree of operating leverage than Baron. Baron's net income grows twice as fast as its sales.
Applied manufacturing overhead is entered on what side of the Manufacturing overhead account?
Always the credit side
A company is currently selling 10,000 units of product for $40 per unit. The unit contribution margin is $27. The company believes that spending $50,000 on advertising will increase sales by 750 units per month and increase the selling price to $45 per unit. If this change is implemented, profits will ______.
An increase in selling price of $5 will increase the contribution margin $5 (from $27 to $32). The increased contribution margin of $74,000 ((10,750 × $32) - (10,000 × $27)) - the additional fixed costs of $50,000 = a profit increase of $24,000.
A company is currently selling 10,000 units of product monthly for $40 per unit. The unit contribution margin is $27. The company believes that spending $50,000 per month on advertising will allow them to increase the selling price to $45 and that sales will increase by 750 units per month. The company should ______.
An increase in selling price of $5 will increase the contribution margin $5 (from $27 to $32). The increased contribution margin of $74,000 ((10,750 × $32) - (10,000 × $27)) - the additional fixed costs of $50,000 = a profit increase of $24,000.
Which of the following appears on job cost sheets and in the work in process account?
Applied manufacturing overhead
Which group is likely to be uncomfortable using ABC allocations that are based on personnel interviews?
Auditors
When preparing financial statements in a job-order costing system, finished goods flow first to the _______ ________and then to the ________ ________.
Balance sheet income statement
Units in ______ work in process inventory + units started or transferred in = Units in ______ work in process inventory + units completed and transferred out.
Beginning Ending
A company's beginning work in process contained 200 units that were 20% complete. Those units were completed and transferred to finished goods. During the period 4,300 units were started. Of the units started, 4,000 were transferred to finished goods. The 300 units in ending work in process were 30% complete. Using the weighted-average method, the equivalent units of production equals ______.
Beginning WIP + started and completed = 4,200 units transferred out + 300 units in ending WIP × 30% complete = 4,290 equivalent units.
Which of the following costs is included in the numerator of the weighted-average method's computation of cost per equivalent unit, but excluded when FIFO is used?
Beginning work in process inventory
A company has a target profit of $204,000. The company's fixed costs are $305,000. The contribution margin per unit is $40. The BREAK-EVEN point in unit sales is ______.
Break-even point = $305,000 ÷ $40 = 7,625
A company has total sales of $1,430,000. Fixed expenses are $657,000 and the contribution margin ratio is 67%. Company profit (loss) is ______.
CM ratio x Sales - Fixed expenses = 67% × $1,430,000 - $657,000 = $301,100.
Chrissy's Cupcakes has $832,000 in sales and $265,000 in fixed expenses. Given a contribution margin ratio of 72%, Chrissy's profit (loss) is ______.
CM ratio × Sales - Fixed expenses = 72% ×$832,000 - $265,000 = $334,040.
Why is CVP analysis more difficult when using absorption costing than when using variable costing?
CVP analysis requires costs to be broken down between variable and fixed which is not done in absorption costing.
A company's current sales are $300,000 and fixed expenses total $225,000. The contribution margin ratio is 30%. The company has decided to expand production which is expected to increase sales by $70,000 and fixed expenses by $15,000. If these results occur, net operating income will ______.
Change in net operating income = $70,000 × 30% - $15,000 = $6,000 increase.
A company currently has sales of $700,000 and a contribution margin ratio of 45%. As a result of increasing advertising expense by $8,000, the company expects to increase sales to $735,000. If this is done and these results occur, net operating income will ______.
Change in net operating income = ($735,000 - $700,000) × 45% - $8,000 = $7,750.
Fantastic Frames sells its frames for $15 per unit. Variable costs total $6 per unit, and fixed costs total $90,000. If the number of units being sold increases by 2,000 frames, net operating income will ______.
Change in net operating income = 2,000 × ($15 - $6) = $18,000.
Tommy's Trains is currently selling 55,000 toy trains for $50 per unit. The variable cost per train is $26 and total fixed costs are $110,000. If Tommy sells an additional 5,000 trains, profits will ______.
Change in profits = 5,000 × ($50 - $26) = $120,000.
What methods can be used to dispose of underapplied or overapplied manufacturing overhead?
Close it to Cost of goods sold. Allocate it to Work in process, Finished goods, and Cost of goods sold.
Which of the statements regarding closing out over or underapplied overhead is correct?
Closing to Cost of goods sold is simpler, and allocating is more accurate.
A 15% increase in sales resulted in a 40% increase in net income for Company A and a 60% increase in net income for Company B. Based on this, which company has the greater operating leverage?
Company B
Which of the following are differences between the traditional and contribution format to income statements?
Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier. Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior.
Which of the following is NOT a common mistake made in preparing segmented income statements?
Computing contribution margin instead of gross margin.
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
Sales revenue minus variable expenses equals
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
A company sold 20,000 units of its product for $20 each. Variable cost per unit is $11. Fixed expenses total $150,000. The company's contribution margin is ______.
Contribution margin = 20,000 × ($20 - $11) = $180,000.
Given sales of $100,000 a contribution margin of $40,000, and fixed expenses of $50,000, the result is a ______.
Contribution margin of $40,000 - fixed expenses of $50,000 = a $10,000 loss.
Gifts Galore had sales revenue of $189,000. Total contribution margin was $100,170 and total fixed expenses were $27,500. The contribution margin ratio was ______.
Contribution margin ratio = $100,170 ÷$189,000 = 53%.
Given sales of $1,452,000, variable expenses of $958,320 and fixed expenses of $354,000, the contribution margin ratio is ______.
Contribution margin ratio = ($1,452,000 - $958,320) ÷ $1,452,000 = 34%.
Milton Corporation sold goods costing $50,000 for $75,000. Journal entries to be made could include entries debiting ______.
Cost of Goods Sold for $50,000 and Accounts Receivable for $75,000
Which of the following are used to calculate Cost of goods available for sale on the schedule of cost of goods sold?
Cost of goods manufactured Beginning finished goods inventory
The journal entry to record the more accurate allocation of overapplied or underapplied overhead includes entries to ______.
Cost of goods sold Work in process Finished goods Manufacturing overhead
The entry to record the sale of finished goods to customers is a debit to ______.
Cost of goods sold and a credit to Finished goods
Underapplied or overapplied manufacturing overhead can be disposed of by closing it to ______.
Cost of goods sold or allocating it to Work in process, Finished goods, and Cost of goods sold
Goldin Corporation currently pays its salesperson a flat salary of $5,000 per month and is considering paying him $20 per unit instead. Sales are currently 200 units per month. Goldin believes the compensation change will increase unit sales by 50%. The current contribution margin is $80 per unit. If the change is implemented, net operating income will ______.
Current income: ($80 × 200) - $5,000 = $11,000. With the change salary becomes a variable cost: ($80 - $20) x 200 × 150% = $18,000, an increase of $7,000 per month.
Bluin Corporation pays its salesperson a flat salary of $5,750 per month and is considering paying her $30 per unit instead. Current unit sales are 250 per month, but Bluin believes the compensation change will increase unit sales by 50%. Bluin's current contribution margin is $100 per unit. If Bluin switches the compensation and sales grow as expected, net operating income will ______ per month.
Current net operating income = ($100 × 250) - $5,750 = $19,250. With the change salary becomes a variable cost and net operating income would be: ($100 - $30) × 250 × 150% = $26,250, an increase of $7,000 per month.
Differential costs, opportunity costs and sunk costs are all cost classifications used in ______.
Decision making
Place the steps for implementing ABC in order.
Define activities, activity cost pools, and activity measures. Assign overhead costs to activity cost pools. Calculate activity rates. Assign overhead costs to cost objects. Prepare management reports.
The journal entry to record depreciation on office equipment debits ______.
