Smart Book - Cost Account (Ch. 4, 5, & 6)
Citrus Scents produces body sprays. Each bottle has a unit product cost of $5.38. The company produced 1,490 bottles this month and sold 1,203 of those bottles. Total cost of goods sold was ______
$5.38 × 1,203 = $6,472.14
Ceramic Creations sells pots for $25. The variable cost per pot is $12 and 15,000 pots must be sold to break-even. If Ceramic Creations sells 25,000 pots, net operating income will be ______.
Net income = (25,000 - 15,000) × ($25 - $12) = $130,000.
Which of the following is not a characteristic of operation costing?
Products are homogeneous
Equivalent units of production equals the number of units transferred to the next department (or finished goods) plus equivalent units in ending work in process under which method(s) of costing?
Weighted-average only
The journal entry to record direct materials costs in processing Department #1 is debit ______.
Work in Process-Department #1 and credit Raw Materials
The journal entry to record direct labor costs in processing Department #1 is debit ______
Work in process-Department #1 and credit Salaries and wages payable
Fixed manufacturing overhead costs are included as part of Work in Process inventory under ______
absorption costing only
Differences between job-order and process costing include that process costing
accumulates costs by department is used for indistinguishable products
Direct labor plus manufacturing overhead equals _________ cost.
conversion
According to the CVP analysis model and assuming all else remains the same, profits would be increased by a(n) ______.
decrease in the unit variable cost
Process costing accumulates costs by
department, operation, or process
Conversion costs are ______.
direct labor plus manufacturing overhead
When constructing a CVP graph, the vertical axis represents ______.
dollars
Operations costing is similar to job-order costing because ______.
each batch is charged for its own specific materials
Industries/products more suitable for process costing than job-order costing include
flour, sunscreen, paper towels
When products have both similar and individual characteristics, ______ costing is used.
operation
Variable costing treats fixed manufacturing overhead as a(n) ________ cost.
period
At the break-even point ______.
total revenue equals total cost net operating income is zero
Direct costing or marginal costing are other terms for __________ costing.
variable
What method combines costs and outputs from the current and prior periods.
weighted-average method
When using process costing, each processing department has a separate __________ __________ __________ account.
work in process
_________ becomes profit after fixed expenses are covered
Contribution margin (Because contribution margin is a variable amount, it is affected by changes in activity.)
A company sold 20,000 units of its product for $20 each. Variable cost per unit is $11. Fixed expenses total $150,000. The company's contribution margin is ______.
Contribution margin = 20,000 × ($20 - $11) = $180,000.
What method bases costs solely on the costs and outputs from the current period.
FIFO method
Vivian's Violins has sales of $326,000, contribution margin of $184,000 and fixed costs total $85,000. Vivian's Violins net operating income is ______.
Net operating income = $184,000 - $85,000 = $99,000 $99,000
Daisy's Dolls sold 30,000 dolls this year. Each doll sold for $40 and had a variable cost of $19. Fixed expenses were $250,000. Net operating income for the year is ______.
Net operating income =30,000 × ($40 - $19) - $250,000 = $380,000
What is the key difference between process and job-ordering costing?
Under process costing, it makes no sense to try to identify materials, labor and overhead costs with a particular customer order.
For external reporting, income statements are generally prepared using _________ costing, while ________ costing is used for internal decision making purposes.
absorption, variable
For external reporting, income statements are generally prepared using ____________ costing, while ________ costing is used for internal decision making purposes.
absorption, variable
In process costing, manufacturing overhead costs are distributed to each department ______.
according to the amount of the allocation base incurred in the department
Similarities between job-order costing and process costing include the ______.
basic purpose to assign and compute product costs manufacturing accounts used flow of costs through the manufacturing accounts
To calculate cost per equivalent unit using the weighted-average method, add the cost of _______________ work in process inventory to costs added during the period and divide by equivalent units of production.
beginning
units in ______ work in process inventory + units started or transferred in = units in _____ work in process inventory + units completed and transferred out
beginning, ending
Costs per equivalent unit are used to value ______
both units in ending inventory and units transferred to the next department
Under absorption costing product costs consist of
both variable and fixed manufacturing costs
When a company sells one unit above the number required to break-even, the company's net operating income will ______.
change from zero to a net operating profit
Variable costing income statements are based upon a ______ format.
contribution
After reaching the break-even point, a company's net operating income will increase by the ___________ ________ per unit for each additional unit sold.
