Exam 2 UNH Managerial Accounting
True or false: A static budget is being compared to actual activity. The variance is F for net income but U for most expenses. This suggests that actual activity was lower than budgeted.
False
The difference between reported net income on variable costing and absorption costing income statements is based on how Blank______.
fixed overhead is accounted for
Estimates of what revenues and costs should have been based on the actual level of activity are shown on the budget.
flexible
Revenues and costs are adjusted as the level of activity changes on a(n______ budget
flexible
Absorption costing net income is calculated by subtracting selling and administrative expenses from .
gross margin
An absorption costing income statement calculates ______.
gross margin by deducting cost of goods sold from sales
The statistic R² Blank______.
is a measure of goodness of fit
A traceable fixed cost Blank______.
is incurred because of the existence of the segment
A company with a high ratio of fixed costs:
is more likely to experience greater profits when sales are up than a company with mostly variable costs. is more likely to experience a loss when sales are down than a company with mostly variable costs.
To determine the slope, intercept and R² using Excel, select the Trend/Regression type
linear
When inventory decreases, cost of goods sold under absorption costing will generally be Blank______ cost of goods sold under variable costing.
more than
Variances are more accurate when using Blank______.
multiple cost drivers
If a segment is entirely eliminated, common fixed costs will Blank______.
not change
The flexible budget _____ report combines activity and revenue and spending variances.
performance
Variable costing treats fixed manufacturing overhead as a(n)_____ cost
period
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
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
Absorption costing treats fixed manufacturing overhead as a ______ cost.
product
Vs Violins has sales of $326,000, CM of $184,000, and fixed costs total $85,000. Vs Violoins NOI is ____
NOI=$184,000-$85,000= $99,000
The contribution margin as a percentage of sales is referred to as the contribution margin or CM ______
Ratio
The difference between a revenue or cost item in the planning budget and the same item in the flexible budget at the actual level of activity is a(n) ______ variance.
activity
The difference between a revenue or cost item in the planning budget and the same item in the flexible budget at the actual level of activity is a(n) ______variance.
activity
A flexible budget performance report combines the ______.
activity variances with the revenue and spending variances
Using the high-low method, the fixed cost is calculated Blank______.
after the variable cost per unit is calculated using either the high or low level of activity
Selling and administrative expenses _____
are always treated as period costs
Contribution Margin is
becomes profit after fixed expenses are covered
The variance analysis cycle _______
begins with the preparation of performance reports
Under absorption costing product costs consist of Blank______ costs.
both variable and fixed manufacturing
Variable costing income statements are based upon a ______ format.
contribution
The degree of operating leverage = ______.
contribution margin ÷ net operating income
To calculate the variable cost per unit using the high-low method, the change in is ________ divided by the change in ______ .
cost, units
Given the following information, calculate the unit product cost under absorption costing. Direct materials: $50/unit; Direct labor: $75/unit; Variable manufacturing overhead: $27/unit; Fixed manufacturing overhead: $30,000; Units produced: 10,000; Units sold: 6,000. Multiple choice question.
$50 + $75 + $27 + ($30,000 ÷ 10,000) = $155 per unit=158
The relative proportions in which a company's products are sold is referred to as
Sales Mix
Which of the following statements is correct? The risk of loss is not impacted by the margin of safety. The higher the margin of safety, the lower the risk of incurring a loss. The higher the margin of safety, the higher the risk of incurring a loss.
The higher the margin of safety, the lower the risk of incurring a loss.
Performance reports for cost centers Blank______.
do not include revenues or net income
When constructing a CVP graph the vertical axis represents
dollars
A part or activity within an organization about which managers would like cost, revenue or profit data is called a(n) _______
segment
An unchanged planning budget is known as a(n) ______ planning budget
static
Selling and administrative expenses are ______ on both the absorption and variable costing income statements.
the same amount
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
The difference in net operating income between absorption costing and variable costing is due to the ______.
time when fixed overhead is expensed
To prepare a CVP Graph, lines must be drawn representing total revenue, _____
total expense, and total fixed expense
When preparing a CVP graph, the horizontal axis repents
unit volume
The contribution margin equals sales minus ____ expenses
variable
Nonprofit organizations ______.
-may have revenue sources that are fixed usually have significant funding sources other than 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
True or false: The margin of safety is the excess of break-even sales dollars over budgeted (or actual) sales dollars.
False: Reason: The margin of safety is the excess of the budgeted (or actual) sales dollars over break-even sales dollars.
When the number of units produced equals the number of units sold, ______.
absorption costing net income is equal to variable costing net income all fixed overhead incurred flows to the income statement under both costing methods
When preparing a flexible budget, the level of activity ______.
affects variable costs only
On an absorption costing income statement, selling and administrative expenses Blank______.
are reported as a single amount equal the amounts reported on a variable costing income statement
Net operating income is less under absorption costing than under variable costing when inventory for the period Blank______.
decreases
Using variable costing and the contribution approach for internal decision making Blank______.
enables CVP analysis supports decision making facilitates explaining changes in net income
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. True false question.
fasle Reason:This is the formula for variable, not absorption costing net income.