Depreciation expense and credits Accumulated depreciation
Which of the following are inventoriable costs under super-variable costing?
Direct materials Variable overhead
Which of the following is NOT an ABC level of activity?
Employee
Under the FIFO method, which of the following inventory balances are used in the calculation of equivalent units?
Ending work in process Beginning work in process
Number of partially completed units x Percentage completion =
Equivalent units
Which of the following is included in computing equivalent units under the FIFO method, but not under the weighted-average method?
Equivalent units to complete beginning work in process
True or false: A benefit of TDABC is that it only requires about half the number of employee interviews that are needed with traditional ABC.
FALSE
From a cost control perspective, the best method for process costing is ______.
FIFO
The method of process costing that is generally considered to be the most accurate, but also the most complex is ______.
FIFO
Which of the following are most likely fixed costs? Factory rent Factory insurance Electricity to operate factory machines Administrative salaries
Factory rent Factory insurance Administrative salaries
Segment margin is most useful in decisions involving short-run changes in sales volume such as pricing special orders.
False
True or false: Absorption costing net income may be computed by multiplying the number of units sold by the contribution margin per unit and subtracting total fixed expenses.
False
True or false: Account analysis involves a detailed analysis of what cost behavior should be, based on an industrial engineer's evaluation.
False
True or false: Actual overhead costs appear in the Work in Process account but not on the job cost sheet.
False
True or false: Allocated costs of other service departments are reallocated back to the original service department allocations when using the step-down method.
False
True or false: Cost structure refers to the relative portion of product and period costs in an organization.
False
True or false: Job B was not completed by April 30. If an April balance sheet is prepared, the costs accumulated for Job B will NOT appear on it.
False
True or false: Knowledge of previous sales is necessary when using incremental analysis to evaluate a change in profits.
False
True or false: Operating leverage is the smallest at sales levels near the break-even point and increases as sales and profits rise.
False
True or false: Period costs flow from Finished Goods to Cost of Goods Sold.
False
True or false: Removing expenses that do not differ between alternatives could alter a decision.
False
True or false: Traditional cost systems tend to undercost standard products and overcost specialty products.
False
True or false: Variable costs remain fixed in total within the relevant range of activity.
False
True or false: When a company sells multiple products, an increase in total sales always results in an increase in total profits.
False
True or false: Without knowing the future, it is best to have a cost structure with high variable costs.
False
When a job is completed, its costs are transferred into ______.
Finished Goods
When jobs are sold their costs are transferred out of ______.
Finished Goods
When production is completed in the last processing department, units are transferred to the ______ ______ account.
Finished Goods
When a job is completed, which account is debited?
Finished goods
When goods are sold on account, what accounts are credited?
Finished goods and Sales
The journal entry to record the transfer of completed units to the finished goods warehouse is to debit ______.
Finished goods and credit Work in process
Tasty Tangerine is currently selling 50,000 boxes for $25 per box. Variable cost per box is $17 and fixed costs total $260,000. A plan is being considered to increase advertising and reduce the selling price. The advertising would increase fixed costs by $60,000. Management believes the advertising along with a $2 reduction in the selling price per box will increase sales volume by 24,000 boxes. If management's predictions are correct, making these changes will cause net income for the year to ______.
If the change is implemented, total contribution margin would increase by $44,000 ((74,000 boxes × $6) - (50,000 boxes × $8)). Additional contribution margin of $44,000 - $60,000 in new fixed costs = a net operating income decrease of $16,000.
Which of the following statements are correct? In practice, direct labor costs are really fixed. Employee morale may be reduced when direct labor is treated as a variable cost. Treating direct labor as a variable cost improves decision making. Managers generally have the ability to quickly adjust the direct labor force.
In practice, direct labor costs are really fixed. Employee morale may be reduced when direct labor is treated as a variable cost.
Which of the following is not a COST CLASSIFICATION associated with decision making?
Indirect costs
Why is top management support needed when ABC is implemented?
Leadership is instrumental in motivating employees to embrace ABC.
To determine the slope, intercept and R² using Excel, select the Trend/Regression type ______.
Linear
In a traditional cost accounting system, what type of costs are assigned to products even if the costs are not caused by the products?
Manufacturing
Which of the following costs are found on the balance sheet?
Manufacturing Overhead Raw Materials Direct Labor
The journal entry to record $1,000 in expired prepaid insurance on factory equipment is debit ______.
Manufacturing Overhead $1,000 and credit Prepaid Insurance $1,000
The journal entry to record $20,000 in depreciation on factory equipment is debit ______.
Manufacturing Overhead $20,000 and credit Accumulated Depreciation $20,000
The journal entry to record expired prepaid factory insurance debits ______.
Manufacturing Overhead and credits Prepaid Insurance
Absorption costing Variable costing
Manufacturing and selling and administrative Variable and fixed
Which account is credited when manufacturing overhead is applied?
Manufacturing overhead
George Corporation recognized $1,000 of accrued property taxes on its manufacturing facility. The journal entry to record this debits ______.
Manufacturing overhead $1,000 and credits Property taxes payable $1,000
If a company incurs $2,000 of factory rent, $1,000 of factory utilities, and $5,000 of miscellaneous factory costs, the journal entry to record these transactions would be to debit ______.
Manufacturing overhead $8,000 and credit Accounts payable $8,000
The journal entry to record depreciation on factory equipment debits ______.
Manufacturing overhead and credits Accumulated depreciation
The journal entry to record accrued property taxes for a factory building debits ______.Salaries and wages payable
Manufacturing overhead and credits Property taxes payable
The period ends
Manufacturing overhead is closed
Overhead is applied to Work in Process
Manufacturing overhead is credited
Actual overhead is incurred
Manufacturing overhead is debited
Jump-It Corporation has a margin of safety of $272,000. The company sold 100,000 units this year. If the company sells each unit for $17, the margin of safety percentage is ______.
Margin of safety = $272,000 ÷ (100,000 × $17) = 16%
When using process costing, which of the following can be added in any department?
Materials, labor and overhead
Ceramic Creations sells pots for $25. The variable cost per pot is $12 and 15,000 pots must be sold to break-even. If Ceramic Creations sells 25,000 pots, net operating income will be ______.
Net income = (25,000 - 15,000) × ($25 - $12) = $130,000.
Vivian's Violins has sales of $326,000, contribution margin of $184,000 and fixed costs total $85,000. Vivian's Violins net operating income is ______.
Net operating income = $184,000 - $85,000 = $99,000
A company's break-even point is 17,000 units. If the contribution margin is $22 per unit and 26,000 units are sold, net operating profit will be ______.
Net operating income = (26,000 - 17,000) × $22 = $198,000.
A company sold 750 units with a contribution margin of $120 per unit. If the company has a break-even point of 450 units, the net operating income or (loss) is ______.
Net operating income = (750 - 450) × $120 = $36,000.
Adam's Sports Store has a contribution margin ratio of 55% and has already passed the break-even point for the year. If Adam's generates additional sales of $250,000 by the end of the year, net operating income for the year will increase by ______.
Net operating income change = $250,000 × 55% = $137,500 increase.
Anne's Antique Store has a contribution margin ratio of 29%. The break-even point has been reached. If the store generates an additional $600,000 of sales for the year, net operating income will increase by ______.
Net operating income change = $600,000 × 29% = $174,000.
In activity-based costing, what costs are not assigned to products?
Organization-sustaining Unused capacity
Which of the following is not a characteristic of operation costing?
Products are homogeneous.
Marjorie's Mugs sold 300 mugs last year for $20 each. Variable costs were $7 per mug and total fixed costs were $1,700. Marjorie's Mugs' profit was ______
Profit = 300 × ($20 - $7) - $1,700 = $2,200.
The journal entry to record issuing materials to be used in production credits ______.
