ACCT225

For cost control purposes, the ______ method is better than the ______ method.

FIFO, weighted-average

Which of the following help companies channel their resources into the most profitable growth opportunities?

Product and customer profitability reports

Operations costing is similar to job-order costing because ______.

each batch is charged for its own specific materials

The cost of jobs still unfinished at the end of a period are included in ______.

ending Work in process inventory

When computing equivalent units, FIFO and weighted-average treat ______ the same.

ending inventory

In process costing, manufacturing overhead costs are ______.

generally applied using a predetermined overhead rate

A journal entry debiting Cost of goods sold and crediting Finished goods is made when ______.

goods are sold

The best fitting line minimizes the sum of the squared errors when using ______.

least-square regression

A method that uses all the available data points to divide a mixed cost into its fixed and variable components is called ______.

least-squares regression

A measure of how sensitive net operating income is to a given percentage change in sales dollars is known as operating ______.

leverage

When using process costing, a separate ______ account is maintained for each processing department.

work in process

When using process costing, each processing department has a ______ ______ ______separate account.

work in process

When making decisions using ABC data ______.

unavoidable fixed costs should be ignored

A debit balance in Manufacturing overhead means overhead was

underapplied

The activity in a processing department is performed ______.

uniformly on all units

Power to run production equipment is a(n) -level activity.

unit

Selling and administrative expenses ______.

are always treated as period costs

The journal entry to record the transfer of partially completed products from processing Department #1 to processing Department #2 is to debit Work in Process Department ______.

#2 and credit Work in Process-Department #1

LPM Industries has two service departments (Administration and Maintenance) and two operating departments. Departmental costs before allocations are $950,000 for Administration and $1,650,000 for Maintenance. Maintenance costs are allocated on the basis of the number of employees. Administration has 450 employees; Maintenance has 750 employees; Operating Department 1 has 1,350 employees and Operating Department 2 has 1,200 employees. Using the direct method,the cost allocated from Maintenance to Administration is ______.

$0

Company A has a contribution margin ratio of 35%. For each dollar in sales, contribution margin will increase by ______.

$0.35

Candle Central has $1,440 of total variable expense for a sales level of 600 units and $2,160 of total variable expense for a sales level of 900 units. If Candle Central sells 500 units ______.

$1,200 $2.4 1,440 ÷ 600 = $2.40 per unit × 500 units = $1,200 total variable cost.

Seth's Speakers had actual sales of $1,630,000 If break-even sales equals $935,000, Seth's margin of safety in dollars is ______.

$1,630,000 - $935,000 = $695,000

LPM Industries has two service departments (Administration and Maintenance) and two operating departments. Departmental costs before allocations are $950,000 for Administration and $1,650,000 for Maintenance. Maintenance costs are allocated on the basis of the number of employees. Administration has 450 employees; Maintenance has 750 employees; Operating Department 1 has 1,350 employees and Operating Department 2 has 1,200 employees. Using the step-down method, how much of the cost from the Maintenance Department will be allocated to Operating Department 2?

$1,650,000 × 1,200 ÷ (450 + 1,350 + 1,200) = $660,000

LPM Industries has two service departments (Administration and Maintenance) and two operating departments. Departmental costs before allocations are $950,000 for Administration and $1,650,000 for Maintenance. Maintenance costs are allocated on the basis of the number of employees. Administration has 450 employees; Maintenance has 750 employees; Operating Department 1 has 1,350 employees and Operating Department 2 has 1,200 employees. Using the direct method, Maintenance cost allocated to Operating Department 1 is ______.

$1,650,000 × 1,350 ÷ (1,350 + 1,200) = $873,529

LPM Industries has two service departments (Administration and Maintenance) and two operating departments. Departmental costs before allocations are $950,000 for Administration and $1,650,000 for Maintenance. Maintenance costs are allocated on the basis of the number of LPM employees. Administration has 450 employees; Maintenance has 750 employees; Operating Department 1 has 1,350 employees and Operating Department 2 has 1,200 employees. Using the step-down method, how much of the cost from the Maintenance Department will be allocated to Administration?

$1,650,000 ×450 ÷ (450 + 1,350 + 1,200) = $247,500

Given sales of $100,000 a contribution margin of $40,000, and fixed expenses of $50,000, the result is a ______.

$10,000 net operating loss Contribution margin of $40,000 - fixed expenses of $50,000 = a $10,000 loss.

