ACC 202 Midterm
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