Raw materials
Which of the following statements are true? Multiple select question. Direct labor costs flow through the Raw materials inventory account. Raw materials inventory represents the cost of materials not yet used in production. Raw materials inventory only includes the cost of direct materials. When materials are purchased they are recorded in the Raw materials inventory account.
Raw materials inventory represents the cost of materials not yet used in production. When materials are purchased they are recorded in the Raw materials inventory account.
The assumption that cost behavior is strictly linear is reasonably valid within the of activity.
Relevant range
The percentage of the variation in cost that is explained by activity is ______.
R²
The journal entry to record labor costs credits ______.
Salaries and wages payable
Which of the following items are found above the contribution margin on a contribution margin format income statement?
Sales Variable expenses
Place the following items in the correct order in which they appear on the contribution margin format income statement.
Sales Variable expenses Contribution margin Fixed expenses Net operating income
Cakes by Jacki has $144,000 of fixed costs per year. The contribution margin ratio is 59%. The sales dollars to break-even rounded to the nearest dollar equals ______.
Sales = $144,000 ÷ 0.59 = $244,068
Softie, Inc. produces facial tissues. The company's contribution margin ratio is 77%. Fixed expenses are $240,400. To achieve a target profit of $930,000, Softies' sales rounded to the nearest dollar must be ______.
Sales = ($240,400 + $930,000) ÷ 0.77= $1,520,000
Company A has fixed costs of $564,000 and wishes to earn a profit of $800,000 this year. If Company A has a contribution margin ratio of 62%, sales dollars needed to reach the target profit equals ______.
Sales = ($564,000 + $800,000) ÷ 0.62 = $2,200,000
Chitter-Chatter sells phones and has set a target profit of $975,000. The contribution margin ratio is 65%, and fixed costs are $195,000. Sales dollars needed to earn the target profit total:
Sales = ($975,000 + $195,000)/0.65 = $1,800,000.
A company's selling price is $90 per unit, variable cost per unit is $28 and total fixed expenses are $320,000. The number of unit sales needed to earn a target profit of $200,800 is ______.
Sales volume = ($320,000 + $200,800) ÷ ($90-$28) = 8,400 units
Paula's Perfumes has a target profit of $4,000 per month. Perfume sells for $15.00 per bottle and variable costs are $13.50 per bottle. Fixed costs are $3,200 per month. The number of bottles that must be sold each month to earn the target profit is ______.
Sales volume = ($4,000 + $3,200) ÷($15.00 - $13.50) = 4,800 bottles.
Run Like the Wind sells ceiling fans. Target profit for the year is $470,000. If each fan's contribution margin is $32 and fixed costs total $222,640, the number of fans required to meet the company's goal is:
Sales volume = ($470,000 + $222,640)/$32 = 21,645 fans.
Blissful Blankets' target profit is $520,000. Each blanket has a contribution margin of $21. Fixed costs are $320,000. The number of blankets Blissful Blankets need to sell in order to achieve its target profit is ______.
Sales volume = ($520,000 + $320,000) ÷ $21 = 40,000 blankets.
Which of the following statements are true?
Scattergraphs are a way to diagnose cost behavior. Plotting data on a scattergraph is an important diagnostic step.
Which of the following is NOT an organizational sustaining cost?
Set-up labor wages
Costs that have already been incurred and can not be changed by decisions made in the current period or in future periods are called ____ cost
Sunk
What type of cost is never relevant and should be disregarded when making decisions?
Sunk
A company sells 500 sleds per month for $80. Variable costs are $41 per unit and fixed expenses are $3,500 per month. The company thinks that using a new material would increase sales by 70 units per month. If the new material increases variable costs by $4 per unit, the impact on net income would be a ______.
The current contribution margin is $39 per unit ($80 - $41) or $19,500 (500 units × $39) total. The new contribution margin would be $35 per unit ($39 - $4 new cost) or $19,950 (570 units × $35), an increase of $450.
Which of the following statements is correct?
The higher the margin of safety, the lower the risk of incurring a loss.
Which of the following is not essential for the successful implementation of an ABC system?
Top managers must design the ABC system.
Which of the following items are the same under both ABC and traditional costing?
Total costs Net operating income Total sales
Pretty in Pearls sold 95 necklaces last month. If variable cost per unit is $40 and fixed costs total $3,085, the company's total variable cost was ______.
Total variable cost = 95 ×$40 = $3,800.
Which costing system does not assign selling and administrative costs to products when computing product margin?
Traditional
Which costing method assigns only manufacturing costs to products?
Traditional absorption costing
What causes traditional and activity-based costing systems to report different product margins?
Traditional cost systems allocate all manufacturing overhead costs to products. Traditional cost systems allocate all of the manufacturing overhead costs to products using a volume-related allocation base. The ABC system assigns nonmanufacturing overhead costs to products on a cause-and-effect basis as appropriate.
When using Excel, the intercept (a), slope (b) and R² is determined by selecting any data point in the scattergraph plot and selecting Add
Trendline
A cost that can be traced directly to a specific segment should be charged directly to that segment and not allocated to other segments.
True
True or false: A cost reconciliation report using the weighted-average method reports the same information as a cost reconciliation report using FIFO.
True
True or false: A processing department needs to calculate a separate unit cost for each type of cost incurred.
True
True or false: Presenting fixed costs on an average per unit basis makes them look like they are variable costs.
True
True or false: The equivalent units of production computed under the weighted-average method does not take into account the percentage completed of the beginning inventory.
True
True or false: The flow of costs through manufacturing accounts is basically the same for job-order costing and process costing.
True
True or false: The transfer of costs from one inventory account to the next parallels the physical transfer of goods from one inventory to the next.
True
True or false: Underapplied or overapplied overhead occurs because overhead is applied to jobs using a predetermined rate based on estimates of costs and activity levels.
True
True or false: When a team is created to design and implement an ABC system, it should include members that represent many different functional areas.
True
True or false: When using the high-low method, fixed costs are calculated after variable costs are determined.
True
super-variable costing treats all manufacturing overhead as a fixed cost.
True
Which of the following is a key difference between process and job-order costing?
Under process costing, it makes no sense to try to identify materials, labor and overhead costs with a particular customer order.
Which of the following is needed to calculate profit?
Unit contribution margin, unit sales, and total fixed costs
Company A's product sells for $90 and has a variable cost of $35 per unit. Fixed costs total $550,000. If Company A sells 16,000 units, the contribution margin per unit is ______.
Unit contribution margin= $90 -$35 = $55.
What level of activity is performed each time an item of a product is produced?
Unit-level
Which of the following equations is correct?
Units in beginning WIP + units started or transferred in = Units in ending WIP + units completed and transferred out
Given ending work in process of 400 equivalent units, beginning work in process inventory of 500 equivalent units and 800 units transferred out, equivalent units of production using FIFO is ______.
Units transferred out + Equivalent units in Ending WIP - Equivalent units in Beginning WIP = 700
The Cutting Edge sells ice skates. Total sales are $845,000, total variable expenses are $245,050 and total fixed expenses are $302,000. The variable expense ratio is ______.
Variable expense ratio = $245,050 ÷$845,000 = 29%.
Spice sells paprika for $9.00 per bottle. Each bottle incurs $2.43 in variable cost. Spice incurs annual fixed costs of $825,000. The variable expense ratio for paprika is:
Variable expense ratio=$2.43/$9=27%.
Match the costing method to the manner in which unit costs are calculated.
Weighted-average method matches -> Combines costs and outputs from the current and prior periods. Combines costs and outputs from the current and prior periods. FIFO method matches --> Bases costs solely on the costs and outputs from the current period. Bases costs solely on the costs and outputs from the current period.
Equivalent units of production equals the number of units transferred to the next department (or finished goods) plus equivalent units in ending work in process under which method(s) of costing?
Weighted-average only
All the cost appearing on the job cost sheets of the jobs that are being worked on are found in the ______ account.
Work in Process
Units that are partially complete are found in ______.