A company reports the following for a sales volume of 200 units: $100,000 in sales and $80,000 in variable costs. If the break-even point is 200 units and the company sells 201 units, net profit will be:

$100 For each unit sold above break-even, profit increases by the contribution margin per unit which is ($100,000 - $80,000)/200 or $100.

Carlisle, Inc. had Sales of $500,000, Cost of goods sold of $400,000, and Selling and administrative expenses of $50,000. Gross margin is ______.

$100,000 $500,000 - $400,000 = $100,000

SPS Products has two divisions—Catalog Sales and Online Sales. For the last quarter the Catalog Sales segment margin was ($5,000). Online sales were $100,000. Online Sales contribution margin was $60,000, and its segment margin was $40,000. If Catalog Sales are discontinued, it is estimated that online sales will increase by 10%. Discontinuing Catalog Sales should increase company profits by ______.

$11,000 Increased online sales contribution margin ($100,000 10% ($60,000 / $100,000)) is $6,000 + $5,000 saved from stopping catalog sales = $11,000.

Blink sells and manufactures frames for eyeglasses. The unit product cost for frame #47320 is $76.35. Last period, Blink produced 200 frames and sold 155 of them. Total cost of goods sold equals ______.

$11,834.25

Franklin, Inc. had costs in beginning work in process inventory of $4,730. During the period a total of $12,900 costs were added. Franklin uses FIFO costing and had 860 equivalent units. The cost per equivalent unit is ______.

$12,900 ÷ 860 = $15

Job #4260 consisted of 1,000 units at a total cost of $200,000. The cost transferred to Cost of Goods Sold for the sale of 600 of the units is ______.

$120,000 $200,000 ÷ 1,000 × 600 = $120,000

JPL Company has two segments - Retail and Commercial. The Retail segment has a contribution margin ratio of 40% and traceable fixed expenses of $70,000. Commercial has traceable fixed expenses of $50,000 and a contribution margin ratio of 55%. The company also has $30,000 of common fixed expenses. The break-even point in dollar sales for the Retail segment equals ______.

$175,000

Given the following, calculate total manufacturing costs: Direct materials cost: $62,000 Direct labor cost: $78,000 Manufacturing overhead applied: $46,000 Actual manufacturing overhead: $51,000 Beginning Work in process inventory: $32,000 Ending Work in process inventory: $35,000

$186,000 $62,000 +$78,000 + $46,000 = $186,000. Adjust for work in process when calculating the cost of goods manufactured.

Company A sells its product for $10 per unit. If Company A has variable expenses of $5 per unit and fixed expenses of $200,000, the break-even point in units and dollars is ______.

$200,000 ÷ 5 = 40,000 units ×$10 each = $400,000

The total cost in the Product Design cost pool is $200,000 with a total activity of 1,600 designs. The total cost assigned to a customer who had 7 designs done is $ .

$200,000/1600 = $125 $125*7= $875

Estimated manufacturing overhead $500,000 Estimated direct labor hours 200,000 Actual manufacturing overhead $625,000 Actual direct labor hours 260,000 The company applies overhead using direct labor hours as the cost driver. Calculate the amount that overhead was overapplied or underapplied.

$25,000 overapplied ($500,000 ÷ 200,000) = $2.50 × 260,000 = $650,000 applied. Actual overhead = $625,000, so overhead is $25,000 overapplied.

Given the following, calculate the cost of goods available for sale. Cost of goods manufactured of $234,000 Beginning Finished goods inventory of $18,000 Ending Finished goods inventory of $24,000

$252,000 Goods available for sale = $234,000 + $18,000 = $252,000

Based on the following information, compute the cost of goods sold for Spengler Merchandising Corporation. Sales $400,000 Purchases $300,000 Beginning inventory $50,000 Ending inventory $90,000 Selling expenses $70,000 Administrative expenses $30,000 Accounts receivable $110,000

$260,000

Meep Industries had unadjusted cost of goods sold of $300,000. Overhead was overapplied by $20,000. Adjusted cost of goods sold is ______.

$280,000 $300,000 - $20,000 = $280,000

A company assigns overhead using a plantwide rate. If total estimated manufacturing overhead is $900,000 and the total estimated activity is 30,000 machine-hours, the overhead cost assigned to a product using 12,000 machine-hours is ______.

$360,000 ($900,000/30,000)

Shonda's Shoes sell for $95 per pair. If Shonda must sell a total of 284 pairs of shoes to break-even, and a total of 450 pairs to achieve her target profit, sales dollars needed to earn the target profit equals ______.