contribution margin
To report ending inventory, partially completed units are translated into _________ units.
equivalent
Number of partially completed units x Percentage completion =
equivalent units
Equivalent units of production under the weighted-average method equal ______.
equivalent units in ending work in process plus units transferred out
Once production is completed in all processing departments, production costs are transferred to ______.
finished goods
Total contribution margin equals ______.
fixed expenses plus net operating income
Absorption and variable costing net income are usually different due to the accounting for ______
fixed manufacturing overhead
Process costing produces ______ units.
homogeneous
The two common methods for determining unit product costs are ______ costing.
job-order and process
Operations costing is similar to process costing because ______.
labor and overhead costs are accumulated by operation or department
Variable costing treats ______ manufacturing costs as product costs.
only variable
Each department has a separate Work in Process account when using ______ costing.
process
Industries that convert raw materials into homogeneous products typically use ___________ costing.
process
Work is performed on products, and materials, labor, or overhead costs are added to products in a(n) _________ department.
processing
Characteristics of operation costing include ______.
products are processed in batches costs are accumulated by department
Elle's Elephant Shop sells giant stuffed elephants for $55 each. Each elephant has variable costs of $10 and total fixed costs are $700. If Ellie sells 35 elephants this month, ______. profit? total sales? total variable costs?
profits = $875 total sales = $1,925 total variable costs = $350
When preparing a CVP graph, the horizontal axis represents ______.
sales volume
CVP analysis focuses on how profits are affected by ______.
sales volume unit variable cost mix of products sold selling price total fixed costs
The break-even point is reached when the contribution margin is equal to ______.
total fixed expenses
The equivalent units completed are valued the same as units ______ for purposes of determining the cost per unit.
transferred out
True or false: The flow of costs through manufacturing accounts is basically the same for job-order costing and process costing.
true
Product costs under absorption costing include ______
variable manufacturing overhead direct materials direct labor fixed manufacturing overhead
CVP analysis allows companies to easily identify the change in profit due to changes in ______.
volume costs selling price
Methods to calculate departmental unit costs include ______.
weighted-average FIFO
A processing department is an organization unit ______.
where work is performed on a product, and materials, labor or overhead are added
Recording the transfer of partially completed products from one processing department to another, requires a journal entry that affects the ______ account of both processing departments.
work in process
The break-even point is the level of sales at which the profit equals
zero
Frames, Inc. manufactures large wooden picture frames. Each frame requires $19 of direct materials and $40 of direct labor. Variable manufacturing overhead cost is $9 per frame produced, and variable selling and administrative expense is $13 per frame sold. The company produces 5,000 units each month and total fixed manufacturing overhead cost per month is $15,000. The unit product cost of each frame using variable costing is $________
$68
Canners Company uses weighted-average costing. Beginning work in process inventory had $3,650 of material costs. During the period, $5,000 of materials and $9,250 in conversion costs were added. If there are 250 equivalent units of production for materials, the cost per equivalent unit for materials is ______.
($3,650 + $5,000) ÷ 250 = $34.60 $34.60
Costs in beginning work in process inventory was $4,500 and $37,800 in costs were added during the period. If there are 7,050 equivalent units, the cost per equivalent unit under the weighted-average method is ____________
(4500+37800)/7050 = $6
The formula for the cost per equivalent unit using the weighted-average method is ______.
(Cost of beginning work in process inventory + Cost added during the period) ÷ Equivalent units of production
Profit equals ______.
(P × Q) - (V × Q) - fixed expenses
Net operating income equals ______.
(unit sales - unit sales to break even) × unit contribution margin
contribution margin format income statement
1. sales 2. variable expenses 3. contribution margin 4. fixed expenses 5. net operating income
A company transferred 150 units to finished goods and has 215 units in ending work in process inventory that are 60% complete. Using weighted-average costing, the number of equivalent units is ______.
279 150 + (215 × 60%) = 279
A company's beginning work in process contained 200 units that were 20% complete. Those units were completed and transferred to finished goods. During the period 4,300 units were started. Of the units started, 4,000 were transferred to finished goods. The 300 units in ending work in process were 30% complete. Using the weighted-average method, the equivalent units of production equals ______.
4200 + (300 x 30%) 4290
A product has a selling price of $10 per unit, variable expenses of $6 per unit and total fixed costs of $35,000. If 10,000 units are sold, net operating income will be $___________
5,000