Work in Process
Prior to being recorded on the income statement, manufacturers' product costs flow through ______.
Work in Process Finished Goods Raw Materials
A product requires processing in two departments, A and B. Products start in Dept. A. Costs transferred out of Dept. A will be transferred to ______.
Work in Process - Dept. B
The journal entry to record direct materials costs in processing Department #1 is debit ______.
Work in Process-Department #1 and credit Raw Materials
Manufacturing overhead is applied with a debit to ______.
Work in process
A company incurred $10,000 in direct labor costs and $8,000 in indirect labor costs. The journal entry to record this transaction debits ______.
Work in process $10,000 and Manufacturing overhead $8,000 and credits Salaries and wages payable $18,000
The journal entry to record $10,000 in manufacturing overhead applied to Job #40 debits ______.
Work in process $10,000 and credits Manufacturing overhead $10,000
A company requisitioned $40,000 in direct materials and $30,000 in indirect materials from the storeroom to be used in production. The journal entry to record this transaction would debit ______.
Work in process $40,000, debit Manufacturing overhead $30,000 and credit Raw materials $70,000
The journal entry to apply overhead cost to processing Department #1 is to debit ______.
Work in process-Department #1 and credit Manufacturing overhead
The journal entry to record direct labor costs in processing Department #1 is debit ______,
Work in process-Department #1 and credit Salaries and wages payable
When a company produces and sells multiple products ______.
a change in the sales mix will most likely change the break-even point each product most likely has a unique contribution margin. each product most likely creates a unique total of fixed costs.
Discontinuing a profitable segment results in ______.
a reduction in the overall profits of the company the loss of the segment's revenues
Cost behavior is considered linear whenever ______.
a straight line approximates the relationship between cost and activity
Advocates of costing believe fixed costs are an essential part of product production.
absorption
In order to comply with GAAP and IFRS, the ______ costing method must be used for external reporting in the United States.
absorption
Managers who believe that all manufacturing costs must be assigned to products in order to properly match the cost of production with sales are advocates of costing.
absorption
The use of costing can lead to the omission of segment costs because nonmanufacturing costs are not included as costs of a product.
absorption,
Costs are categorized by function when using costing and by behavior when using costing.
absorption, variable
In process costing, manufacturing overhead costs are distributed to each department ______.
according to the amount of the allocation base incurred in the department
Differences between job-order and process costing include that process costing ______.
accumulates costs by department. is used for indistinguishable products.
The first major step in implementing ABC is to identify the that will form the foundation for the system
activities
In ABC, any event that causes consumption of overhead resources is a(n)
activity
In activity-based costing, each cost pool accumulates costs that relate to a single measure in the ABC system
activity
Focusing on activities to eliminate waste, decrease processing time, and reduce defects is the basis of
activity based management
A "bucket" in which costs are accumulated that relate to a single activity measure in the ABC system is a(n) ______.
activity cost pool
Overhead includes both manufacturing and nonmanufacturing costs under ______ costing.
activity-based
The Manufacturing Overhead account is debited when ______.
actual overhead costs are incurred
Overhead is overapplied if ______.
actual overhead is less than applied overhead
Overapplied or underapplied overhead is the difference between ______.
actual total overhead and total overhead applied
A journal entry debiting Salaries expense and crediting Salaries and wages payable could record ______.
administrative salaries
Discretionary fixed costs include ______.
advertising management training programs
Under activity-based costing, overhead includes ______.
all indirect costs
The contribution margin equals sales minus ______.
all variable costs
The more accurate method of closing out the balance in Manufacturing overhead is ______.
allocating it among Work in process, Finished goods, and Cost of goods sold
In activity-based costing, the consumption of overhead resources is caused by ______.
an activity
The journal entry to record selling and administrative salaries debits ______.
an expense account and credits Cash or a liability
When using process costing, materials, labor and overhead may be added in ______ processing department.
any
Raw materials
any materials that go into the final product
A journal entry that debits Work in process and credits Manufacturing overhead is recording the ______.
application of manufacturing overhead costs
To calculate total manufacturing costs, add direct materials, direct labor and ______.
applied manufacturing overhead
Work in Process consists of ______.
applied manufacturing overhead actual direct labor cost actual direct materials cost
Super-variable costing will have higher net operating income than variable costing when units produced ______ units sold.
are less than
Advocates of variable costing believe fixed manufacturing costs ______.
are not caused by and cannot be meaningfully traced to specific units of production are period expenses
Actual manufacturing overhead costs are recorded in the Manufacturing Overhead account ______.
as they are incurred
Raw Materials is a(n) _________ account.
asset
Raw materials inventory is an ______.
asset
Customer cost analysis using time-driven activity-based costing (TDABC) ______.
assists with measuring customer profitability uses estimates based on practical capacity
ABC is not used for external reporting because would not be comfortable using allocations based on employee interviews.
auditors
Similarities between job-order costing and process costing include the ______.
basic purpose to assign and compute product costs flow of costs through the manufacturing accounts manufacturing accounts used
Contribution margin ______.
becomes profit after fixed expenses are covered
To calculate cost per equivalent unit using the weighted-average method, add the cost of ______ work in process inventory to costs added during the period and divide by equivalent units of production.
beginning
To calculate cost per equivalent unit using the weighted-average method, add the cost of work in process inventory to costs added during the period and divide by equivalent units of production.______
beginning
In both the FIFO and weighted-average methods, costs to be accounted for include ______ work in process inventory, while costs accounted for include ______ work in process inventory.
beginning ending
Units in work in ______ process inventory + units started or transferred in = Units in ______ work in process inventory + units completed and transferred out.
beginning ending
When computing the equivalent units of production under the weighted-average method, partially completed ______ inventory is ignored.
beginning work in process
To calculate cost of goods manufactured add ______.
beginning work in process to total manufacturing costs, then deduct ending Work in process
How individual costs react to changes in activity level is referred to as cost __________
behavior
A systematic approach that can identify improvement opportunities is ______.
benchmarking
Interdepartmental services are services provided ______.
between service departments
Activity based costing provides managers with information that affects ______.
both fixed and variable costs
When compared with weighted-average costing, the FIFO method is ______ complex.
both more accurate and more
Costs per equivalent unit are used to value ______.
both units in ending inventory and units transferred to the next department
Multiplying unit selling price times the number of units required to break-even is one way to calculate ______.
break-even sales dollars
Using the contribution margin ratio, the impact on net income for a change in sales dollars is ______.
change in sales dollars × contribution margin ratio
To prepare a scattergraph plot in Excel, highlight the data and select the "Scatter" subgroup from the ______ group within the Insert tab
chart
One reason service departments allocate costs to operating departments is to enable ______.
calculating various unit costs
A contribution approach income statement ______.
can assist with management decision making separates costs into their fixed and variable components
Step-variable costs ______.
can be adjusted quickly as conditions change may include total salaried employee expense
Activity-based costing data ______.
can be easily misinterpreted
Differential costs ______.
can be fixed or variable
Time-driven activity-based costing (TDABC) performs to evaluate employee idle time.
capacity analysis
In activity-based costing, nonmanufacturing and manufacturing costs are assigned to products on a(n) ______ basis.
cause-and-effect
When a company sells one unit above the number required to break-even, the company's net operating income will ______.
change from zero to a net operating profit
When making a decision using incremental analysis consider the ______.
change in cost resulting specifically from the decision change in sales dollars resulting specifically from the decision
The variable cost per unit using the high-low method is calculated as ______.
change in cost ÷ change in units (activity)
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 levels of activity and their associated costs
The simpler method of closing out the balance of Manufacturing overhead is ______.
closing it out to Cost of goods sold
A change in profits that occurs due to a change in sales and fixed expenses may be calculated as ______.
cm ratio × change in sales - change in fixed expenses
Fixed costs that cannot easily be changed and often lock a company into a multi-year decision are called _______ fixed costs.
