Accounting 201B
Which of the following will always increase degree of operating leverage? (changes in variable cost per unit?) (changes in total fixed expense?)
-changes in variable cost per unit... decrease -changes in total fixed expense... increase
The work of factory employees that can be physically and directly associated with converting raw materials into finished goods is
Direct labor
Using the traditional three-part classification of manufacturing costs, prime costs and conversion costs have the common component of
Direct labor cost Prime cost= direct material+ Direct labor Conversion cost= direct labor+ manufacturing OVHD
Which of the following is not a fixed cost
Direct materials
Which one of the following would not be classified as manufacturing overhead
Direct materials
Manufacturing overhead applied is added to direct labor incurred and to what other item to equal total manufacturing costs for the period
Direct materials used
Product costs consist of
Direct materials, direct labor, and manufacturing overhead
Contribution margin
Equals sales revenue minus variable costs
The manufacturing overhead account shows debts of 30,000, 24000, and 28000 and one credit for 86000. Based on this info, the manufacturing overhead
Has been over applied
An important feature of a job order cost system is that each job
Has it's own distinguishing characteristics
If the activity level increases 10%, total variable costs will
Increase 10%
A manufacturing process requires small amounts of glue. The glue used in the production process is classified as an
Indirect cost
Cotter pins and lubricants used irregularly in a production process are classified as
Indirect materials
Changes in activity have an (blank) effect on fixed costs per unit
Inverse
The flow of costs in a job order cost system
Involves accumulating manufacturing costs incurred and assigning the accumulated costs to work done
When determining costs of jobs, how does a company account for indirect materials
It is transferred out of raw materials into manufacturing overhead when used
Process costing is not used when
Jobs have distinguishing characteristics
The relevant range of activity refers to the
Levels of activity over which the company expects to operate
Which one of the following is not a direct material
Lubricant for a ball bearing joint for a large crane
Manufacturing costs that cannot be classified as either direct materials or direct labor are known as
Manufacturing overhead
The product cost that is most difficult to associate with a product is
Manufacturing overhead
Which of the following is not a cost classification
Multiple
which of the following would suggest a switch to ABC
OVHD costs constitute a significant portion of total costs
Which one of the following is not a cost element in manufacturing a product
Office salaries
If manufacturing overhead has a credit balance at the end of the period, then
Overhead has been over applied
If manufacturing overhead has a debit balance at the end of the period, then
Overhead has been under applied
Which one of the following is not considered as material costs
Partially completed motor engines for a motorcycle plant
Sales commissions are classified as
Period costs
Which one of the following costs would not be inventoriable
Period costs
Which of the following is not another name for the term manufacturing overhead
Pervasive costs
For the work of factory employees to be considered as direct labor, the work must be conveniently and
Physically associated with raw materials conversion
Both direct materials and indirect materials are
Raw materials
A fixed cost is a cost which
Remains constant in total with changes in the level of activity
Which of the following would not be an acceptable way to express contribution margin
Sales minus unit costs
Which of the following are period costs
Selling expenses
If a firm increases its activity level
Some costs will change, others will remain the same
unit contribution margin is the amount that each unit sold contributes towards the recovery of fixed costs and to income
TRUE
Which one of the following represents a period cost
The VP of Sales salary and benefits
Which of the following would be accounted for using job order cost system
The construction of a new campus building
Cost of Goods Sold is obtained from
The finished goods inventory records
Process costing is used when
The production process is continuous
Which of the following is not true about the graph of a mixed cost
The variable cost portion of the graph is rectangular in shape
a static budget is appropriate in evaluating a managers performance if
actual activity closely approximates the master budget activity
In computing equivalent units, (blank) is not part of the equivalent units of production formula
beginning WIP
The two major steps in the flow of costs are
c. accumulating and assigning.
the single most important output in preparing financial budgets is the
cash budget
which of the following ignores the time value of money
cash payback
the contribution margin ratio is
contribution margin divided by sales
the break-even point is where
contribution margin equals total fixed costs
a critical factor in budgeting for a service firm is to
coordinate professional staff needs with anticipated services
to use ABC, it is necessary to know the
cost driver for each activity cost pool, expected use of cost drivers per activity, expected use of cost drivers per product...
As inventoriable costs expire, they become
cost of goods sold
the total costs accounted for in a production cost report equal the
cost of units completed and transferred out plus the cost of ending WIP
a capital budgeting method that take into consideration the time value of money is the
internal rate of return method
a master budget consists of
interrelated financial budgets and operating budgets
changes in activity have a (blank) effect on fixed costs per unit
inverse
the flexible budget
is a series of static budgets at different levels of activity
the degree of operating leverage
is computed by dividing total CM by net income
a flexible budget is one that
is updated to reflect the actual level of activity during the period
each of the following is a limitation of activity-based costing except that
it decreases control over overhead costs
The two basic types of cost accounting systems are
job order and process cost systems
if the average selling price is greater than the expected, the revenue variance is
labeled as favorable
the relevant range of activity refers to the
levels of activity over which the company expects to operate
Cost of raw materials is debited to Raw Materials Inventory when the
materials are received.
