Accounting 202 Final

Zimmer, Inc. started the month of January with beginning finished goods inventory of $20,000. The cost of goods manufactured during the month was $120,000 and the ending finished goods inventory was $50,000. What is the unadjusted cost of goods sold for January?

$90,000

sunk cost

A cost that has already been incurred and that cannot be changed by any decision made now or in the future.

Variable Costing

A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs.

allocation base

A measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects.

differential Revenue

Future revenue that differs between any two alternatives

Break Even Formula

BEP=FC/SP-VC

The ratio of fixed expenses divided by the contribution margin per unit is the:

Break-even point of sales

Contribution Margin Ratio

Contribution Margin / Sales

What occurs when manufacturing overhead is applied to Work in Process?

Credit to Manufacturing Overhead.

What best describes the journal entry to record the withdrawal of raw materials from the storeroom for use as direct and indirect materials in production?

Debit Work in Process, debit Manufacturing Overhead, and credit Raw Materials.

What best describes the journal entry to record the use of direct and indirect labor in production?

Debit Work in Process, debit Manufacturing Overhead, and credit Salaries and Wages Payable.

the ratio of fixed expenses divided by the contribution margin per unit is the: a)break-even point in unit sales b) break-even point in sales dollars c)contribution margin ratio d) margin of Saftey

a)break-even point in unit sales

incremental cost

an increase in cost between two alternatives

Absorption Costing

assigns all 3 factors(direct material, direct labor, and both fixed and variable manufacturing overhead) to inventory

Process costing would be appropriate for each of the following except: a) Oil refining b) custom luxury boat manufacturing c) Soda Botteling d) newspaper production

b) custom luxury boat manufacturing

The difference between a variable costing income statement and an absorption costing income statement will be: a) the amount of variable manufacturing overhead deferred or released in inventory b) the amount of fixed manufacturing overhead deferred or released in inventory c) the amount of direct materials deferred or released in inventory d) None of the above

b) the amount of fixed manufacturing overhead deferred or released in inventory

Within the relevant range, the difference between variable and fixed costs is: a) both variable costs and total fixed costs are constant b) variable costs per unit fluctuate and fixed costs per unit remain constant c) variable costs per unit are constant and fixed costs per unit fluctuate d) both variable costs per unit and fixed costs per unit are constant.

c) variable costs per unit are constant and fixed costs per unit fluctuate

Contribution Margin

Sales - Variable Costs

Which of the following is NOT a part of the master budget? a) production budget b) sales budget c) absorption budget d) cash budget

a) absorption

Cost of goods sold is: a) an expense account b) included in inventory on the balance sheet c) the total dollar amount of goods available for sale in the period b) another term for managerial accounting

a) an expense account

When companies incur selling and administrative costs, those costs ________

do not flow through inventories on the balance sheet

Implementing an activity-based costing system often results in a shift of overhead costs from:

high-volume to low-volume products.

The standard quantity allowed is _______.

the amount of an input that should have been used to complete the actual output for the period.

common costs

the costs of resources shared by two or more services or products.

The standard hours allowed is ________.

the direct labor-hours that should have been used to complete the actual output for the period.

the segment margin represents

the margin available after a segment has covered all of its own costs

Under an ABC system, overhead costs are allocated to the products using a two-stage process. What happens during the second stage of that process?

We allocate the costs in the activity pools to the products using activity rates and activity measures.

traceable fixed cost

a fixed cost that is incurred because of the existence of the segment

Which of the following is true for a CVP graph: a) the break even point is where the sales line and total cost line intersect b) fixed costs are not shown c) the contribution margin is where the fixed and variable cost lines intersect d) none of the above

a) the break even point is where the sales line and total cost line intersect

The standard quantity per unit defines the ________.

amount of direct materials that should be used for each unit of finished product including an allowance for normal inefficiencies, such as scrap and spoilage.

activity

an event that causes the consumption of overhead resources in an organization

The contribution approach to income statement preparation: a)organisms costs according to the function of production, administration, and sales b) is used for external reporting c) organizes costs according to their variable and fixed cost behavior d) both b and c are true e) both a and b are true

c) organizes costs according to their variable and fixed cost behavior

All of the following are reasons for preparing a flexible budget with multiple cost drivers EXCEPT ________.

it eliminates the need for performing variance analysis

What is the term used when a company applies less overhead to production than it actually incurs?

under-applied

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

When computing variable manufacturing overhead variances, the standard rate represents the ________.

variable portion of the predetermined overhead rate.

The involvement by a company in more than one of the activities in the entire value chain from development through production, distribution, sales, and after-sales service is called ________.

vertical integration

When a company does not have enough capacity to produce all of the products and sales volume demanded by their customers, this leads to ________.

volume trade-off decisions

Which two terms below describe the salary paid to janitor who clean a facility every evening? a) variable cost and direct cost b) fixed cost and indirect cost c) variable cost and indirect cost d) fixed cost and direct cost

b) fixed cost and indirect cost

the "fixed cost per unit" is not shown in the CVP analysis because: a) the focus of CVP analysis is solely on the relationship between variable costs and sales b) fixed costs per unit would be different at very level of production, thus the information is only relevant at one production point c) fixed costs per unit do not change no matter the level or production d) None of the Above

b) fixed costs per unit would be different at very level of production, thus the information is only relevant at one production point

Which of the following is a benefit of budgeting? a) It coordinates the activities of the entire organization by integrating the plans and objectives of the various parts b) it provides necessary information to external investors when they are deciding if the company is a good investment c) it uncovers potential bottlenecks d) it provide benchmarks for evaluating subsequent performance

b) it provides necessary information to external investors when they are deciding if the company is a good investment

A flexible budget performance report for variable manufacturing costs shows _______.

both the activity variances and the spending variances.

The adjustment for overapplied overhead ________.

decreases cost of goods sold and increases net operating income.

In a direct materials budget, the desired ending raw materials inventory for the year is equal to the ________.

desired ending raw materials inventory for the last period

Superware, Inc. produces multiple products out of a common input. Geratin is one such product, which has a sales value of $15,000 at the split-off point. Joint costs allocated to Geratin are $12,000. Sales value of Geratin increases to $25,000 after further processing, and this processing will cost $7,000. What is the net profit or loss if Superware processes the product further?

$3,000 profit

Spending Variance

Difference between the actual price of an item and its standard price.

Target Profit Formula

Profit = (Sales - Variable Expenses) - Fixed Expenses

Prime costs consist of direct labor combined with a) Direct Materials b)Manufacturing Overhead c) Indirect Materials d) Cost of goods manufactured

d) Cost of goods manufactured

Salinas Corporation has a degree of operating leverage of 8. This means that a 1% change in sales dollars at Salinas will generate an 8% change in: a) variable expenses b)fixed expenses c)contribution margin ratio d) net operating income

d) net operating income

HiLo Confectionary Corporation has a number of store location throughout North America. In income statements segmented by store, which of the following would be considered a common fixed cost? a) Store Manager Salaries b) rent for the store in Lansing, Michigan c) Depreciation on equipment of stores d) none of the above

d) none of the above

The use of absorption costing for segmented income statements results in ________.

omission of upstream and downstream costs

The budgeting process begins with the preparation of the ______ budget.

sales

Cost of Goods Sold Equation

CGS = Beginning Inventory + Purchases of merchandise - Ending Inventory

Margin of Saftey (equation)

Current output - breakeven output

A self- imposed budget or _______ budget is a budget that is prepared with the full cooperation of managers at all levels

participative