$42,750

If the activity rate for the customer order cost pool is $250 per order and the total for this cost pool is $425,000, the total number of customer orders is ______.

$425,000 ÷ $250 = 1,700

Martin Industries had unadjusted cost of goods sold of $450,000. Overhead was underapplied by $30,000. Adjusted cost of goods sold is ______.

$480,000 $450,000 + $30,000 = $480,000.

Citrus Scents produces body sprays. Variable selling and administrative expense is $1.05 per bottle and fixed selling and administrative expense is $4,500 per month. The company produced 1,490 bottles this month, and sold 1,203 of those bottles. Total selling and administrative expense for the month was ______.

$5,763.15

The customer orders cost pool uses 25% of indirect factory wages. If total indirect factory wages are $500,000, the amount allocated to this cost pool in the first-stage allocation is:

$500,000 × 0.25 = $125,000

Luver Corporation's Gross margin is $100,000, Cost of goods sold equals $70,000, and Selling and administrative expenses total $45,000. Net operating income is ______.

$55,000 $100,000 - $45,000 = $55,000

A company reports Gross margin of $100,000, Cost of goods sold of $70,000, and Selling and administrative expenses of $45,000. Net operating income (loss) is ______.

$55,000 Gross margin - Selling & administrative expenses: $100,000 - $45,000 = $55,000

Company A has fixed costs of $564,000 and a contribution margin of 62%. Sales dollars to break-even rounded to the nearest whole dollar equals ______.

$564,000 ÷ 0.62 = $909,677

Costs in beginning work in process inventory totaled $1,200 and $6,000 in costs were added during the period. If there are 75 equivalent units, the cost per equivalent unit using FIFO is ______.

$6,000 ÷75=$80

A company has two activity cost pools—Customer Orders and Product Design. The activity rates are $300 per order for Customer Orders and $500 per design for Product Design. How much overhead cost would be assigned to a customer placing 4 orders and requiring 10 designs?

$6200 ($300 × $4) + ($500 × 10) = $6,200

Raw materials inventory was $27,000 at the beginning of the year and $25,000 at the end of the year. During the year, $100,000 in raw materials were purchased, including $28,000 of indirect materials that were put into manufacturing overhead during the period. Calculate the cost of direct materials used during the period.

$74,000 Beginning Inventory + Purchases - Indirect Materials - Ending Inventory ($27,000 + $100,000 - $28,000 - $25,000 = $74,000)

A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and total activity of 20,000 development hours. Using activity-based costing, calculate the appropriate activity rate(s).

$8 per customer call and $15 per development hour Reason: $200,000 ÷ 25,000 = $8 per customer call and $300,000 ÷ 20,000 = $15 per development hour.

Based on the following information, calculate net income for Dana's Dress Shop using the traditional format. Sales $360,000 Gross Margin $140,000 Contribution Margin $110,000 Total Selling & Administrative Exp. $60,000

$80,000

JVL Enterprises has set a target profit of $126,000. The company sells a single product for $50 per unit. Variable costs are $15 per unit and fixed costs total $98,000. How many units does JVL have to sell to BREAK-EVEN?

$98,000 ÷ ($50 - $15) = 2,800

Budgeted sales are $982,000, break-even sales are $932,200, and fixed expenses are $429,000. The company's budgeted margin of safety in dollars is ______.

$982,000 - $932,200 = $49,800.

Canners Company uses weighted-average costing. Beginning work in process inventory had $3,650 of material costs. During the period, $5,000 of materials and $9,250 in conversion costs were added. If there are 250 equivalent units of production for materials, the cost per equivalent unit for materials is ______.

($3,650 + $5,000) ÷ 250 = $34.60

The formula for the cost per equivalent unit using the weighted-average method is ______.

(Cost of beginning work in process inventory + Cost added during the period) ÷ Equivalent units of production

Dollar break-even for a company is calculated as ______.

(Traceable fixed expenses + Common fixed expenses) ÷ Overall CM ratio

Solving for the sales level needed to attain a target profit of $ ______ is the same process as solving for the sales level needed to break-even.