committed
If a segment is eliminated, fixed costs that are not traced to the segment will not change.
common
One mistake companies make when preparing segmented income statements is arbitrarily assigning fixed costs to segments.
common
When a segment is eliminated, a ______.
common fixed cost will remain unchanged traceable fixed cost will disappear
A journal entry that debits Finished goods and credits Work in process records the ______.
completion of a job
Finished goods ______.
consists of completed, unsold goods
Contribution margin ratio is equal to ______ divided by ______.
contribution margin sales
An income statement focusing on product and period costs has been prepared using a(n) ____ format, while a(n) ____ income statement makes a distinction between fixed and variable costs.
contribution traditional
To calculate profit, multiply the ______ per unit by sales volume and subtract total fixed cost.
contribution margin
Users can easily judge the impact on profits of changes in selling price, cost or volume when using an income statement constructed under the ______ approach.
contribution margin
To calculate the effect on profits of a planned increase in sales, you need the increase in units sold, any change in fixed costs and the ______.
contribution margin per unit
The degree of operating leverage = ______.
contribution margin ÷ net operating income
The calculation of contribution margin (CM) ratio is ______.
contribution margin ÷ sales
Variable costing net income may be computed by multiplying the number of units sold by the per unit and subtracting total expenses.
contribution margin, fixed
To calculate the variable cost per unit using the high-low method, the change in ______ , Correct Unavailable is divided by the change in ______ activity.
cost activity
In activity based costing another term for activity measure is ______.
cost driver
In activity-based costing, another term for allocation base or activity measure is
cost driver
The amount transferred from Work in Process to Finished Goods is ______.
cost of goods manufactured
Beginning merchandise inventory + Purchases - Ending merchandise inventory =
cost of goods sold
Gross margin is calculated by subtracting ______ from ______.
cost of goods sold; sales
Within the relevant range of activity,
costs and activity can be approximated by a straight line fixed costs remain constant in total
When using the step-down method, after a service department's costs have been allocated ______.
costs of other service departments are not reallocated back to it
The break-even point calculation is affected by ______.
costs per unit selling price per unit sales mix
When managers allocate organization-sustaining and unused capacity costs to products ______.
costs will be overstated incorrect decisions may be made
Incorrectly or arbitrarily assigning common costs to segments ______.
could reduce the overall profits of the company distorts the profitability of segments holds managers responsible for costs they cannot control
When overhead is underapplied, a _____ must be made to the Manufacturing overhead account to close it out.
credit
The __________ side of the manufacturing overhead account is always used to record manufacturing overhead applied to production and the _________ side is always used to record the actual manufacturing costs incurred.
credit debit
The correct journal entry to apply manufacturing costs to processing Department #1 is (debit/credit) Manufacturing overhead and (debit/credit) Work in process-Department #1.
credit debit
The journal entry to record labor cost in the first department is (debit/credit) Wages payable and (debit/credit) Work in process-Department #1.
credit debit
When a customer's order is filled and units are sold, there is a ______ to Finished Goods and a ______ to Cost of Goods Sold.
credit debit
Actual manufacturing overhead was $50,000, while overhead applied to jobs was $45,000. The entry to dispose of underapplied or overapplied overhead ______.
credits Manufacturing overhead $5,000 Underapplied overhead results in a $5,000 debit balance in the overhead account. To dispose of it, Manufacturing overhead should be credited for $5,000.
FIFO is considered better than the weighted-average method because ______.
current performance is based on current period costs it provides more up-to-date cost data
The most appropriate activity measure for a cost pool consisting of the costs of resources consumed taking and processing individual customer sales is the number of ______.
customer orders
A cost pool including costs to entertain clients and make sales calls is a(n) ______ activity.
customer-level
The journal entry to record material cost in the second department includes a (debit/credit) to Work in Process-Department #2.
debit
The journal entry to record the transfer of completed units to finished goods is (debit/credit) Finished Goods and (debit/credit) Work in Process.
debit credit
Actual manufacturing overhead is ______ to the Manufacturing overhead account.
debited
The difference between the entries to record depreciation on office equipment and depreciation on factory equipment is that one ______.
debits Depreciation expense, while the other debits Manufacturing overhead
Actual manufacturing overhead was $50,000, while overhead applied to jobs was $45,000. Work in process contained 10% of applied overhead, Finished goods contained 40%, and Cost of goods sold contained 50%. The entry to dispose of underapplied or overapplied overhead using the allocation method ______.
debits Work in process $500 Overhead is underapplied by $5,000. To dispose of the underapplied overhead, overhead is credited and the other accounts including Work in process, Finished goods, and Cost of goods sold are debited by $500 (10%), $2,000 (40%), and $2,500 (50%), respectively.
Assuming sales price remains constant, an increase in the variable cost per unit will ______ the contribution margin per unit.
decrease
Sweet Dreams sells pillows for $25 each. Variable costs are $15 per pillow. The company is considering improving the quality of materials which will increase variable costs to $19. The company currently sells 1,200 pillows per month and expects that the improved materials would increase sales to 1,500 per month. The impact of this change on total contribution margin would be a(n) ______ (increase/decrease) of $
decrease 3,000
Net operating income is less under absorption costing than under variable costing when inventory for the period ______.
decreases
When inventory increases, absorption costing net operating income is higher than variable costing net income due to the fixed manufacturing overhead ______.
deferred in the inventory account on the balance sheet
An example of a traceable fixed cost for General Motors' Corvette Division is the ______.
depreciation cost on the equipment used to manufacture the Corvettes
A journal entry that debits Depreciation expense and credits Accumulated depreciation records ______.
depreciation on office equipment
A change in revenues between two alternatives is known as revenue or incremental revenue.
differential
The method of allocating service department costs that ignores services provided by one service department to other service departments is the ______ method.
direct
Differences in net operating income between super-variable and variable costing occur because of the treatment of ______ costs under the two methods.
direct labor
Costs assigned and/or traced when computing product margin in a traditional cost system are ______.
direct labor direct material manufacturing overhead
A journal entry that debits Manufacturing overhead and credits Accounts payable would not be used to record ______.
direct labor costs
Common activity bases include ______.
direct labor hours machine hours units sold
In the 19th and 20th centuries ______.
direct labor hours was a satisfactory overhead allocation base
Conversion costs are ______.
direct labor plus manufacturing overhead
The direct method allocates service department costs ______.
directly to operating departments
Fixed costs that usually arise from annual spending decisions by management are called _______ fixed costs.
discretionary
Fixed costs that can be cut-back or eliminated without significant damage to a company's long-term goals are _________ fixed cost and _______ fixed costs can not be easily changed or eliminated
discretionary committed
A journal entry that involves Manufacturing overhead, Work in process, Finished goods, and Cost of goods sold is recorded to ______.
dispose of underapplied or overapplied overhead
The contribution approach to constructing income statements ______.
distinguishes between fixed and variable costs aids in decision making
Time-driven activity-based costing (TDABC) ______ require extensive interviews with employees.
does not
Customer cost analysis using time-driven activity-based costing (TDABC) ______.
does not require employee interviews helps manage customer mix enables estimating customer service employee needs
When constructing a CVP graph, the vertical axis represents ______.
dollar
The amount of time required to perform an activity is measured by a(n) driver.
duration
To calculate direct materials on the schedule of cost of goods manufactured, add purchases to beginning raw materials inventory and subtract ______.
ending raw materials inventory and Indirect materials used
Estimating the fixed and variable components of a mixed cost using the ______ approach involves a detailed analysis of what cost behavior should be.
engineering
On an absorption costing income statement, selling and administrative expenses ______.
equal the amounts reported on a variable costing income statement are reported as a single amount
A company has reached its break-even point when the contribution margin ______ fixed expenses.
equals
To report ending inventory, partially completed units are translated into ______ units.
