Cost Accounting Test 2

variable expense ratio

1 - CM ratio

equivalent units

number of partially completed units x percentage completion

profit

sales - var. expense - fixed expense

Cost of ending wip inventory (weighted average)

# of equivalent units in ending WIP for materials x cost per equivalent units for materials PLUS # of equivalent units in ending WIP for conversion x cost per equivalent units in ending WIP for conversion

decrease, even though total sales may increase

A shift in the sales mix from high-margin items to low-margin items can cause total profit to

variable and fixed cost distinctions

Absorption costing income statements ignore

proccessing department

In process costing, a separate work in process account is kept for each:

debit: WIP shaping department credit: manufacturing overhead

Manufacturing overhead was applied to the Shaping Department, $10,000.

sales mix

The relative proportions in which a company's products are sold. - computed by expressing the sales of each product as a percentage of total sales.

Units transferred to the next department × Cost per equivalent unit

Under the weighted-average method, the cost of units transferred out of a department is computed as follows for a cost category:

unit volume (activity)

What is represented on the X axis of a cost-volume-profit (CVP) graph?

operating leverage

a measure of how sensitive net operating income is to a given percentage change in dollar sales

cost transferred in

costs transferred out to the next department will be accounted for in the next department as ______

change in net operating income (operating leverage)

degree of leverage x percent of sales

conversion cost

direct labor cost + manufacturing overhead cost

unit product cost (variable costing)

direct materials + direct labor + variable manufacturing overhead

debit: finished goods credit: shaping department

finished snowboards worth $80,000 were transferred from the Shaping Department to the finished goods warehouse.

two: the FIFO and the weighed average

how many methods for computing departmental unit costs and what are they

operation costing

hybrid system that includes characteristics of job order and process costing -used in situations where products have some common and some individual characteristics

equal to variable (no change in inventory)

if number of units produced equals number of units sold, then, absorption is

greater than variable (inventory increases)

if number of units produced greater than number of units sold, then, absorption is

less than variable (inventory decreases)

if number of units produced is less than number of units sold, then, absorption is

Margin of Safety Percentage

margin of safety in dollars / total budgeted (or actual) sales in dollars

weighted average method

process costing method of computing using combined costs and outputs from current and prior periods

fifo method

process costing method of computing using costs and outputs from current period

contribution margin

sales revenue - variable expenses

sales

selling price per unit x quantity sold

cost reconciliation report

shows that costs in beginning inventory and costs added during the period have been properly accounted for -costs of inputs = costs of outputs

contribution margin

the amount available to cover fixed expenses and then to provide profits for the period

complex

the breakeven for a multi product company is more _______ than the break even for a single profit company

break-even point

the point at which the costs of producing a product equal the revenue made from selling the product

period cost

under the variable costing approach, variable selling and administrative expenses

period cost

under the variable costing approach, what is Fixed selling and administrative expenses

product cost

under the variable costing approach, what is Variable manufacturing overhead

product cost

under the variable costing approach, what is direct labor

period cost

under the variable costing approach, what is fixed manufacturing overhead

process costing

used by a company that produces a continuous flow of units that are indistinguishable from eachother

job order costing

used by a company that produces many different products in one facility

variable expense ratio

variable expenses/sales

Unit Contribution Margin

when break even has been reached, the net operating income will increase by the amount of the ______ for each unit sold

contribution margin ratio

1 - variable expense ratio

fixed manufacturing overhead

The difference between absorption costing net operating income and variable costing net operating income can be explained by the way these two methods account for

contribution margin ration

Contribution Margin / Sales

cost assigned to units transferred out (weighted average)

(# of equivalent units transferred out for materials x cost per equivalent unit) plus (# of equivalent units transferred out for conversion x cost per equivalent unit)

unit sales to attain target profit

(Target Profit + Fixed Expenses) / Unit CM

dollars to attain target profit

(target profit + fixed expenses) / CM ratio

margin of safety in dollars

total budgeted (or actual) sales - break even sales

change in contribution margin

CM ratio x change in sales

profit

CM ratio x sales - fixed expenses

degree of operating leverage

Contribution Margin / Net Operating Income

debit: costs of goods sold credit: finished goods

Finished snowboards that cost $100,000 were sold to customers.

dollar sales to break even

Fixed Expenses / CM Ratio

unit sales to break even

Fixed Expenses / Unit CM

false

T/F: Raw material costs are added only to the first processing department.

debit: WIP cutting department credit: raw materials

Raw materials worth $12,000 were issued for use in the Cutting Department.

equivalent units of production (weighted average)

The units transferred to the next department (or to finished goods) during the period + the equivalent units in the department's ending work in process inventory.

sales, profit and costs

What is represented on the Y axis of a cost-volume-profit (CVP) graph?

fixed expenses

What is usually plotted as a horizontal line on the CVP graph?

process costing is used when a company produces a continuous flow of units that are distinguishable from one another

Which of the following statements about processing costing is false? -Process costing accumulates costs by department. -Process costing assigns departmental costs uniformly to all identical units that pass through the department during a period. -Process costing systems compute unit costs by department. -Process costing is used when a company produces a continuous flow of units that are distinguishable from one another

partially completed units

______ must be translated into an equivalent number of fully completed units

cost per equivalent unit of production (weighted average)

cost of beginning WIP inventory + cost added during period / equiv units of production

contribution margin ratio

this can compute change in contribution margin for change in sales volume

cost volume profit graph

this illustrates the relationships among revenue, profit, and costs over different levels of activity

margin of safety

tool to help management see how much sales can change before the company incurs a net lost