cost Acc 1

Charleston Inc. manufactures 40,000 components per year. The manufacturing cost of the components total $190,000 and are comprised of direct materials, $90,000; direct labor, $50,000; variable manufacturing overhead, $20,000; and fixed manufacturing overhead, $30,000. If Charleston purchases the component from an outside supplier for $4.25 per unit, how will the company's operating profit be impacted?

$10,000 decrease

Soapy's Suds makes and sells root beer. Its beginning Work-in-Process Inventory was $12,000 and the ending Work-in-Process Inventory was $10,000. During the year, Soapy used $45,000 of direct materials and incurred $30,000 of direct labor in production. Its cost of goods manufactured for the period was $97,000. How much manufacturing overhead did Soapy incur during the period?

$20,000

James Company had the following costs at a production level of 30,000 units of product: direct materials, $45,000; direct labor, $60,000; variable manufacturing overhead, $15,000 and fixed manufacturing overhead, $30,000. If the same cost pattern persists, what would be the total cost of production at a level of 50,000 units?

$230,000

Abbott Company incurred the following costs during the year: utilities (60% factory), $5,000; insurance (75% factory), $4,000; direct materials, $20,000; indirect materials, $3,000; direct labor, $30,000; and indirect labor, $5,000. What is the amount of conversion costs incurred during the year?

$44,000

Bent Tree incurred the following unit costs during the year: variable manufacturing cost, $27; fixed manufacturing cost, $10; variable marketing and administrative cost, $8; and fixed marketing and administrative cost, $6. During the year, Bent Tree produced 30,000 units and sold 25,000 units of product. The selling price was $67 per unit. What was Bent Tree's total gross margin?

$750,000

Bent Tree incurred the following unit costs during the year: variable manufacturing cost, $27; fixed manufacturing cost, $10; variable marketing and administrative cost, $8; and fixed marketing and administrative cost, $6. During the year, Bent Tree produced 30,000 units and sold 25,000 units of product. The selling price was $67 per unit. What was Bent Tree's total contribution margin?

$800,000

A retailer called Little Big Brother sells video games. The games sell for $40 each. The variable costs consist of the purchase price of $20 per video game. The store's annual fixed costs are $250,000 and the company's income tax rate is 40%. What is the volume of sales dollars required to earn an after-tax target profit of $120,000?

$900,000

Summit Manufacturing had $10,000 of direct materials on hand at the beginning of the year and $9,000 on hand at the end of the year. During the year, the company purchased $42,000 of direct materials, and incurred $22,000 of direct labor and $17,000 of manufacturing overhead. The company had $26,000 of inventory in Work-in-Process Inventory at the beginning of the year and $12,000 at the end of the year. What is the cost of goods manufactured for the year?

$96,000

Margin of safety

(Current sale levels - beak even)/current sales

Cuddly Toys makes a large teddy bear that currently sells for $62 per bear. At a production level of 20,000 bears per year, the bears have a total unit cost of $50 per bear. The total unit cost is comprised of variable costs of $45 per bear and fixed costs of $5 per bear (or total fixed costs of $100,000 ÷ 20,000 bears). Cuddly Toys has excess capacity to manufacture 15,000 more bears. The company has been approached by a new customer, who wants to buy 5,000 large bears for $47 apiece. What is the effect on operating profit if the special order is accepted?

10,000 increase to operating profit

Jordan Inc. manufactures water polo balls, which sell for $50. The company expects to incur the following costs during the coming year: variable manufacturing cost, $15 per unit; variable selling and administrative cost, $5 per unit; fixed manufacturing cost, $35,000; and fixed selling and administrative cost, $25,000. What is the break-even volume in sales dollars?

100,000

Summit Company manufactures and sells three products; X, Y, and Z. Last year sales of these products were 20,000 units of X, 30,000 units of Y and 50,000 units of Z. The unit contribution margins are $5 for X, $4 for Y, and $3 for Z. Assuming the product mix remains the same and that fixed costs are $222,000, how many units of X must Summit sell to break even?

12,000

Hale & Hearty Inc. currently sells 10,000 treadmills for $520 each. Variable costs relating to this product are $320 per unit and fixed costs total $1,200,000. What is the company's margin of safety?