equivalent
Equivalent units of production under the weighted-average method equal ______.
equivalent units in ending work in process plus units transferred out
Super-variable costing will have lower net operating income than variable costing when units produced ______ units sold.
exceed
Individual product costs calculated using ABC are not listed on ______ reports.
external
Using variable costing and the contribution approach for internal decision making ______.
facilitates explaining changes in net income enables CVP analysis supports decision making
True or false: In an activity-based costing system, it is best to combine activities that are not highly correlated.
false
True or false: The margin of safety is the excess of break-even sales dollars over budgeted (or actual) sales dollars.
false
Completed units that have not yet been sold are found in ________ ________ inventory.
finished goods
In activity-based costing, the process of assigning overhead costs to activity cost pools is ______ stage allocation.
first
Employees may be asked to estimate their time spent dealing with cost pool activities so that ______.
first-stage allocations will be more accurate
As the level of activity moves outside of the relevant range, _______ costs increase or decrease in discrete steps rather than an linear fashion.
fixed
In a least-squares regression line, the vertical intercept (a) of the line represents the total ______ cost
fixed
Within the relevant range of activity, ______ costs remain constant in total.
fixed
The contribution approach to constructing income statements distinguishes between ______ costs.
fixed and variable
Within the relevant range of activity ______.
fixed costs remain constant in total costs and activity can be approximated by a straight line
Total contribution margin equals ______.
fixed expenses plus net operating income
A change in sales mix ______.
from high-margin to low-margin items may cause total profits to decrease despite an increase in total sales from low-margin to high-margin items may cause total profits to increase despite a decrease in total sales
The step-down method begins allocating cost with the department that provides the ______ amount of service to other service departments.
greatest
Absorption costing net income is calculated by subtracting selling and administrative expenses from
gross margin
sales minus cost of goods sold equals
gross margin
An absorption costing income statement calculates ______.
gross margin by deducting cost of goods sold from sales
A segment should be discontinued when the segment ______.
has a contribution margin that cannot cover traceable fixed costs cannot cover its own costs
A company with three segments has $10,000 in common fixed expenses. All three segments are at the break-even point. As a result, the company ______.
has an overall net operating loss of $10,000
Because the variable cost per unit equals the slope of the straight line, the steeper the slope, the ______ the variable cost per unit.
higher
If operating leverage is high, a small percentage increase in sales produces a (higher/lower) percentage increase in net operating income than if operating leverage is low.
higher
Contribution margin computed using super-variable costing will be ______ than the contribution margin computed using traditional variable costing.
higher than
Net operating income under absorption costing is generally ______ net operating income under variable costing in periods in which inventory increases.
higher than
The company-wide break-even sales will always be ______ the sum of the segment break-even sales.
higher than
Total fixed costs on a super-variable costing income statement will be ______ than total fixed costs on a traditional variable costing income statement.
higher than
When units sold exceed units produced, net income under variable costing will generally be _______ net income under absorption costing.
higher than
In a processing department, all units of output are .
homogeneous
In a processing department, all units of output are
homogeneous, identical, uniform, indistinguishable, or equivalent
A processing department produces ________ units.
identical homogeneous
The first major step when implementing an ABC system is ______.
identify the activities
Under the FIFO method, the cost of units transferred out consists of the cost ______.
in beginning work in process inventory to complete beginning work in process inventory of units started and completed during the period
A fixed cost remains fixed ______ within the relevant range of activity.
in total
Variable costs vary ______ within the relevant range of activity.
in total
ABC does not conform to GAAP because it ______.
includes some nonmanufacturing costs excludes some manufacturing costs
Cost of goods manufactured ______.
includes the manufacturing costs of goods finished during the period
Selling and administrative costs first appear on the ______.
income statement
Absorption costing can lead managers to mistakenly believe that fixed manufacturing overhead costs will ______ in total as the number of units produced increases.
increase
In recent years, direct labor as a percentage of total cost began declining, which caused overhead to
increase
As the level of activity moves outside of the relevant range, fixed costs, ______.
increase or decrease in discrete steps
When the analysis of a change in profits only considers the costs and revenues that will change as the result of the decision, the decision is being made using ______ analysis.
incremental
Labor costs charged to Manufacturing Overhead represent ______.
indirect labor costs
In a least-squares regression equation, a represents the ______ and b represents the ______
inercept slope
The contribution margin statement is ordinarily used by those ______.
inside the company only
The journal entry to record a cash payment of $400 for insurance on administrative office equipment debits ______ and credits cash.
insurance expense
Services provided between service departments are known as ______ services.
interdepartmental
ABC is generally used for ______ reporting.
internal
Example service departments include ______.
internal auditing cafeteria Human resources
The contribution margin statement is primarily used for ______.
internal decision making
When using absorption costing and explaining changes in operating income, financial statement users need to be aware of changes in levels.
inventory
The statistic R² ______.
is a measure of goodness of fit
An activity-based costing system ______.
is costly to maintain produces different numbers than a traditional system requires substantial resources
The degree of operating leverage ______.
is greatest at sales levels near the break-even point is not a constant decreases as sales and profits rise
A company with a high ratio of fixed costs ______.
is more likely to experience a loss when sales are down than a company with mostly variable costs is more likely to experience greater profits when sales are up than a company with mostly variable costs.
Cost structure ______.
is the relative proportion of each type of cost in an organization
A journal entry that debits Work in process and Manufacturing overhead and credits Raw materials records the ______.
issuance of materials
Strengths of time-driven activity-based costing (TDABC) include ______.
it helps estimate the financial impact of aligning capacity with demand it is easy to update employees do not have to self-report idle time
Examples of products that may use operation costing include ______.
jewelry shoes clothing
Operations costing is similar to process costing because ______.
labor and overhead costs are accumulated by operation or department
It makes sense to perform a high-low or regression analysis if a scattergraph plot reveals ______ ______ behavior.
linear cost
The most appropriate activity measure for a cost pool consisting of equipment depreciation and power to run machines is ______.
machine hours
In the 19th and 20th centuries, cost systems relied on allocation bases such as ______.
machine hours labor hours
The cost of goods ______ is the sum of all amounts transferred from Work in process to Finished goods during a period.
manufactured
The cost of goods ________ is the sum of all amounts transferred from Work in process to Finished goods during a period.
manufactured
The schedule of cost of goods ______ Blank 1Blank 1 sold , Incorrect Unavailable summarizes costs that remain in Work in process inventory and that have been transferred from Work in process to Finished goods inventory.
manufactured
The schedule of cost of goods ______ summarizes costs that remain in Work in process inventory and that have been transferred from Work in process to Finished goods inventory.
manufactured
Manufacturing overhead consists of all ______.
manufacturing costs other than direct labor and direct materials
Actual overhead costs may not be proportional to the actual amount of the allocation base used because ______.
many actual overhead costs are fixed overhead spending may not be under control
Customer sales minus direct material, direct labor, and overhead cost pools used for each customer equal customer
margin
The amount by which sales can drop before losses are incurred is the ______ ______
margin safety
The segment margin represents the ______.
margin available after a segment has covered all of its own costs
The margin of safety percentage is:
margin of safety in dollars divided by total budgeted (or actual) sales in dollars
The cost of producing one more unit is the ______ cost.
marginal
The revenue from selling one additional unit is called ______ revenue.
marginal
The revenue obtained from selling one additional unit of product is called ____ revenue
marginal
The revenue obtained from selling one additional unit of product is called ____ revenue.
marginal
The best team to create an ABC system should include employees from ______.
marketing
The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is recognized is known as ________ the principle
matching
Activity-based costing ______ include activities that do not relate to the number of units produced.
may
Under activity-based costing, nonmanufacturing costs ______.
may be allocated to products based on cause
When a segment cannot cover its own costs, that segment should ______.
may be prepared for activities at many levels in a company
An activity base ______.
measures whatever causes costs to vary is sometimes called a cost driver
A cost than contains both variable and fixed costs elements is called ____ a(n) cost.
mixed
A cost that contains both variable and fixed cost elements is a(n) ______ cost.
mixed
Compared to traditional systems, activity-based costing uses ______ cost pools and unique measures of activity.
more
The greater number of activities in an ABC system, the (more/less) costly it is for the company to develop.
more
In ABC, the greater the number of activities, the ______.
more accurate the costs are likely to be more costly the system will be to design
Companies allocate service department costs to operating departments to ______.
motivate managers evaluate managerial performance
If the total contribution margin is less than the total fixed expenses, a ______ occurs.
net loss At the break-even point total contribution margin = total fixed expenses.
