A306 Exam 1
Jones Company uses a job-order costing system with a predetermined overhead rate of 120% of direct labor cost. The job cost sheet for Job #420 listed $4,000 in direct materials cost and $5,000 in direct labor cost to manufacture 7,500 units. The unit cost of Job #420 is:
$2.00. Reason: Total cost of Job #420 = Direct materials + direct labor + overhead (predetermined overhead rate × direct labor cost) = $4,000 + $5,000 + 1.20 × $5,000 = $15,000 Unit product cost = $15,000 ÷ 7,500 units = $2.00 per unit.
A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements,
$300 is reported as a expense and $900 is reported as an asset
A company has total sales of $1,430,000. Fixed expenses are $657,000 and the contribution margin ratio is 67%. Company profit (loss) is ______.
$301,100 Reason: (67% × $1,430,000) - $657,000 = $301,100
Vivian's Violins has sales of $326,000, contribution margin of $184,000 and fixed costs total $85,000. Vivian's Violins net operating income is Blank______.
$99,000 Net operating income = $184,000 - $85,000 = $99,000
increase in NOI =
((increase of sales - current sales) x CM%) - expense
how to find units sales need to earn x profit
(fixed expenses + target profit) / (price of unit - variable cost)
Blissful Blankets' target profit is $520,000. Each blanket has a contribution margin of $21. Fixed costs are $320,000. The number of blankets that must be sold to achieve the target profit is Blank______.
40,000 Reason: ($520,000 + $320,000) ÷ $21 = 40,000
A company has a target profit of $204,000. The company's fixed costs are $305,000. The contribution margin per unit is $40. The BREAK-EVEN point in unit sales is
7,625 Reason: Break-even point = $305,000 ÷ $40 = 7,625.
Which of the following statements are true?
Period costs do not flow through the inventory accounts. Period costs are expensed when incurred
A company's selling price is $90 per unit, variable cost per unit is $28 and total fixed expenses are $320,000. The number of unit sales needed to earn a target profit of $200,800 is Blank______.
Reason: ($320,000 + $200,800) ÷ ($90 - $28) = 8,400 units.
Which type of cost changes in total, in direct proportion to changes in activity level?
Variable
Period costs ______.
are expensed in the period incurred include all costs that are not product costs
The unit product cost is the same as the ______.
average product cost per unit total job cost divided by number of units
How individual costs react to changes in activity level is referred to as cost
behaviour
When compared to a company with higher fixed costs and lower variable costs, a company with lower fixed costs and higher variable costs, has Blank______.
better protection from loss in bad years greater profit stability lower net income in good years
Cost classifications for predicting cost behavior are used on
contribution format income statements only
To calculate profit, multiply the Blank______ per unit by sales volume and subtract total fixed cost.
contribution margin
The contribution margin income statement is organized by
cost behavior.
Any item for which cost data is desired is called a(n)
cost object
To calculate the unit product cost using the job cost sheet Blank______ by the number of units produced.
divide the total job cost
Indirect labor costs include ______.
factory security guard wages assembly-line supervisor salary
A company's current sales are $300,000 and fixed expenses total $85,000. The contribution margin ratio is 30%. The company has decided to expand production which is expected to increase sales by $70,000 and fixed expenses by $15,000. If these results occur, net operating income will Blank______.
increase by $6,000 Reason: ($70,000 × 30%) - $15,000 = $6,000 increase
As the level of activity moves outside of the relevant range, fixed costs,
increase or decrease in discrete steps
The difference in revenues between two alternatives is called
incremental revenue
Salaries of factory supervisors and factory maintenance personnel are examples of
indirect
`Salaries of factory supervisors and factory maintenance personnel are examples of Blank______ labor costs.
indirect
Manufacturing overhead:
is an indirect cost. contains fixed costs. consists of many different types of costs.
Direct materials and direct labor are both
manufacturing costs
Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as
manufacturing overhead
Factory materials, such as cleaning supplies, that are not components of finished products are classified as
manufacturing overhead
Indirect materials and indirect labor are classified as
manufacturing overhead
The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is recognized is known as the ---- principle.
matching
If the total contribution margin is less than the total fixed expenses, a Blank______ occurs.
net loss
Cost objects include:
organizational subunits. anything for which cost data is desired. customers.
Direct materials, direct labor, and manufacturing overhead are all
product costs
The assumption that cost behavior is strictly linear is reasonably valid within the
relevant range
Contribution margin is
sales revenue minus variable costsq
Period costs are always expensed on the income statement in the period in which
they are incurred
Period costs are always expensed on the income statement in the period in which Blank______.
they are incurred
The break-even point is reached when the contribution margin is equal to:
total fixed expenses.
Net operating income=
units x (price of unit - variable cost) - fixed expenses = NOI
Cost of goods sold for a merchandising company, direct materials and commissions are all examples of Blank
variable
Cost of goods sold for a merchandising company, direct materials and commissions are all examples of Blank______ costs.
variable
Allocation bases that do not drive overhead costs
will not accurately measure the cost of overhead used