4,000 units

Key West Inc. manufactures inflatable kayaks. Each kayak sells for $350. At a production level of 10,000 units, the total variable manufacturing cost is $1,200,000 and the fixed manufacturing cost in total is $420,000. At this level of activity, the company will incur variable selling and administrative costs of $900,000 and fixed selling and administrative costs of $770,000. How many units have to be sold to break even?

8,500

costs and expenses

An expense is a cost charged against revenue in an accounting period. We incur a cost whenever we give up (sacrifice) resources, regardless of whether we account for it as an asset or an expense. If the cost is recorded as an asset, it becomes an expense when the asset has been consumed.

budgets

Budgets help managers decide whether their goals can be achieved and, if not, what modifications are necessary. As part of the planning and control process, managers prepare budgets containing expectations about revenues and costs for the coming period. Budgeting is very important to the financial success of individuals and organizations. A budget is the financial plan of the revenues and resources needed to carry out activities and meet financial goals.

Sacrifice of resources

Cost

cost accounting information

Cost accounting information is designed for managers. Cost accounting information is commonly used in developing financial accounting information. The primary purpose of cost accounting information is to provide information to management

information technology that links the various processes of an enterprise into a single comprehensive system?

Enterprise resource planning

overarching ethical principle of the IMA Statement of Ethical Professional Practice?

Fairness Honesty Objectivity

Assume that you are a cost accountant who is a member of the Institute of Management Accountants (IMA). If you are faced with an ethical conflict, what should you do?

Follow the established policies that deal with them and, if the policies do not resolve the conflict, you should consider discussing the matter with superiors.

If a company decides to increase its selling price by $4 per unit because of an increase in its variable labor cost of $4 per unit, what impact will these two changes have on the break-even volume in units?

It will not be impacted.

If a company produces or purchases units just in time for use, thereby keeping inventories at a minimum, which of the following methods is it using?

Just-in-time

life-cycle product costing and pricing

Life-cycle costing tracks costs attributable to each product from start to finish. A product life-cycle budget highlights for managers the importance of setting prices that will cover costs in all value-chain categories. Life-cycle costing is becoming increasingly important in light of Take-Back Laws in Europe, which make the costs of recycling and disposal of products the responsibility of the manufacturer. Life-cycle costs provide important information for pricing.

CVP analysis with spreadsheets

Once the data are entered, an analysis tool such as Goal Seek can be used to find the volume associated with a given desired profit level. A Microsoft Excel worksheet is ideally suited to doing CVP. An extremely simple Microsoft Excel spreadsheet can easily be edited to analyze alternative scenarios (also called "what-if" analyses). Only the second and third statements above are correct.

value-added activity?

Product design Production Marketing Customer service

Which of the following is an example of a nonvalue-added activity?

Reworking defective units

Sarbanes-Oxley Act of 2002 require the CEO and CFO to do?

Take responsibility for signing financial statements. Stipulate that the financial statements do not omit material information. Disclose that they have evaluated the company's internal controls. Disclose that they have notified the company's auditors and the audit committee of the board of any fraud that involves management

activities that transforms raw resources into the goods and services end users (households, for example) purchase and consume and also includes the treatment or disposal of any waste generated by the end users?

Value chain

Sacrifice of resources.

cost

Differential cost

cost that changes in response to alternative courses of action

Differential cost

cost that changes in response to alternative courses of action?

Sunk cost

cost that has been incurred that cannot be changed by present or future decisions?

Cost that can be directly related to a cost object.

direct cost

Which of the following describes an important qualitative factor to consider regarding a special order?

effect of the sale of special-order units will have on the sale of regularly priced units.

Cost charged against revenue in a particular accounting period.

expense

Cost that does not vary with the volume of activity.

fixed cost

Cost used to compute inventory value according to GAAP.

full absorption cost

Cost that cannot be directly related to a cost object.

indirect cost

After-tax target profit equals the before-tax operating profit:

multiplied by (1 - tax rate).

Lost benefit from the best forgone alternative.

opportunity cost

Past, present, or near-future cash flow.

outlay cost

Price fixing

particular legal and ethical problem because it is not universally illegal.

Cost that can more easily be attributed to time intervals.

period cost

Price discrimination

practice of selling identical goods or services to different customers at different prices.

Peak-load pricing

practice of setting prices highest when the quantity demanded for the product approaches the physical capacity to produce it.

Cost that is part of inventory.

product cost

Throughput contribution =

sales dollars - direct materials costs and other variable costs (energy and piecework labor)

Cost that varies with the volume of activity.

variable cost