ACC 202 Midterm

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margin of safety

a tool used to help management understand how far sales can change before the company would incur a net loss. (the excess of budgeted or actual sales dollars over the break even volume of sales dollars)

Which of the following is not part of work-in-process inventory?

actual manufacturing overhead

finished goods inventory

completed goods that have not yet been sold

the sum of direct labor cost and manufacturing overhead cost

conversion cost

Cost classifications used for assigning costs to cost objects include

direct and indirect costs

the first step in the budgeting process

sales budget

The cost of goods manufactured is:

the amount transferred from Work in Process to Finished Goods

In the equation, y = a + bX, the X represents:

the level of activity

target profit

the level of profit a company's management desires to earn

break-even point

the level of sales at which profit is zero

Which of the following statements is true?

the numerator in POHR is estimated using the formula Y= a + bX

In the equation, y = a + bX, the A represents:

the total fixed cost

underapplied overhead

total overhead applied is less than actual manufacturing overhead cost. Debit: COGS, Credit: Work in Process Inventory

Which of the following statements is true?

a common cost is a type of indirect cost

sunk cost

a cost that has already been committed and cannot be recovered

Operating Leverage

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

activity base

a measure of whatever causes the incurrence of a variable cost; sometimes referred to as a cost driver

In normal costing, overhead is applied to production using:

a predetermined overhead rate

master budget

a summary of the company's plans that sets specific targets for sales, production, distribution, and financing activities.

overapplied or underapplied overhead is computed:

at the end of the period

The unadjusted cost of goods sold is calculated using which of the following equations?

beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory

Which of the following is not one of the three inventory accounts reported on the balance sheet?

cost of goods sold

Which of the following statements is true with respect to the cost of goods sold equation?

cost of goods sold= beginning inventory + purchases - ending inventory

which of the following is a product cost

direct materials

product costs include

direct materials, direct labor, manufacturing overhead

Period Costs (Selling and Administrative)

do not flow through the balance sheet and are recorded as expenses on the income statement in the period incurred

When jobs are sold their costs are transferred out of

finished goods inventory

a revenue variance is calculated by comparing:

flexible budget to actual results

spending variance is calculated by comparing:

flexible budget to actual results

raw materials

purchased items are directly recorded in Raw Materials inventory account. When used in production, their costs are transferred to the Work in Process Inventory account as direct materials.

Which of the following costs are found on the balance sheet?

raw materials, direct labor, manufacturing overhead

cost flow

refers to how costs flow to the balance sheet and income statement

activity variance is calculated by comparing the:

planning budget to the flexible budget

cost classifications used for GAAP financial statements include

product and period costs

what is an example of a cost object?

products, customers, and jobs

POHR

Estimated total manufacturing overhead cost for the coming period / Estimated total units in the allocation base for the coming period

T/F: Direct labor costs flow through the Raw Materials Inventory account

False

T/F: If the allocation base in the predetermined overhead rate does not drive overhead costs, it will nevertheless provide reasonably accurate unit product costs because of the averaging process.

False

T/F: In absorption costing, nonmanufacturing costs are assigned to units of product.

False

T/F: The total volume in sales dollars that would be required to attain a given target profit is determined by dividing the target profit by the contribution margin ratio

False

Contribution Margin

Sales - Variable Expenses

T/F: A cost driver is a factor that causes indirect costs.

True

T/F: CVP analysis is a tool to easily calculate profit, given per unit selling price and variable costs, sales volume, and total fixed costs.

True

T/F: Management by exception compares actual results to a budget so that significant deviations can be flagged and investigated further.

True

T/F: Most countries require some form of absorption costing for external reports

True

T/F: The break-even point in units can be obtained by dividing total fixed expenses by the unit contribution margin.

True

cost volume profit graph

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

Which of the following statements is true with respect to a contribution format income statement?

it subtracts variable expenses from sales to derive contribution margin

A document that records the materials, labor, and manufacturing overhead charged to a specific job is called a:

job cost sheet

In the equation, y = a + bX, the Y represents:

the total mixed cost

In the equation, y = a + bX, the B represents:

the variable cost per unit of activity

cost behavior

the way in which a cost reacts to changes in the level of activity

overapplied overhead

total overhead applied is more than actual manufacturing overhead cost. Debit: Work in Process Inventory, Credit: COGS

T/F: a cost that differs from one alternative to another is called a differential cost

true

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

flexible budget

used to account for changes in costs due to changes in activity; tells what the revenues and costs should have been for the actual level of activity

used to predict cost behavior

variable and fixed costs


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