In a least-squares regression line, the vertical intercept (a) of the line represents the total _____ cost
fixed
When units sold exceed units produced, net income under variable costing will generally be _______ net income under absorption costing. Multiple choice question.
higher
Net operating income under absorption costing is generally ______ net operating income under variable costing in periods in which inventory increases.
higher than
When units produced exceed units sold, net income will generally be ______ costing.
higher under absorption costing than under variable
Under both variable costing and absorption costing, variable and fixed selling and administrative costs are treated as Blank______ costs.
period
Variable costing treats fixed manufacturing overhead as a(n)_____ cost.
period
A budget that is prepared before the beginning of the period for a specific level of activity is called a Blank______ budget.
planning
A company's operations can be divided by product lines, geographical area, manufacturing plants, service centers or sales territories, which are known as
segments
An unchanged planning budget is known as a(n)_________ planning budget
static
The prominent difference between performance reports in nonprofit and for-profit organizations is that nonprofit organizations Blank_____
usually receive significant funding from sources other than sales
Variable costing treats Blank______ manufacturing costs as product costs.
variable
Profit=Selling price per unit x quantity sold) -(__________ expense per unit x quantity sold) - _____ expenses
variable, fixed
Variable costing income statements separates _______ expenses from _______ expenses.
variable, fixed
Cost structure refers to the relative portion of product and period costs in an organization.
False:Reason: Cost structure refers to the relative portion of fixed and variable costs in an organization.
Fixed manufacturing overhead costs are expensed as units sold as part of cost of goods sold under ______ costing, and expensed in full with period costs under _____ costing. (Enter only one word per blank.)
absorption,variable
When a company produces and sells multiple products ______.
each product most likely has different costs each product most likely has a unique contribution margin a change in the sales mix will most likely change the break-even point
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
When using variable costing, fixed manufacturing overhead is _____.
expensed in the period incurred
When using absorption costing, fixed manufacturing overhead cost per unit = Total fixed manufacturing overhead cost divided by units:
produced.
A flexible budget shows what budgeted amounts should have been at the actual level of activity. As a result of this change in activity, the flexible budget will show a change in total ______.
variable cost revenue
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 Blank______.
($320,000 + $200,800) ÷ ($90 - $28) = 8,400 units.
A company's current sales are $300,000 and fixed expenses total $85,000. 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 Blank______.
($70,000 × 30%) - $15,000 = $6,000 increase
Daisys Dolls sold 30,000 dolls this year. Each Doll sold for $40 and had a variable cost of $19. Fixed expenses were $250,000. NOI for the year was
(40-19)x30,000=630,000-250,000=380,000
A company's current sales are $300,000 and fixed expenses total $85,000. 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 Blank______.
(70,000x30%)-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 Blank______.
(735,000-700,000x.45%)-8,000=7,750
CVP analysis focuses on how profits are affected by
1. Selling Price 2.Sales Volume 3.Unit Variable Costs 4.Total Fixed Costs 5.Mix of products sold
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 Blank______.
11834
Revenue on the planning budget is expected to be $380,000 for 1,900 client visits. The revenue on the flexible budget is $410,000, showing that there were actually ______ client visits.
2,050 reason:$380,000 ÷ 1,900 = $200 per client visit. $410,000 ÷ $200 = 2,050 client visits.
Granny's Touch manufactures and sells cookbooks. The company's variable cost of goods sold is $39,200 and variable selling and administrative expense is $6,200. Fixed manufacturing overhead is $19,700 and fixed selling and administrative expense is $9,290. An income statement prepared using variable costing shows $ _____as the total fixed expenses
28,990
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 Breakeven point in the unit sales is _____
7625
The calculation of contribution margin (CM) ratio is:
Contribution Margin/Sales
The measure of how a percentage change in sales affects profits at any given level of sales is the Blank______.
Degree of operating Leverage
Cost structure refers to the relative portion of product and period costs in an organization.
False
Fancy Nails has an estimated cost for supplies of $0.75 per manicure. June's budget was based on 2,400 manicures and a total cost for supplies of $1,800. June's actual activity was 2,500 manicures. The actual cost of supplies in June was $2,000. Calculate the spending variance for June.
Reason: Flexible budget amount for supplies: $0.75 × 2,500 manicures = $1,875. Spending variance: $1,875 - $2,000 = $125 U.
Financial statement users need to be aware of changes in inventory levels when using costing.
absorption
Net income computed under ______ costing may not agree with the results of CVP analysis.
absorption
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
In a least-squares regression equation, a represents the ____ and b represents the _____
intercept, slope
When comparing the static planning budget to actual activity, a problem that arises when actual activity is higher than budgeted activity is that ______.
net income is higher than expected but all or most expense variances are unfavorable
The two general costing approaches used by manufacturing companies to prepare income statements are _______ costing ______ and costing... For external reporting, income statements are generally prepared using variable costing, while absorption , costing is used for internal decision making purposes.
variable: absorption
Companies use the _______ ______ cycle to evaluate and improve performance
variance analysis
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)=2800
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 Blank______.
Break-even point = $305,000 ÷ $40 = 7,625.
When using the high-low method, the slope of the line equals the ______ cost per unit of activity
variable
The variable costing income statement separates _____.
variable and fixed expenses