Operating leverage is a measure of how sensitive ______ is to a given percentage change in sales dollars.
net operating income
At the break-even point ______.
net operating income is zero total revenue equals total cost
Terry's Trees has reached its break-even point and has a contribution margin ratio of 70%. For each $1 increase in sales ______.
net operating income will increase by $0.70 total contribution margin will increase by $0.70
The FIFO and weighted-average methods will produce identical results if there are ______ ending inventories.
never any
If a segment is entirely eliminated, common fixed costs will ______.
not change
Applied manufacturing overhead will most likely ______ actual manufacturing overhead.
not equal
An example of a transaction driver is the ______.
number of bills sent out to a customer
Under the FIFO method, the cost of units transferred out consists of the cost ______.
of units started and completed during the period to complete beginning work in process inventory in beginning work in process inventory
If some products are overcosted and some are undercosted the errors will ______.
offset each other in cost of goods sold and inventory valuations
Using absorption costing for segmented income statements can lead to ______.
omission of upstream and downstream costs under-costing of segments
When labor costs are incurred, _________ are added directly to the Work in Process account.
only direct labor costs
In traditional costing, ______ costs are assigned to products.
only manufacturing
Segment break-even calculations include ______.
only traceable fixed expenses
Costs should be allocated to segments for internal decision-making purposes ______ the allocation base actually drives the cost being allocated.
only when
Costs should be allocated to segments for internal decision-making purposes ______.
only when the allocation base actually drives the cost being allocated
Most large organizations have both ______ departments where the central purposes of the organization are carried out and departments that provide assistance.
operating service
The two types of departments in large organizations are ______.
operating and service
In situations where products have some common characteristics and some individual characteristics, ______ costing is used.
operation
Products such as clothing that are produced in batches but can vary considerably from model to model may use ______ costing.
operation
A potential benefit that is forfeited or lost when one decision is chosen over another is called a(n) ______ ______
opportunity cost
Activities that occur regardless of which customers are served, which products are produced or how many batches are run or units made are facility-level or - activities.
organization-sustaining
One way to compute equivalent units under the FIFO method is to add units transferred to equivalent units in work in process inventory and then subtract the equivalent units in work in process inventory.
out ending beginning
A credit balance in the Manufacturing Overhead account means overhead was
overapplied
A credit balance in the Manufacturing Overhead account means overhead was ______.
overapplied
Time-driven activity-based costing (TDABC) ______.
overcomes some important limitations of ABC does not assume employees will self-report idle time
Usually, traditional costing ______ high-volume products and ______ low-volume products.
overcosts; undercosts
In activity-based costing, first-stage allocation assigns costs to activity cost pools.
overhead
If ABC is not implemented correctly and organization-sustaining costs are included in product costs, then product costs will be ______ and margins will be ______.
overstated; understated
Under both variable costing and absorption costing, variable and fixed selling and administrative costs are treated as ______ costs.
p
To assist in first-stage allocations in ABC, employees designated as indirect factory workers should provide the ______.
percentage of employee time spent for each activity pool
The basis of benchmarking is comparing ______.
performance within the same industry
Activity-based costing treats organization-sustaining costs as expenses
period
Selling and administrative costs incurred are treated as ______.
period expenses
Activity-based costing uses more cost than traditional costing.
pool
The final step in implementing ABC is ______.
prepare management reports
Decision-making problems that could occur when using absorption costing include inappropriate ______ decisions, and decisions made to ______ products that are, in fact, profitable.
pricing; drop
The weighted-average method includes costs for ______.
prior and current periods
When a segment cannot cover its own costs, that segment should ______.
probably be dropped
Work is performed on products, and materials, labor, and overhead costs are added to products in a(n) ______ department.
processind
When allocating fixed manufacturing overhead cost to units under absorption costing, the total fixed overhead costs must be divided by the number of units
produced
A product's _________ is a function of sales and the direct and indirect costs that the product causes.
product margin
The profit from a product is also called the
product margin
In activity-based costing, ______ are different from those calculated using traditional costing.
product margins
On a traditional income statement, cost of goods sold reports the ____ costs attached to merchandise sold during the period, while selling and administrative expenses report all ____ costs that have been expensed as incurred.
product or manufacturing period
The most common management reports using ABC data are ______.
product profitability customer profitability
Activity-based costing only charges products for the cost of the capacity used because ______.
products are only assigned the costs of resources they actually use it results in a more stable unit product cost
A simpler form of the CVP graph is called the ______ graph.
profit
The single point where the total revenue line crosses the total expense line on the CVP graph indicates:
profit equals zero the break-even point
The vertical distance between the total revenue line and the total expense line on a CVP graph represents the total:
profit or loss
A journal entry that debits Raw Materials and credits Accounts Payable is recording the ______.
purchase of materials
Any purchased materials that will go into the finished product are first recorded in the __________ _____________inventory account.
raw material
The journal entry to record the purchase of materials debits ______.
raw materials
Company A has sales of $500,000, variable costs of $350,000, and fixed costs of $150,000. Company A has ______.
reached the break-even point a contribution margin equal to fixed costs
A journal entry that debits Manufacturing overhead and credits Property taxes payable records the ______.
recognition of accrued property taxes
Cost behavior ______.
refers to how a cost will change as activity level changes categorizes costs as fixed, mixed and variable
variable costs
remain constant per unit and vary in total.
Super-variable costing and variable costing will ______.
report the same net operating income when units produced equal units sold
U.S. GAAP and IFRS ______ publicly traded companies include segmented financial data prepared for external users that use the same methods used in internal segment reports.
require
GAAP and IFRS rules ______.
require that the same method be used for both internal and external segment reporting create problems in reconciling internal and external reports require segmented financial data be included in annual reports
The equation used to calculate the variable expense ratio using total values is total variable expenses divided by total ______.
sales
Individual customer minus individual customer equals customer margin.
sales cost
Customer-level activities include ______.
sales calls mailing catalogs
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
To convert the margin of safety in dollars to the margin of safety in terms of the number of units sold, divide the margin of safety in dollars by the ______.
sales price per unit
Contribution margin is ______.
sales revenue minus variable costs
Activity rates are used to apply overhead costs to products and customers in the -stage allocation.
second
Activity-based costing uses activity rates to apply overhead costs to products in ______ stage allocation.
second
From a decision making point of view, margin is most useful for major capacity decisions and margin is most useful for short-term sales volume decisions.
segment contribution
Assigning common fixed costs to segments impacts ______.
segment margin only
The contribution margin income statement allows users to easily judge the impact of a change in ______ on profit.
selling price volume cost
Contribution Approach to Income Statement
separates costs into their fixed and variable components can assist with management decision making
Organization-sustaining activities include ______.
setting up a computer network preparing annual reports heating a factory
Activities that could be combined into one batch-level activity are the number of ______.
shipped orders customer orders received
Costs that can be easily traced to individual products include ______.
shipping costs sales commission warranty repair costs
Costs that can be traced directly to a segment ______.
should not be allocated to other segments
Within the relevant range, fixed costs ______.
should not be expressed on a per unit basis when making decisions generally include rent and supervisor salaries remain constant in total regardless of changes in activity
The schedule of cost of goods ______ summarizes costs that remain in Finished goods inventory and that have been transferred to Cost of goods sold.