0

A company has four cost pools—customer relations, order size, product design and customer orders. Indirect labor is used 15% for customer relations, 30% for order size, and 35% for product design. The percentage is used for customer orders is:

100% - (15% + 30% + 35%) = 20%

Sleep Tight manufactures pillows. The company incurred $42,000 of fixed manufacturing overhead cost this year. Variable unit product cost was $17. Variable selling and administrative cost was $9 per unit and fixed selling and administrative expenses totaled $59,000. The company manufactured 28,000 pillows and sold 15,408. Total fixed expenses on the variable costing contribution format income statement equal ______.

101000

Lance, Inc. has sales of 9,000 units. The contribution margin per unit is $32 and fixed costs total $120,000. Lance's profit is $ .

168000

Fill in the blanks to complete the sentence. When ending work in process contains 500 units that are 34% completed, there are ______ equivalent units.

170 (500 x 0.34)

Steel, Inc. has a margin of safety in dollars of $559,740. If actual sales were $2,946,000, Steel's margin of safety percentage is ______%.

19

A company has an opportunity to make a bulk sale that would not impact regular sales or total fixed expenses. The variable cost per unit is $11 and the company desires a total profit of $4,500. The quoted selling price per unit for 500 units should be $ .

20

If sales increase by 5% and the degree of operating leverage is 4, net operating income should increase by ______.

20% Increase in net operating income = 5% × 4 = 20%.

The unit product cost of a blender is $24. If 900 blenders are produced and 849 blenders are sold, the total cost of goods sold is $

20376

A company incurred $12,000 of maintenance cost for 6,500 machine hours in June and $14,250 of maintenance costs for 8,000 hours in August. Assuming these are the high and low months of activity, the estimated fixed maintenance costs using the high-low method is $ .

2250

A company incurred $12,000 of maintenance cost for 6,500 machine hours in June and $14,250 of maintenance costs for 8,000 hours in August. Assuming these are the high and low months of activity, the estimated fixed maintenance costs using the high-low method is $.

2250

Shonda's Shoes sell for $95 per pair. If Shonda must sell 284 pairs of shoes to break-even, sales dollars needed to break-even equals $ .

26,980

Adams, Inc. has sales of $100,000 with a contribution margin of $60,000 and net income of $20,000. Baron, Inc. has sales of $110,000 with a contribution margin of $44,000 and net income of $22,000. Thus, the degree of operating leverage is for Adams, Inc. and for Baron, Inc.

3 2

Given a sales price of $100, variable costs of $70 and a break-even point of 500 units, net operating profit for sale of 501 units will be $.

30

Total estimated manufacturing overhead is $900,000 and total estimated activity is 30,000 machine-hours. The plantwide overhead rate is $ per machine hour.

30($900,000 / 30,000 = $30)

If ending work in process contains 300 units that are 40% complete the number of equivalent units is ______.

300 × 0.4=120

Using the weighted-average method, if work in process inventory has 100 units that are 40% complete and 300 units were transferred to the next department during the period, there are a total of ______ equivalent units of production.

340

A company has 50,000 square foot building. Square footage is used as follows: 5,000 feet by Service Dept. #1, 10,000 feet by Service Dept. #2 and 35,000 feet by the two operating departments. Under the direct method, ______ square feet will be used in the allocation of Service Dept. #2's costs.

35,000

A company occupies a building that has 50,000 square feet. Of the total square footage, 5,000 is used by Service Dept. #1, 10,000 is used by Service Dept. #2 and 35,000 is used by the two operating departments. Under the direct method of service department allocation, square footage used in the allocation of Service Dept. #1's costs will be ______.

35000

Daisy's Dolls sold 30,000 dolls this year for $40 each. Each doll's variable cost was $19. If Daisy incurred $250,000 of fixed expenses, net operating income for the year is ______.

380,000 Net operating income =30,000 × ($40 - $19) - $250,000 = $380,000

If equivalent units of production using weighted-average is 4,650 units and there were 500 units in beginning inventory that were 45% complete, equivalent units of production under FIFO equals

4,425

The activity rate for the Customer Orders activity pool is $20 per order. If there are 400 customer orders for a product, the total overhead cost assigned to this product for customer orders is $ .

400 x 20 = 8000

Sales total $500,000, and fixed costs total $300,000. The contribution margin ratio is 68%. Profit = $

40000

A company has two segments with total sales of $500,000 and total variable costs of $343,750. Traceable fixed expenses are $50,000 and common fixed expenses are $80,000. The break even in dollars for the company as a whole equals $

416,000

Seating Galore sells high-end desk chairs. The variable expense per chair is $85.05 and the chairs sell for $189.00 each. The variable expense ratio for Seating Galore's chairs is %.

