acc recharge questions

Company A has a contribution margin ratio of 35%. For each dollar in sales, contribution margin will increase by:

$0.35

When a company produces and sells multiple products:

-each product most likely has a unique CM -a change in the sales mix will most likely change the break-even point -each product most likely creates a unique total of fixed costs

A company with a high ratio of fixed costs:

-is more likely to experience greater profits when sales are up than a company with mostly variable costs -is more likely to experience a loss when sales are down than a company with mostly variable costs

Which of the following statements are true?

-period costs do not flow through the inventory accounts - period costs are expensed when incurred

Within the relevant range, fixed costs:

-remain constant in total regardless of changes in activity -should not be expressed on a per unit basis when making decisions -generally include rent and supervisor salaries

Which of the following statements are true about period costs

-sales commissions are period costs -period costs are expensed in the same period in which they are incurred -period costs do not flow through the inventory accounts

CVP analysis focuses on how profits are affected by:

-total fixed costs -unit variable cost -mix of products sold -sales volume -selling price

True or false: Cost structure refers to the relative portion of product and period costs in an organization.

false variable and fixed costs

Within the relevant range of activity, ______ costs remain constant in total.

fixed

The contribution approach to constructing income statements distinguishes between ______ costs.

fixed and variable

total fixed cost equation

fixed mfg OH + fixed selling exp + fixed administrative exp

Variable costs vary ______ within the relevant range of activity.

in total

product costs are also called

inventoriable costs

direct labor is also called

touch labor

An income statement focusing on product and period costs has been prepared using a(n) _________ format. while a ________ format income statement makes a distinction between fixed and variable costs

traditional contribution

True or false: Presenting fixed costs on an average per unit basis makes them look like they are variable costs.

true

A bill of materials contains the:

type of each direct material needed to complete a unit of product and quantity of each direct material needed to complete a unit of product

Cost of goods sold for a merchandising company, direct materials and commissions are all examples of _________ costs

variable

variable expenses/sales is the calculation for what ratio

variable expense ratio

A company currently has sales of $700,000 and a contribution margin ratio of 45%. As a result of increasing advertising expense by $8,000, the company expects to increase sales to $735,000. If this is done and these results occur, net operating income will: (change in net operating income)

(735,000 - 700,000) X 45% - 8,000 = 7,750

profit equation

(selling price per unit X quantity sold) - (variable expense per unit X quantity sold) - fixed expenses

Administrative costs include:

executive compensation and public relations costs

A company purchased a 12 month insurance policy on October 1 at a cost of $1,200. On the December 31 annual financial statements:

300 is reported as an expense, 900 is reported as an asset

Estimated manufacturing overhead $500,000 Estimated direct labor cost $250,000 Actual manufacturing overhead $720,000 Actual direct labor cost $300,000 based on this information, the predetermined OH rate per direct labor dollar is:

500,000 / 250,000 = $2 per direct labor dollar

JVL Enterprises has set a target profit of $126,000. The company sells a single product for $50 per unit. Variable costs are $15 per unit and fixed costs total $98,000. How many units does JVL have to sell to BREAK-EVEN? breakeven equation

98,000/(50-15) = 2,800 units

period cost equation

= selling expense + admin expense

degree of operating leverage =

CM / net op income

A change in profits that occurs due to a change in sales and fixed expenses may be calculated as:

CM ratio X change in sales - change in fixed expenses

Based on the following information, compute the cost of goods sold for Spengler Merchandising Corporation. Sales $400,000 Purchases $300,000 Beginning inventory $50,000 Ending inventory $90,000 Selling expenses $70,000 Administrative expenses $30,000 Accounts receivable $110,000

COGS = beg merch inv + purchases - ending merch inv = 500,000 + 300,000 - 90,000 = 260,000

True or false: Variable costs remain fixed in total within the relevant range of activity.

false

All manufacturing costs are assigned to units of product and all non-manufacturing costs are treated as period cost under

absorption costing

Which of the following would not be a good allocation base for manufacturing overhead?

accounting hours

When a company creates overhead rates based on the actions it performs, it is employing an approach called ________ _________ costing

activity based

Manufacturing overhead costs:

consist of many different items and are indirect costs

Job-order costing would most likely be used in a(n) ______.

construction company

Sales revenue minus variable expenses equals

contribution margin

contribution margin ratio equation

contribution margin / sales

any item for which cost data is desired is called

cost object

The difference in costs between two alternatives is called a(n) ______ cost.

differential

Costs that can be easily and conveniently traced to a specific product are called ______ costs.

direct

In an automobile manufacturing plant, the assembly-line workers are classified as

direct labor

product cost equation

direct materials + direct labor + mfg OH

variable manufacturing cost equation

direct materials + direct labor + variable mfg OH

Selling and administrative costs are _______ costs.

direct or indirect

predetermined rate is based on

estimated amounts

Which of the following is an essential quality of an overhead allocation base?

it must be common to all the company's products and services

Typical cost drivers include:

machine-hours, flight hours, computer time

Direct materials and direct labor are both ______ costs.

manufacturing costs

Indirect materials and indirect labor are classified as ______.

manufacturing overhead

A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of ______.

manufacturing overhead and indirect materials

the amount by which sales can drop before losses are incurred is the

margin of safety

The accrual concept that costs incurred to generate revenue are expensed in the same period the revenue is recognized is known as the _____________ principle

matching

A job cost sheet contains:

materials costs charged to the job labor costs charged to the job manufacturing overhead costs charged to the job

Indirect materials include ______.

nails, glue, and thread

Terry's Trees has reached its break-even point and has calculated its contribution margin ratio to be 70%. For each $1 increase in sales:

net operating income will increase by $0.70 and total contribution margin will increase by $0.70

There are two broad classifications of costs: manufacturing costs and ______ costs

nonmanufacturing

The formula for applying overhead to a specific job is:

predetermined overhead rate X amount of allocation base incurred by job

The term used for the relative proportion in which a company's products are sold is:

sales mix

Selling costs include:

sales salaries advertising sales commissions

Paula's Perfumes has a target profit of $4,000 per month. Perfume sells for $15.00 per bottle and variable costs are $13.50 per bottle. Fixed costs are $3,200 per month. The number of bottles that must be sold each month to earn the target profit is: (sales volume)

sales volume = (4,000 +3,200)/(15-13.50) = 4,800 bottles

Which of the following is not a manufacturing cost category?

selling and administrative costs

Costs that have already been incurred and can not be changed by decisions made in the current period or in future periods are called

sunk

Which of the following would not be considered a job in a service firm that uses job-order costing?

tax department in an accounting firm