Cost Accounting Exam 2 - Dr. Long
CVP
cost volume profit
when computing the cost per equivalent unit, the weighted average method of process costing considers
costs incurred during the current period + cost of beginning work in process inventory
a company with a high ratio of fixed costs
is more likely to experience a loss when sales are down than a company with mostly variable costs
degree of operating leverage=
contribution margin/net operating income
when a segment is eliminated a
1) traceable fixed cost will disappear 2.) common fixed cost will remain unchanged
when calculating the profit impact of discontinuing a segment, consider
1. segments traceable fixed costs 2. segments contribution margin
process costing
A costing method used when essentially homogeneous products are produced on a continuous basis
contribution margin ratio
Contribution Margin / Sales
conversion costs
Direct Labor + Manufacturing Overhead
Product costs under absorption costing
Direct Materials, Direct Labor Variable Manufactur. Overhead Fixed Manufacturing Overhead
breakeven in unit sales
Fixed Expenses / Unit CM
equivalent units
The product of the number of partially completed units and their percentage of completion with respect to a particular cost. Equivalent units are the number of complete whole units that could be obtained from the materials and effort contained in partially completed units.
the journal entry to record direct materials costs in processing department 1 is
a debit to WIP Department 1 credit to raw materials
common fixed cost
a fixed cost that supports the operations of more than one segment, but is not traceable in while or part to any one segment is a
process costing is used when a
a single product is produced on a continuing basis or for a long period of time
financial statement users need to be aware of changes in inventory levels when using
absorption costing
according to the CVP analysis model, assuming all else remains the same, profits would be increased by a
decrease in the unit variable cost
Product costs under variable costing
direct materials direct labor variable manufacturing overhead
operating leverage is a measure of how sensitive
net operating income is to a percent change in sales dollars
if a segment is entirely eliminated, common fixed costs will
not change
contribution margin becomes
profit after fixed expenses are covered
the higher the margin of safety
the lower the risk of incurring a loss
degree of operating leverage
the measure of how a percentage change in sales affects profits at any given level of sales
the break even point is reached when the contribution margin is equal to
total fixed expenses
only costs that would disappear over time if a segment disappeared should be treated as
traceable fixed costs
the sales mix must be taken into consideration when calculating break even point for more than one product
true
the number of units produced does not affect net operating income when using
variable costing
variable expense ratio
variable expenses/sales