45 $85.05/$189

Methods to calculate departmental unit costs include ______.

FIFO weighted-average

A product has a selling price of $10 per unit, variable expenses of $6 per unit and total fixed costs of $35,000. If 10,000 units are sold, net operating income will be $.

5000

Given the following, calculate the cost of goods available for sale. Cost of goods manufactured of $410,000 Beginning Finished goods inventory of $110,000 Ending Finished goods inventory of $125,000

52000

Costs in beginning work in process inventory was $4,500 and $37,800 in costs were added during the period. If there are 7,050 equivalent units, the cost per equivalent unit under the weighted-average method is $ .

6 or 6.00 (4,500 + 37800/7050)

If a company has a variable expense ratio of 35%, its CM ratio must be %

65

If the activity rate is $65 per order with a total of 120 orders for a product, the overhead cost assigned to the product is $.

65x120=$7800

A company needs to sell 90,000 units to reach the target profit of $180,000. If each unit sells for $7.50, the total sales dollars needed to reach the target profit is $.

675000

A company's products had sales of $750,000 and total costs of $360,000. If the net operating income for the company was $215,000, total overhead costs not assigned to products was $

750,000 - 360,000 = 390,000 390,000 - 215,000 = 175,000

Polly's Day Planners sells its planners for $35 each. Sales this year equals $927,500. The margin of safety is $27,300. The margin of safety in units is

780

If equivalent units of production using weighted-average is 8,125 units and there were 1,200 units in beginning inventory that were 30% complete, equivalent units of production under FIFO equals ______.

8,125 - (1,200 × 30%) = 7,765

If sales increase by 15% and the degree of operating leverage is 6, net operating income should increase by ______ %

90

Citrus Fruits sells oranges for $20 per crate. If the company's margin of safety is $180,000, the margin of safety in units is ______ crates.

9000

What are some of the limitations of activity-based costing systems?

ABC requires substantial resources. Managers and employees may resist the change to ABC. ABC procedures produce numbers that do not match traditional costing.

When inventory increases, which costing method generally results in higher net income?

Absorption costing

The journal entry to record the purchase of materials credits ______.

Account Payable

Which costing system charges products only with the costs of the capacity used by those products and not with the cost of unused capacity?

Activity-based

Adams, Inc. has sales of $100,000 with a contribution margin of $60,000 and net income of $20,000. Baron, Inc. has sales of $110,000 with a contribution margin of $44,000 and net income of $22,000. Which of the following statements are correct?

Adams has a higher degree of operating leverage than Baron. Baron's net income grows twice as fast as its sales.

Applied manufacturing overhead is entered on what side of the Manufacturing overhead account?

Always the credit side

A company is currently selling 10,000 units of product for $40 per unit. The unit contribution margin is $27. The company believes that spending $50,000 on advertising will increase sales by 750 units per month and increase the selling price to $45 per unit. If this change is implemented, profits will ______.

An increase in selling price of $5 will increase the contribution margin $5 (from $27 to $32). The increased contribution margin of $74,000 ((10,750 × $32) - (10,000 × $27)) - the additional fixed costs of $50,000 = a profit increase of $24,000.

A company is currently selling 10,000 units of product monthly for $40 per unit. The unit contribution margin is $27. The company believes that spending $50,000 per month on advertising will allow them to increase the selling price to $45 and that sales will increase by 750 units per month. The company should ______.

An increase in selling price of $5 will increase the contribution margin $5 (from $27 to $32). The increased contribution margin of $74,000 ((10,750 × $32) - (10,000 × $27)) - the additional fixed costs of $50,000 = a profit increase of $24,000.

Which of the following appears on job cost sheets and in the work in process account?

Applied manufacturing overhead

Which group is likely to be uncomfortable using ABC allocations that are based on personnel interviews?

Auditors

When preparing financial statements in a job-order costing system, finished goods flow first to the _______ ________and then to the ________ ________.

Balance sheet income statement

Units in ______ work in process inventory + units started or transferred in = Units in ______ work in process inventory + units completed and transferred out.

Beginning Ending

A company's beginning work in process contained 200 units that were 20% complete. Those units were completed and transferred to finished goods. During the period 4,300 units were started. Of the units started, 4,000 were transferred to finished goods. The 300 units in ending work in process were 30% complete. Using the weighted-average method, the equivalent units of production equals ______.