sold
The schedule of cost of goods _______ summarizes costs that remain in Finished goods inventory and that have been transferred to Cost of goods sold. (
sold
Cost behavior patterns such as salaried employees are often called ____ - ____ costs.
step variable
Service department costs are allocated to both operating departments and some, but not all, service departments when using the ______ method.
step-down
Customer service employees are a ______ cost.
step-fixed
To reconcile ABC product margin to net income ______.
subtract overhead costs not assigned to products
Cost of goods manufactured is the ______.
sum of all jobs transferred from Work in process to Finished goods
Costs that have already been incurred and can not be changed by decisions made in the current period or in future periods are called costs.
sunk
All direct labor and manufacturing overhead is treated as fixed under ______ costing.
super-variable
Examples of operating departments include ______.
surgery department at a hospital production department at a manufacturer geography department at a university
A reason that activity-based costing is not often used for external reporting is ______.
the ABC system may not conform to GAAP
Marginal cost is ______.
the cost incurred to produce one more unit of a product
The value of work in process is equal to ______.
the cost of all unfinished jobs
Differential cost is ______.
the difference in cost between two alternatives also known as incremental cost
The rise-over-run formula for the slope of a straight line is the basis of __.
the high-low method
Cost of Goods Manufactured
the manufacturing costs associated with the goods that were finished during the period
Pete's Putters sells each putter for $125. The variable cost is $60 per putter and fixed costs total $400,000. Based on this information ______.
the sale of 12,000 putters results in net operating income of $380,000 the contribution margin per putter is $65.
The profit graph allows users to easily identify ______.
the sales volume required to reach the break-even point the profit at any given sales volume
Selling and administrative expenses are ______ on both the absorption and variable costing income statements.
the same amount
When there is no change in inventory, net operating income will be ______.
the same under both absorption costing and variable costing
When calculating the profit impact of discontinuing a segment, consider _____.
the segment's traceable fixed costs the segment's contribution margin
When comparing the FIFO method of computing equivalent units to the weighted-average method ______.
the weighted-average method blends together work and costs from prior periods with the current period whereas FIFO separates the two periods
Absorption costing and variable costing net operating income will be equal when ______.
there is no beginning and no ending inventory the number of units produced equals the number of units sold
An example of a duration driver is the ______.
time spent preparing invoices
Differences in net operating income between absorption costing and variable costing is due to the ______.
timing of when fixed manufacturing overhead is expensed
The break-even point can be affected by ______.
total fixed costs contribution margin per unit sales mix
The break-even point is reached when the contribution margin is equal to ______.
total fixed expenses
In the equation Y= a + bX, Y is the ______.
total mixed cost
Only costs that would disappear over time if a segment disappeared should be treated as fixed costs.
traceable
Bart's Inc. operates retail stores in various cities. Segmented income statements are prepared for each store and for each product line in each store. The property tax for the store is a(n) fixed cost for the store, and a(n) fixed cost for each product line sold in the store.
traceable common
Arbot Co. manufactures appliances at three manufacturing facilities in the United States. Each location has a plant manager who oversees the manufacturing process for that location. Segmented income statements are prepared for each plant and for each product manufactured in the plant. The salary of each plant manager is a ______ for the individual product lines made in the plant.
traceable fixed cost to the plant and a common fixed cost
When preparing a segment margin income statement ______.
traceable fixed expenses are deducted from contribution margin cost of goods sold consists of only variable manufacturing costs
The segment margin is obtained by deducting the ______ fixed costs of a segment from the segment's ______.
traceable; contribution margin
All manufacturing costs are assigned to products in costing.
traditional
An income statement focusing on product and period costs has been prepared using a(n) ____ format, while a(n) ____ format income statement makes a distinction between fixed and variable costs.
traditional or GAAP contribution
Simple counts of the number of times an activity occurs are drivers.
transaction
When unit costs are transferred from Department A to Department B, Department B will treat the costs as ______.
transferred in
The equivalent units completed are valued the same as units ______ for purposes of determining the cost per unit.
transferred out
Treating direct labor costs as variable can lead to bad decisions.
true
True or false: Activity-based costing can be used for process improvement.
true
True or false: In an automated environment, using traditional allocation bases based on volume may distort unit product costs.
true
True or false: Some manufacturing costs may be excluded from product cost when using ABC.
true
When only a portion of the units involved in a job are sold, the ______.
unit product cost is used to calculate the amount transferred from finished goods to cost of goods sold
When preparing a CVP graph, the horizontal axis represents ______.
unit volume
Work in process
units of product that are only partially complete and will require further work before they are ready for sale to the customer
Finished goods
units of product that have been completed but not yet sold to customers
When using absorption costing, fixed manufacturing overhead cost per unit = Total fixed manufacturing overhead divided by ______.
units produced
Absorption costing is ______.
used by most companies for both internal and external reports required by GAAP and IFRS
An activity-based costing system ______.
uses numerous overhead cost pools may exclude some manufacturing costs from product costs
The high-low method ______.
uses only two data points is easy to apply is based on periods where the activity tends to be unusual
Using the high-low method, the fixed cost is calculated __.
using either the high or low level of activity after the variable cost per unit is calculated
A cost that changes in direct proportion to changes in the activity level is a ______ cost.
variable
Advocates of costing believe the matching principle dictates that fixed costs should be recognized as an expense in the current period.
variable
The number of units produced does not affect net operating income when using costing.
variable
The slope of the regression line represents the ______ cost per unit of activity.
variable
When using the high-low method, the slope of the line equals the ______ cost per unit of activity.
variable
Variable expenses ÷ Sales is the calculation for the ______ ______
variable expense
Profit = (selling price per unit × quantity sold) - (______ expense per unit × quantity sold) - ______ expenses
variable fixed
The term "cost structure" refers to the relative proportion of ______ ______ in an organization.
variable fixed
he term "cost structure" refers to the relative proportion of _____ and ______ costs in an organization.
variable fixed
The equation that should be used in setting a target selling price for a special order bulk sale that does not affect a company's normal sales is: selling price per unit = ______.
variable cost per unit + desired profit per unit
When a company only produces a single product, the total variable cost can be calculated with the equation ______.
variable cost per unit multiplied by quantity of units sold
CM ratio is equal to 1 - ______ ______ ratio.
variable expense
Within the relevant range of activity, variable costs ______.
vary in total remain constant per unit
Traditional cost systems allocate all manufacturing costs using ______ allocation base(s).
volume-related
Prior costs are blended with current period costs when using the ______ method(s).
weighted-average
A processing department is an organization unit ______.
where work is performed on a product, and materials, labor and overhead are added
Costs transferred in from Department A to Department B ______.
will always be 100% complete with respect to Department A
If there are no beginning or ending inventories, then the FIFO and weighted-average methods will produce identical results because unit costs ______.
will be based on just the current period's costs
Costs of partially completed units are accounted for in ______.
work in process
Recording the transfer of partially completed products from one processing department to another, requires a journal entry that affects the ______ account of both processing departments.
work in process
When a job is completed, the job costs are transferred OUT OF ______.
work in process
A non-profit organization is trying to determine the fixed and variable costs of providing meals. During the first six months of the year, the following meals were served and the following costs were incurred. Month Meals Costs January 1,500 $5,200 February 1,700 $5,700 March 1,200 $4,100 April 1,100 $4,200 May 1,150 $4,250 June 1,650 $5,550
y = $1,450 + $2.50x. The high-low method uses the highest and lowest level of activity, not costs. February (1,700 meals and $5,700) and April (1,100 meals and $4,200) are the high and low activity months.
The break-even point is the level of sales at which the profit equals .
zero
To convert the formula for sales dollars required to attain a target profit to sales dollars required to break-even, set the target profit to $ .
zero