Accounting 2301 Exam #2
What is NOT included on a job order cost sheet..
Actual plant wide overhead costs
Which is NOT a manufacturing cost element
Advertising expense
Consumption Ratio Formula
Amount of activity for a product / total activity
What is considered annual activity
Annual direct labor hours/ annual machine hours
The predetermined overhead rate is usually calculated..
At the beginning of the year
Breakeven Sales {dollars} Formula
Total fixed costs (dollars) / contribution margin ratio
Breakeven Units Formula
Total fixed costs / contribution margin per unit
Overhead Rate Formula
Total overhead costs / total activity
Margin of Safety {dollars} Formula
Total sales dollars - breakeven sales dollars
Margin of Safety {units} Formula
Total units sold - breakeven units
Variable Cost Ratio {dollars} Formula
Total variable costs (dollar) / total sales (dollar)
A company with a low degree of operating leverage is at lesser risk during downturns in the economy
True
A volume based costing system tends to be allocation intensive
True
A work distribution matrix is derived from an interview or a written survey
True
Activity drivers should be classified as either unit level or non unit level
True
Actual overhead costs are accumulated in the overhead control account
True
An activity based costing system first assigns costs to activities and then to cost
True
Activity drivers can be classified as either ____ or ____
Unit level and non-unit level
The contribution income statement highlights....
Variable and fixed costs
Variable Cost Ratio Formula
Variable cost per unit / selling price per unit
If the contribution margin per unit decreases, the break even point in units
Will increase
An ___ is derived from the interview process (or written survey)
Work Distribution Matrix
The ending balance of which account is determined by simply summing up the total cost from each unfinished job
Work in process
Using only unit based activity drivers to assign non-unit related overhead costs can cause
Distorted product costs
Predetermined Overhead Rate Formula
Estimated annual overhead costs / estimated annual activity
Department Predetermined Overhead Rate Formula
Estimated department overhead costs / estimated department activity
The margin of safety in dollars is..
Expected sales minus sales at breakeven
Actual overhead is reconciled with applied overhead at the beginning of the period
False
If the breakeven point increases, the margin of safety increases
False
If variable costs per unit increase, then the breakeven point will decrease
False
An activity dictionary lists the activities in organization along with some critical activity attributes
True
If variable EXPENSES decrease and the price increases the break even point decreases
True
Managers can use cup analysis to handle risk and uncertainty
True
Overhead costs are assigned to work in process using a predetermined rate
True
Product diversity means that products consume overhead activities in systematically different proportions
True
Production costs consist of direct materials, direct labor, and overhead
True
Resource drivers are factors that measure the consumption of resources by activities
True
The break even point is where total sales revenue equals total cost
True
The consumption ratio is the amount of each activity consumed by a product
True
The contribution margin income statement provides a good check to determine if the sale of a certain number of units really results in operating income of the given amount
True
The cost volume profit graph depicts the relationship among cost, volume, and profits, by plotting the total cost line of the graph
True
The difference between total revenues and total variable costs is called contribution margin
True
The impact on a firm's income resulting from a change in the number of units sold can be assessed by multiplying the unit contribution margin by the change in units sold fixed cost remain the same
True
The key feature of job order costing is that the cost of one job differs from that of another job and must be kept track separately
True
The profit volume graph shows the relationship between profits and units sold
True
The work in process account consists of all the job order costs sheets for the unfinished jobs
True
In an actual cost system, actual direct materials, actual direct labor and estimated overhead are used to determine unit cost
False
The raw materials account is an inventory account located on the income statement
False
Using a time ticket, the cost accounting department can enter the cost of direct materials onto the correct job order cost sheet
False
Targeted Operating Income {units} Formula
(Total fixed costs + target operating income) / contribution margin per unit
Operation Income Formula
(price x units sold) - (unit variable cost x units sold) - fixed cost
Contribution Margin Ratio from 1 Formula
1.0 - Variable cost ratio
A "what if" technique that examines the impact of changes in underlying assumptions on a result is..
A sensitivity analysis
Interviews and surveys are used to identify
Activities
In an activity dictionary, types of resources consumed is an example of
Activity attribute
A costing system that first assigns costs to activities and then to products is
Activity based costing
Assigned Activity Costs Formula
Activity rate x quantity of activity for a specific cost object
Using normal costing, which costs NEVER enter the work in process of account
Actual overhead
Overhead Variance Formula
Actual overhead costs - applied overhead
Which statement is NOT true
Actual overhead costs always enter the work in process account
Using normal costing requires that...
Actual overhead costs are not assigned directly to jobs
The margin of safety is the difference between..
Budgeted revenues and breakeven revenues
An example of a support department is..
Human resources
Adjusted Costs of Goods Sold Formula
Unadjusted cost of goods sold +/- overhead variance *under applied overhead is added/over applied overhead is subtracted*
Contribution Margin Ratio Formula
Contribution margin per unit / selling price per unit
Degree of operating leverage is calculated as...
Contribution margin/operating income
Which of the following is NOT on a time ticket
Cost of materials
____are assigned using direct tracing and resource drivers
Costs
If variable COSTS PER UNIT decrease, sales volume at the break even point will
Decrease
A list of activities accompanied by info that describes each activity is na activity
Dictionary
Time tickets are filled out for
Direct laborers
What is easy to trace to individual jobs
Direct materials and direct labor
The method that assigns support department costs only to producing departments in proportion to each producing department's usage of the service known as...
Direct method
Which of the following will increase a company breakeven point
Increasing variable cost per unit
The costs of a job are accounted for on the..
Job order cost sheet
Setups, material handling, and inspection are all possible examples of
Non-unit level overhead activities
Which method of measuring costs associated with production is more widely used in practice
Normal costing
____ costs in many firms represents a much higher percentage of product costs than direct labor
Overhead
Assigned Overhead Costs Formula
Overhead rate x quantity of activity for a specific product
Applied Overhead Formula
Predetermined overhead rate x actual activity
The departments responsible for creating product or services that are sold to customers are referred to as...
Producing departments
____ is present whenever products have different consumption ratios for different overhead activities
Product Diversity
A profit volume graph visually portrays the relationship between
Profits and units sold
The method that assigns support department costs by giving full recognition to support department interactions known as..
Reciprocal method
The breakeven point is the activity level where
Revenues equal the sum of variable and fixed costs
Contribution margin equals...
Revenues minus variable costs
Contribution Margin Formula
Sales - Variable costs
Contribution Margin Per Unit Formula
Selling price per unit - Variable cost per unit
Those departments that provide essential services to producing departments are referred to as....
Support department
If actual sales equal breakeven sales...
The margin of safety equals zero
Operating leverage is..
The use of fixed costs to extract higher percentage changes in profits as sales activity changes
Activity Rate Formula
Total activity costs / total activity
Operating Leverage Formula
Total contribution margin (dollars) / operating leverage (dollars)
Contribution Margin Ratio {dollars} Formula
Total contribution margin (dollars) / total sales (dollars)
At the break even point
Total contribution margin equals total fixed cost