Beginning WIP + started and completed = 4,200 units transferred out + 300 units in ending WIP × 30% complete = 4,290 equivalent units.

Which of the following costs is included in the numerator of the weighted-average method's computation of cost per equivalent unit, but excluded when FIFO is used?

Beginning work in process inventory

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 ______.

Break-even point = $305,000 ÷ $40 = 7,625

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 ______.

CM ratio x Sales - Fixed expenses = 67% × $1,430,000 - $657,000 = $301,100.

Chrissy's Cupcakes has $832,000 in sales and $265,000 in fixed expenses. Given a contribution margin ratio of 72%, Chrissy's profit (loss) is ______.

CM ratio × Sales - Fixed expenses = 72% ×$832,000 - $265,000 = $334,040.

Why is CVP analysis more difficult when using absorption costing than when using variable costing?

CVP analysis requires costs to be broken down between variable and fixed which is not done in absorption costing.

A company's current sales are $300,000 and fixed expenses total $225,000. 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 ______.

Change in net operating income = $70,000 × 30% - $15,000 = $6,000 increase.

A company currently has sales of $700,000 and a contribution margin ratio of 45%. As a result of increasing advertising expense by $8,000, the company expects to increase sales to $735,000. If this is done and these results occur, net operating income will ______.

Change in net operating income = ($735,000 - $700,000) × 45% - $8,000 = $7,750.

Fantastic Frames sells its frames for $15 per unit. Variable costs total $6 per unit, and fixed costs total $90,000. If the number of units being sold increases by 2,000 frames, net operating income will ______.

Change in net operating income = 2,000 × ($15 - $6) = $18,000.

Tommy's Trains is currently selling 55,000 toy trains for $50 per unit. The variable cost per train is $26 and total fixed costs are $110,000. If Tommy sells an additional 5,000 trains, profits will ______.

Change in profits = 5,000 × ($50 - $26) = $120,000.

What methods can be used to dispose of underapplied or overapplied manufacturing overhead?

Close it to Cost of goods sold. Allocate it to Work in process, Finished goods, and Cost of goods sold.

Which of the statements regarding closing out over or underapplied overhead is correct?

Closing to Cost of goods sold is simpler, and allocating is more accurate.

A 15% increase in sales resulted in a 40% increase in net income for Company A and a 60% increase in net income for Company B. Based on this, which company has the greater operating leverage?

Company B

Which of the following are differences between the traditional and contribution format to income statements?

Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier. Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior.

Which of the following is NOT a common mistake made in preparing segmented income statements?

Computing contribution margin instead of gross margin.

After reaching the break-even point, a company's net operating income will increase by the ______ ______ per unit for each additional unit sold.

Contribution margin

Sales revenue minus variable expenses equals

Contribution margin

To estimate the effect on profits for a planned increase in sales, multiply the increase in units sold by the unit

Contribution margin

A company sold 20,000 units of its product for $20 each. Variable cost per unit is $11. Fixed expenses total $150,000. The company's contribution margin is ______.

Contribution margin = 20,000 × ($20 - $11) = $180,000.

Given sales of $100,000 a contribution margin of $40,000, and fixed expenses of $50,000, the result is a ______.

Contribution margin of $40,000 - fixed expenses of $50,000 = a $10,000 loss.

Gifts Galore had sales revenue of $189,000. Total contribution margin was $100,170 and total fixed expenses were $27,500. The contribution margin ratio was ______.

Contribution margin ratio = $100,170 ÷$189,000 = 53%.

Given sales of $1,452,000, variable expenses of $958,320 and fixed expenses of $354,000, the contribution margin ratio is ______.

Contribution margin ratio = ($1,452,000 - $958,320) ÷ $1,452,000 = 34%.

Milton Corporation sold goods costing $50,000 for $75,000. Journal entries to be made could include entries debiting ______.

Cost of Goods Sold for $50,000 and Accounts Receivable for $75,000

Which of the following are used to calculate Cost of goods available for sale on the schedule of cost of goods sold?

Cost of goods manufactured Beginning finished goods inventory

The journal entry to record the more accurate allocation of overapplied or underapplied overhead includes entries to ______.

Cost of goods sold Work in process Finished goods Manufacturing overhead

The entry to record the sale of finished goods to customers is a debit to ______.

Cost of goods sold and a credit to Finished goods

Underapplied or overapplied manufacturing overhead can be disposed of by closing it to ______.