a shift from low-margin sales to high-margin sales
may increase net income, even though there is a decline in total units sold
The high-low method is often employed in analyzing
mixed costs
the primary benefit of ABC is it provides
more accurate product costing
a cost structure which relies more heavily on fixed costs makes the company
more sensitive to changes in sales revenue
a process cost system would be used for all of the following products except
motion pictures
equivalent units are calculated by
multiplying the percentage of work done by the physical units
which of the following will always be a relevant cost
opportunity cost
If manufacturing overhead is over applied than the amount over applied is (blank) from COGS?
over applied--> subtracted under applied--> added
if manufacturing overhead has a credit balance at the end of the period, then
overhead has been over applied
the profitability index is computed by dividing the
present value of cash flows by the initial investment
a negative net present value indicates that the
present value of the cash inflows was less than the present value of the cash out flows
a total materials variance is analyzed in terms of
price and quantity variances
under absorption costing and variable costing, how are DL costs treated
product cost for both!
under absorption costing and variable costing, how are variable manufacturing costs treated
product cost for both!
opportunity cost must be considered in decisions involving
resources that have alternative uses
Which of the following is not considered a product cost
sales commission
a process cost accounting system is most appropriate when
similar products are mass-produced
the annual rate of return method...
takes into consideration the salvage value of an investment
the internal rate of return is the interest rate that results in a
zero NPV
The wages of a timekeeper in the factory would be classified as
indirect labor.
If the entry to assign factory labor showed only a debit to work in process inventory, then all labor costs were
Direct labor
In a job order cost accounting system, the Raw Materials inventory account is
A control account
Which one of the following is an example of a period cost
A managers salary for work that is done in the corporate head office
A process cost system would most likely be used by a company that makes
Breakfast cereal
Why is identification of a relevant range important
Cost behavior outside of the relevant range is not linear, which distorts CVP analysis
Debits to work in process inventory are accompanied by a credit to all but which one of the following accounts
Cost of goods sold
Which of the following is not a manufacturing cost category
Cost of goods sold
Which of the following is not viewed as part of accumulating manufacturing costs in a job order cost system
Cost of goods sold is recognized
If actual overhead is greater than applied manufacturing overhead, then manufacturing overhead is
Under applied
An increase in the level of activity will have the following effects on unit costs for variable and fixed costs
Unit variable cost= remains constant Unit fixed cost= decreases
A cost which remains constant per unit at various levels of activity is a
Variable cost
A variable cost is a cost that
Varies in total in proportion to changes in the level of activity
in a process cost system
WIP account is maintained for each process
Which of the following is not classified as direct labor
Wages of supervisors
In a job order cost system, a credit to manufacturing overhead will be accompanied by a debit to
Work in process inventory
when manufacturing overhead costs are assigned to production in a process cost system, they are DR to...
a WIP account
An increase in the cost of goods manufactured will result in
a decrease in the ending balance for WIP
which of the is an irrelevant cost
a sunk cost
A mixed cost contains
a variable element and a fixed element
some fixed manufacturing overhead costs of the current period are deferred to future periods under
absorption costing
under absorption costing and variable costing, how are fixed manufacturing costs treated
absorption--> product variable--> period
Manufacturing overhead is underapplied when...
actual overhead > amount applied
a process cost system would be used by all of the following except
advertising company
the manufacturing cost per unit for absorption costing is
always higher than manufacturing cost per unit for variable costing
which of the following will cause an increase in ROI
an increase in sales
the capital budgeting technique that indicates the profitability of a capital expenditure is the
annual rate of return method
relevant costs are always
avoidable costs
incremental analysis is synonymous with
differential analysis
which of the following is not a fixed cost
direct materials
Manufacturing costs include
direct materials, direct labor, and manufacturing overhead.
the direct labor quantity standard is sometimes called the direct labor...
efficiency standard
if a payback period for a project is greater than its expected useful life, the
entire initial investment will not be recovered
contributing margin=
equals sales revenue minus variable costs
an overly optimistic sales budget may result in
excessive inventories
net income under variable costing is contribution margin less
fixed manufacturing overhead and fixed selling and admin expenses
an unrealistic budget is more likely to result when it
has been developed in a top down fashion
if project A has a lower payback period than project B, this may indicate that project A may have a
higher NPV and be more profitable
if activity level increases 10%, total variable costs will
increase 10%
assigning overhead using ABC will usually
increase the cost per unit for low volume products as compared to a traditional overhead allocation
a revenue that differs between alternatives and makes a difference in decision-making is called an
incremental revenue
sales mix is
the relative percentage in which a company sells its multiple products
equivalent units of production are a measure of
the work done in a period expresses in fully completed units
variable costing
treats fixed manufacturing overhead as a period cost
what of the following would not be relevant in a make-or-buy decision
unavoidable variable costs
fixed selling expenses are period costs
under both absorption and variable costing
if actual costs are greater than standard costs, there is an
unfavorable variance
In general, costs that can be most reliably predicted are
variable cost per unit
companies recognize fixed manufacturing overhead costs as period costs (expenses) when incurred when using
variable costing
the one primary difference between variable and absorption costing is that under
variable costing, companies charge the fixed manufacturing overhead as an expense in the current period
in the analysis concerning the acceptance or rejection of a special order, which items are relevant
variable costs and avoidable costs
the contribution margin ratio increases when
variable costs as a percentage of sales decrease
net income under absorption costing is gross profit less
variable selling and admin expenses and fixed selling and admin expenses
net income under absorption costing is higher than net income under variable costing
when units produced exceed units sold
