accounting exam 2 study guide

What is usually plotted as a horizontal line on the CVP graph?

Fixed expenses

What type of predetermined overhead rate is used in activity-based absorption costing?

Multiple

The profit graph is based on the following linear equation:

Profit = Unit CM x Q - Fixed Expenses.

What is represented on the X axis of a cost-volume-profit (CVP) graph?

Sales volume

What does the green line in the CVP graph indicate?

Total expenses

What is the term used when a company applies less overhead to production than it actually incurs?

Underapplied

An activity measure is like a(n) ________.

allocation base

The direct materials required to manufacture each unit of product are listed on a____

bill of materials

A normal cost system applies overhead to jobs ________.

by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job

A shift in the sales mix from high-margin items to low-margin items can cause total profit to ________.

decrease

The adjustment for overapplied overhead ________.

decreases cost of goods sold and increases net operating income.

Companies can improve job cost accuracy by using ________.

multiple predetermined overhead rates

The measure of how sensitive net operating income is to a given percentage change in dollar sales is called _______.

operating leverage

Design work and engineering changes are examples of ________.

product-level activities

contribution margin ________.

sales - variable cost

When all of a company's job cost sheets are viewed collectively they form what is known as a ________.

subsidiary ledger

Break-even point is the level of sales at which ______.

total revenue equals total costs

Once the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit sold.

unit contribution margin

In the cost formula (Y = a + bX) that is used to estimate the total manufacturing overhead cost for a given period, the letter "a" refers to the estimated ________.

y- estimated total manufacturing overhead cost a-estimated total fixed manufacturing overhead cost b-estimated variable manufacturing overhead cost per unit of allocation base x-estimated total amount of allocation base