Accounting Review

A normal job-order costing system is a system that uses

Actual costs for direct materials and direct labor and estimated costs for overhead

Using normal costing requires that

Actual overhead costs are not assigned directly to jobs

Which of the following costs is not included on a job-order cost sheet

Actual plantwide overhead costs

To determine contribution margin use

Both variable manufacturing costs and variable nonmanufacturing costs

The margin of safety is the difference between

Budgeted revenues and breakeven revenues

Degree of operating leverage is calculated as

Contribution margin/operating income

If the selling price per unit increases, the break-even point in units will

Decrease

If variable costs per unit decrease, sales volume at the break-even point will

Decrease

Time tickets are filled out for

Direct laborers

The margin of safety in dollars

Expected sales minus sales at break-even

Actual overhead is reconciled with applied overhead at the beginning of the period

False

If fixed costs increase, the break-even point decreases

False

If one increases variable costs per unit, the break-even point will decrease

False

If the break-even point increases, the margin of safety increases

False

If variable costs per unit increase, then the breakeven point will decrease.

False

The use of normal costing means that actual overhead costs are assigned directly to jobs

False

Total revenues less total fixed costs equal the contribution margin

False

Using a time ticket, the cost accounting department can enter the cost of direct materials onto the correct job-order cost sheet

False

Breakeven point is

Fixed costs divided by contribution margin per unit

If fixed costs increase, the break-even point in units will

Increase

Which of the following will increase a company's breakeven point

Increasing variable cost per unit

The document that lists the total cost for a single job is a

Job-order cost sheet

Which of the following can be considered a measure of risk in cost-volume-profit analysis

Margin of safety

Which of the following statements is true about overhead?

Overhead costs are not incurred uniformly throughout the year

The cost-volume-profit graph

Plots the total revenue line and the total cost line

A profit-volume graph visually portrays the relationship between

Profits and units sold

Contribution margin equals

Revenues minus variable costs

The contribution margin is

The difference between sales and variable costs

If actual sales equal break-even sales

The margin of safety equals zero

On a cost-volume-profit graph, the break-even point is where

The revenue line intersects the total cost line

Operating leverage is

The use of fixed costs to extract higher percentage changes in profits as sales activity

The breakeven point decreases if

Total fixed cost decrease

The break-even point is when

Total revenues equal total cost

Companies with a greater proportions of fixed costs have a greater risk of loss that companies with a greater proportion of variable

True

If variable expenses decrease and the price increases, the break-even point decreases

True

Managers can use CVP analysis to handle risk and uncertainty

True

Production costs consist of direct materials, direct labor, and overhead

True

The break-even point is where total sales revenue equals total cost

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 contribution margin ration can be calculated by subtracting the variable cost ratio from one.

True

The cost-volume profit graph depicts the relationship among cost, volume, and profits, by plotting the total revenue line and the total cost line on the graph

True

The difference between total revenues and total variable costs is called contribution margin

True

The margin of safety measures the units sold or the revenue earned above the break-even volume

True

The profit-volume graph shows the relationship between operating income and the number of units sold

True

The profit-volume graph shows the relationship between profits and units sold

True

The contribution income statement highlights

Variable and fixed costs