Principles of Accounting

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A company reports these data: Total sales revenue = $250,000 Number of units sold = 50,000 units Variable costs = $100,000 If the company is operating at its break-even point, what is the company's total contribution margin?

$150,000

A company reports these data: Price per unit = $25 Variable costs per unit = $15 Fixed costs = $15,000 Given these data, what is the variable cost ratio?

60%

What is Job Order Costing?

A Method of costing that assigns cost to specific jobs or products.

How is overhead allocated in an ABC system?

Activity rate multiplied by number of cost driver events

How is the production cost per unit computed in a process costing system?

Amount of total production cost divided by the number of units completed during a particular period of time

Which statement is true with respect to activity-based costing (ABC) systems?

An ABC system allocates overhead based on multiple activities.

How could a period cost be reported in an income statement?

As an administrative expense

What account does "Inventory" belong to?

Asset

What account does "Patents" belong to?

Asset

What account does "Prepaid Expenses" belong to?

Asset

What is the basic accounting equation?

Assets = Liabilities + Stockholders' Equity

What is estimated manufacturing OH?

Budgeted manufacturing OH costs that are used to establish the predetermined OH rate.

In an ABC system, which name is given to a numerical measure reflecting the amount of a cost associated with a particular overhead cost activity?

Cost driver

Which item is an expense item? 1. Loans Payable 2. AR 3. AP 4. Costs of goods sold

Cost of goods sold

Cost of Goods Sold

Cost of goods sold is the cost of the merchandise that was sold to customers. The cost of goods sold is reported on the income statement when the sales revenues of the goods sold are reported.

What does a manager have control over in a cost center?

Costs

What is an indirect cost?

Costs normally incurred for the benefit of several segments within the organization

Which label is given to the cost of the wood used in the construction of a piece of wooden furniture?

Direct materials

What account does "Retained Earnings" belong to?

Equity

Which type of account is retained earnings? 1. Liability 2. Equity 3. Revenue 4. Asset

Equity

What is the predetermined OH rate?

Estimated manufacturing OH cost for the year Divided by a total estimated activity base.

Cost of Goods Sold is an _______ item.

Expense

What account does "Maint. Expense" belong to?

Expense

What account does "Utility Expense" belong to?

Expense

What decreases Equity?

Expenses and Dividends

What is the impact of expenses on the accounting equation?

Expenses decrease owners' equity.

Why might employees be interested in their company's financial accounting information?

Financial statement data are often used in determining employee bonuses.

What shows profitability of an organization by company revenues and expenses for a period of time

Income Statement

What is an example of a financial cost that would result from poor direct labor budgeting and planning?

Increased hiring, training, and overtime costs

How does a classified balance sheet provide useful information to a decision maker?

It distinguishes between current and long-term assets.

In a job order costing system, what is the proper accounting for a product cost?

It is reported as a part of cost of goods sold.

What account does "Notes Payable" belong to?

Liability

Which type of business organization has a major focus on direct materials, direct labor, and overhead?

Manufacturing

What is Actual Manufacturing OH?

Manufacturing costs other than direct materials and direct labor.

Dividends

Money Distributed to the STOCKHOLDERS of a company. (From Retained Earnings)

What is a Cost Driver?

Numerical Measure used to reflect the amount of a specific cost associated with particular activity.

What is the formula for calculating activity rate?

OH Cost Pool Divided by Cost Driver

How is ABC OH allocated?

OH is allocated based on customer job activity.

Which cost category is not formally tracked in a company's accounting system?

Opportunity costs

Why is the concept of relevant range important to a manager?

Outside the relevant range, the variable cost per unit can change.

For purposes of cash flow classification in the statement of cash flows, which item is an operating activity?

Paying Employees

For purposes of cash flow classification in the statement of cash flows, which item is an operating activity?

Paying employees

What are the three primary functions that company managers use managerial accounting information for?

Planning, controlling, and evaluating

What is the label given to the quantity computed as estimated overhead costs divided by estimated level of activity?

Predetermined overhead rate

What is the sequence of the flow of costs through a manufacturing operation?

Raw materials, work-in-process, finished goods, cost of goods sold

What is the proper accounting for a product cost?

Record as an inventory cost until the item is sold

For which production process is process costing the appropriate costing method to use?

Refining gasoline in a petroleum facility

If we pay dividends, they will be paid out from?

Retained Earnings

What account does "Fee Income" belong to?

Revenue

What account does "Service Revenue" belong to?

Revenue

What increases Equity?

Revenue

What impacts the equity section of the balance sheet?

Revenues, Expenses and Dividends

How is GROSS PROFIT computed?

Sales - Cost of Goods Sold

What is the CVP equation?

Sales - variable costs - fixed costs = profit

What is the correct sequence of budgets in a manufacturing business?

Sales, production, direct materials

How are the wages of cashiers classified in a merchandising company?

Selling expense

What information does a balance sheet provide to a decision maker?

Summary of the financial position of a company at a particular date

Which statement correctly describes applied manufacturing overhead?

The amount of manufacturing overhead that is assigned to the goods produced

What is applied manufacturing OH?

The amount of the manufacturing OH that is assigned to the goods produced.

What is underapplied Manufacturing OH?

The excess of actual manufacturing OH costs over the applied manufacturing OH costs for the period

What is overapplied manufacturing OH?

The excess of applied manufacturing OH costs over the actual manufacturing OH costs for the period.

FINANCIAL ACCOUNTING STANDARDS BOARD (FASB)

The group that establishes financial accounting rules in the USA

What is a Cost Pool?

Total Cost being generated by a specific OH cost activity.

When the closing entries are made, the income statement information flows into equity and the balance sheet is in balance. (True or False)

True

The 3 general types of OH cost activities in ABC systems?

Unit Level, Batch Level, Product Line

Which item is a period cost?

Utility bills to heat the headquarters building


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