Cost of goods sold or allocating it to Work in process, Finished goods, and Cost of goods sold

Goldin Corporation currently pays its salesperson a flat salary of $5,000 per month and is considering paying him $20 per unit instead. Sales are currently 200 units per month. Goldin believes the compensation change will increase unit sales by 50%. The current contribution margin is $80 per unit. If the change is implemented, net operating income will ______.

Current income: ($80 × 200) - $5,000 = $11,000. With the change salary becomes a variable cost: ($80 - $20) x 200 × 150% = $18,000, an increase of $7,000 per month.

Bluin Corporation pays its salesperson a flat salary of $5,750 per month and is considering paying her $30 per unit instead. Current unit sales are 250 per month, but Bluin believes the compensation change will increase unit sales by 50%. Bluin's current contribution margin is $100 per unit. If Bluin switches the compensation and sales grow as expected, net operating income will ______ per month.

Current net operating income = ($100 × 250) - $5,750 = $19,250. With the change salary becomes a variable cost and net operating income would be: ($100 - $30) × 250 × 150% = $26,250, an increase of $7,000 per month.

Differential costs, opportunity costs and sunk costs are all cost classifications used in ______.

Decision making

Place the steps for implementing ABC in order.

Define activities, activity cost pools, and activity measures. Assign overhead costs to activity cost pools. Calculate activity rates. Assign overhead costs to cost objects. Prepare management reports.

The journal entry to record depreciation on office equipment debits ______.

Depreciation expense and credits Accumulated depreciation

Which of the following are inventoriable costs under super-variable costing?

Direct materials Variable overhead

Which of the following is NOT an ABC level of activity?

Employee

Under the FIFO method, which of the following inventory balances are used in the calculation of equivalent units?

Ending work in process Beginning work in process

Number of partially completed units x Percentage completion =

Equivalent units

Which of the following is included in computing equivalent units under the FIFO method, but not under the weighted-average method?

Equivalent units to complete beginning work in process

True or false: A benefit of TDABC is that it only requires about half the number of employee interviews that are needed with traditional ABC.

FALSE

From a cost control perspective, the best method for process costing is ______.

FIFO

The method of process costing that is generally considered to be the most accurate, but also the most complex is ______.

FIFO

Which of the following are most likely fixed costs? Factory rent Factory insurance Electricity to operate factory machines Administrative salaries

Factory rent Factory insurance Administrative salaries

Segment margin is most useful in decisions involving short-run changes in sales volume such as pricing special orders.

False

True or false: Absorption costing net income may be computed by multiplying the number of units sold by the contribution margin per unit and subtracting total fixed expenses.

False

True or false: Account analysis involves a detailed analysis of what cost behavior should be, based on an industrial engineer's evaluation.

False

True or false: Actual overhead costs appear in the Work in Process account but not on the job cost sheet.

False

True or false: Allocated costs of other service departments are reallocated back to the original service department allocations when using the step-down method.

False

True or false: Cost structure refers to the relative portion of product and period costs in an organization.

False

True or false: Job B was not completed by April 30. If an April balance sheet is prepared, the costs accumulated for Job B will NOT appear on it.

False

True or false: Knowledge of previous sales is necessary when using incremental analysis to evaluate a change in profits.

False

True or false: Operating leverage is the smallest at sales levels near the break-even point and increases as sales and profits rise.

False

True or false: Period costs flow from Finished Goods to Cost of Goods Sold.

False

True or false: Removing expenses that do not differ between alternatives could alter a decision.

False

True or false: Traditional cost systems tend to undercost standard products and overcost specialty products.

False

True or false: Variable costs remain fixed in total within the relevant range of activity.

False

True or false: When a company sells multiple products, an increase in total sales always results in an increase in total profits.

False

True or false: Without knowing the future, it is best to have a cost structure with high variable costs.

False

When a job is completed, its costs are transferred into ______.

Finished Goods

When jobs are sold their costs are transferred out of ______.

Finished Goods

When production is completed in the last processing department, units are transferred to the ______ ______ account.

Finished Goods

When a job is completed, which account is debited?

Finished goods

When goods are sold on account, what accounts are credited?

Finished goods and Sales

The journal entry to record the transfer of completed units to the finished goods warehouse is to debit ______.

