acctg 432 gleim textbook ch 3

product cott has sales of 200,000, a contribution margin of 20%, and a margin of safety of $80,000. What is Cott's fixed cost

24,000 sales minus the margin of safety equals the breakeven point fixed costs equal the contribution margin at the breakeven point, so fixed costsare $24,000 ($120,000 x 20%)

At annual sales of $900,000, the Ebo product has the following unit sales price and costs:Sales price $20 Prime cost 6 Manufacturing overhead: Variable1 Fixed7 Selling & admin. costs: Variable1 Fixed3 Total costs(18) Profit$ 2 What is Ebo's breakeven point in units?

37,500

del co. has fixed costs of $100,000 and breakeven sales of $800,000. What is its projected profit at 1,200,000 sales?

50,000 CMR= fixed costs/BEP in dollars 100,000/800,000 =12.5% 12.5% x 1,200,000 = 150,000 150,000 - 100,000 = profit

A company is concerned about its operating performance, as summarized below: Revenues ($12.50 per unit) $300,000 Variable costs 180,000 Operating loss (40,000) How many additional units should have been sold in order for the company to break even in Year 8?

8,000 cmr is 40% (300,000 - 180,000)/300,000 ucm is 5$ (12.5 x 40%) 40,000/5 = additional units needed to be sold

Normal costing

A costing system that 1) traces direct costs to a cost object by using the actual direct-cost rates times the actual quantities of the direct-cost inputs and 2) allocates indirect costs based on the budgeted indirect cost rates times the actual quantities of the cost-allocation bases.

A company services office equipment. Some customers bring their equipment to the company's service shop; other customers prefer to have the company's service personnel come to their offices to repair their equipment. The most appropriate costing method for the company is

A job costing system Job costing systems accumulate costs for tasks or projects that are unique and nonrepetitive. An entity that services office equipment is interested in identifying the costs applicable to each customer each service call.

actual indirect-cost rate

Calculated by dividing actual total indirect costs in the pool by the actual total quantity of the cost-allocation base

In a labor-intensive industry in which more overhead (service, support, more expensive equipment, etc.) is incurred by the more highly skilled and paid employees, what denominator measure is most likely to be appropriate for applying overhead?

Direct labor cost In labor-intensive industries, overhead is traditionally assigned on the basis of labor time. However, if more overhead is incurred by the more highly skilled and paid employees, the overhead rate should be based upon direct labor cost rather than direct labor hours.

cost volume profit analysis assumes that over the relevant range

revenues are linear

In a capital-intensive industry, which is most likely to be an appropriate basis for applying overhead?

Machine hours In capital intensive industries, the amount of overhead probably is related more to machine hours than to either direct labor hours or direct labor cost.

which of the following would decrease unit contribution margin the most?

a 15% decrease in selling price

actual costing

a costing system that traces direct costs to a cost object based on the actual direct-cost rates times the actual quantities of the direct-cost inputs used.

cost allocation base

a systematic way to link an indirect cost or group of indirect costs to cost objects

budgeted indirect cost rate

budgeted annual indirect costs / budgeted annual quantity of the cost-allocation base

CVP analysis assumes that unit price is ______ within the relevant range

constant

CVP analysis assumes the variable costs per unit are _______ over the relevant range

constant

fixed costs equal the _________ at the breakeven point

contribution margin

Cost-volume-profit (CVP) analysis is a key factor in many decisions, including choice of product lines, pricing of products, marketing strategy, and use of productive facilities. A calculation used in a CVP analysis is the breakeven point. Once the breakeven point has been reached, operating income will increase by the

contribution margin per unit for each additional unit sold

Cost-volume-profit (CVP) analysis allows management to determine the relative profitability of a product by

determining the contribution margin per unit and the projected profits at various levels of production.

At the breakeven point, the contribution margin equals total

fixed costs

the breakeven point in units increases when unit costs

increase and sales price remains unchanged

A new advertising agency serves a wide range of clients including manufacturers, restaurants, service businesses, department stores, and other retail establishments. The accounting system the advertising agency has most likely adopted for its record keeping in accumulating costs is

job costing

cost-volume-profit analysis assumes that over the relevant range total

revenues are linear

CVP analysis assumes that all costs and revenues are ______

linear

in using cost-volume-profit analysis to calculate expected unit sales, which of the following should be added to fix costs in the numerator?

predicted operating income

adjusted allocation rate approach

restates all overhead entries in the general ledger and subsidiary ledgers using actual cost rates rather than budgeted cost rates

sales minus the margin of safety equals

the breakaven point

job costing

used by organizations whose products or services are readily identified by individual units or batches. The advertising agency accumulates its costs by client. Job costing is the most appropriate system for this type of nonmanufacturing firm.