Principles of Accounting
A company reports these data: Total sales revenue = $250,000 Number of units sold = 50,000 units Variable costs = $100,000 If the company is operating at its break-even point, what is the company's total contribution margin?
$150,000
A company reports these data: Price per unit = $25 Variable costs per unit = $15 Fixed costs = $15,000 Given these data, what is the variable cost ratio?
60%
What is Job Order Costing?
A Method of costing that assigns cost to specific jobs or products.
How is overhead allocated in an ABC system?
Activity rate multiplied by number of cost driver events
How is the production cost per unit computed in a process costing system?
Amount of total production cost divided by the number of units completed during a particular period of time
Which statement is true with respect to activity-based costing (ABC) systems?
An ABC system allocates overhead based on multiple activities.
How could a period cost be reported in an income statement?
As an administrative expense
What account does "Inventory" belong to?
Asset
What account does "Patents" belong to?
Asset
What account does "Prepaid Expenses" belong to?
Asset
What is the basic accounting equation?
Assets = Liabilities + Stockholders' Equity
What is estimated manufacturing OH?
Budgeted manufacturing OH costs that are used to establish the predetermined OH rate.
In an ABC system, which name is given to a numerical measure reflecting the amount of a cost associated with a particular overhead cost activity?
Cost driver
Which item is an expense item? 1. Loans Payable 2. AR 3. AP 4. Costs of goods sold
Cost of goods sold
Cost of Goods Sold
Cost of goods sold is the cost of the merchandise that was sold to customers. The cost of goods sold is reported on the income statement when the sales revenues of the goods sold are reported.
What does a manager have control over in a cost center?
Costs
What is an indirect cost?
Costs normally incurred for the benefit of several segments within the organization
Which label is given to the cost of the wood used in the construction of a piece of wooden furniture?
Direct materials
What account does "Retained Earnings" belong to?
Equity
Which type of account is retained earnings? 1. Liability 2. Equity 3. Revenue 4. Asset
Equity
What is the predetermined OH rate?
Estimated manufacturing OH cost for the year Divided by a total estimated activity base.
Cost of Goods Sold is an _______ item.
Expense
What account does "Maint. Expense" belong to?
Expense
What account does "Utility Expense" belong to?
Expense
What decreases Equity?
Expenses and Dividends
What is the impact of expenses on the accounting equation?
Expenses decrease owners' equity.
Why might employees be interested in their company's financial accounting information?
Financial statement data are often used in determining employee bonuses.
What shows profitability of an organization by company revenues and expenses for a period of time
Income Statement
What is an example of a financial cost that would result from poor direct labor budgeting and planning?
Increased hiring, training, and overtime costs
How does a classified balance sheet provide useful information to a decision maker?
It distinguishes between current and long-term assets.
In a job order costing system, what is the proper accounting for a product cost?
It is reported as a part of cost of goods sold.
What account does "Notes Payable" belong to?
Liability
Which type of business organization has a major focus on direct materials, direct labor, and overhead?
Manufacturing
What is Actual Manufacturing OH?
Manufacturing costs other than direct materials and direct labor.
Dividends
Money Distributed to the STOCKHOLDERS of a company. (From Retained Earnings)
What is a Cost Driver?
Numerical Measure used to reflect the amount of a specific cost associated with particular activity.
What is the formula for calculating activity rate?
OH Cost Pool Divided by Cost Driver
How is ABC OH allocated?
OH is allocated based on customer job activity.
Which cost category is not formally tracked in a company's accounting system?
Opportunity costs
Why is the concept of relevant range important to a manager?
Outside the relevant range, the variable cost per unit can change.
For purposes of cash flow classification in the statement of cash flows, which item is an operating activity?
Paying Employees
For purposes of cash flow classification in the statement of cash flows, which item is an operating activity?
Paying employees
What are the three primary functions that company managers use managerial accounting information for?
Planning, controlling, and evaluating
What is the label given to the quantity computed as estimated overhead costs divided by estimated level of activity?
Predetermined overhead rate
What is the sequence of the flow of costs through a manufacturing operation?
Raw materials, work-in-process, finished goods, cost of goods sold
What is the proper accounting for a product cost?
Record as an inventory cost until the item is sold
For which production process is process costing the appropriate costing method to use?
Refining gasoline in a petroleum facility
If we pay dividends, they will be paid out from?
Retained Earnings
What account does "Fee Income" belong to?
Revenue
What account does "Service Revenue" belong to?
Revenue
What increases Equity?
Revenue
What impacts the equity section of the balance sheet?
Revenues, Expenses and Dividends
How is GROSS PROFIT computed?
Sales - Cost of Goods Sold
What is the CVP equation?
Sales - variable costs - fixed costs = profit
What is the correct sequence of budgets in a manufacturing business?
Sales, production, direct materials
How are the wages of cashiers classified in a merchandising company?
Selling expense
What information does a balance sheet provide to a decision maker?
Summary of the financial position of a company at a particular date
Which statement correctly describes applied manufacturing overhead?
The amount of manufacturing overhead that is assigned to the goods produced
What is applied manufacturing OH?
The amount of the manufacturing OH that is assigned to the goods produced.
What is underapplied Manufacturing OH?
The excess of actual manufacturing OH costs over the applied manufacturing OH costs for the period
What is overapplied manufacturing OH?
The excess of applied manufacturing OH costs over the actual manufacturing OH costs for the period.
FINANCIAL ACCOUNTING STANDARDS BOARD (FASB)
The group that establishes financial accounting rules in the USA
What is a Cost Pool?
Total Cost being generated by a specific OH cost activity.
When the closing entries are made, the income statement information flows into equity and the balance sheet is in balance. (True or False)
True
The 3 general types of OH cost activities in ABC systems?
Unit Level, Batch Level, Product Line
Which item is a period cost?
Utility bills to heat the headquarters building