Finished goods and credit Work in process

Tasty Tangerine is currently selling 50,000 boxes for $25 per box. Variable cost per box is $17 and fixed costs total $260,000. A plan is being considered to increase advertising and reduce the selling price. The advertising would increase fixed costs by $60,000. Management believes the advertising along with a $2 reduction in the selling price per box will increase sales volume by 24,000 boxes. If management's predictions are correct, making these changes will cause net income for the year to ______.

If the change is implemented, total contribution margin would increase by $44,000 ((74,000 boxes × $6) - (50,000 boxes × $8)). Additional contribution margin of $44,000 - $60,000 in new fixed costs = a net operating income decrease of $16,000.

Which of the following statements are correct? In practice, direct labor costs are really fixed. Employee morale may be reduced when direct labor is treated as a variable cost. Treating direct labor as a variable cost improves decision making. Managers generally have the ability to quickly adjust the direct labor force.

In practice, direct labor costs are really fixed. Employee morale may be reduced when direct labor is treated as a variable cost.

Which of the following is not a COST CLASSIFICATION associated with decision making?

Indirect costs

Why is top management support needed when ABC is implemented?

Leadership is instrumental in motivating employees to embrace ABC.

To determine the slope, intercept and R² using Excel, select the Trend/Regression type ______.

Linear

In a traditional cost accounting system, what type of costs are assigned to products even if the costs are not caused by the products?

Manufacturing

Which of the following costs are found on the balance sheet?

Manufacturing Overhead Raw Materials Direct Labor

The journal entry to record $1,000 in expired prepaid insurance on factory equipment is debit ______.

Manufacturing Overhead $1,000 and credit Prepaid Insurance $1,000

The journal entry to record $20,000 in depreciation on factory equipment is debit ______.

Manufacturing Overhead $20,000 and credit Accumulated Depreciation $20,000

The journal entry to record expired prepaid factory insurance debits ______.

Manufacturing Overhead and credits Prepaid Insurance

Absorption costing Variable costing

Manufacturing and selling and administrative Variable and fixed

Which account is credited when manufacturing overhead is applied?

Manufacturing overhead

George Corporation recognized $1,000 of accrued property taxes on its manufacturing facility. The journal entry to record this debits ______.

Manufacturing overhead $1,000 and credits Property taxes payable $1,000

If a company incurs $2,000 of factory rent, $1,000 of factory utilities, and $5,000 of miscellaneous factory costs, the journal entry to record these transactions would be to debit ______.

Manufacturing overhead $8,000 and credit Accounts payable $8,000

The journal entry to record depreciation on factory equipment debits ______.

Manufacturing overhead and credits Accumulated depreciation

The journal entry to record accrued property taxes for a factory building debits ______.Salaries and wages payable

Manufacturing overhead and credits Property taxes payable

The period ends

Manufacturing overhead is closed

Overhead is applied to Work in Process

Manufacturing overhead is credited

Actual overhead is incurred

Manufacturing overhead is debited

Jump-It Corporation has a margin of safety of $272,000. The company sold 100,000 units this year. If the company sells each unit for $17, the margin of safety percentage is ______.

Margin of safety = $272,000 ÷ (100,000 × $17) = 16%

When using process costing, which of the following can be added in any department?

Materials, labor and overhead

Ceramic Creations sells pots for $25. The variable cost per pot is $12 and 15,000 pots must be sold to break-even. If Ceramic Creations sells 25,000 pots, net operating income will be ______.

Net income = (25,000 - 15,000) × ($25 - $12) = $130,000.

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 ______.

Net operating income = $184,000 - $85,000 = $99,000

A company's break-even point is 17,000 units. If the contribution margin is $22 per unit and 26,000 units are sold, net operating profit will be ______.

Net operating income = (26,000 - 17,000) × $22 = $198,000.

A company sold 750 units with a contribution margin of $120 per unit. If the company has a break-even point of 450 units, the net operating income or (loss) is ______.

Net operating income = (750 - 450) × $120 = $36,000.

Adam's Sports Store has a contribution margin ratio of 55% and has already passed the break-even point for the year. If Adam's generates additional sales of $250,000 by the end of the year, net operating income for the year will increase by ______.

Net operating income change = $250,000 × 55% = $137,500 increase.

Anne's Antique Store has a contribution margin ratio of 29%. The break-even point has been reached. If the store generates an additional $600,000 of sales for the year, net operating income will increase by ______.

Net operating income change = $600,000 × 29% = $174,000.

In activity-based costing, what costs are not assigned to products?

Organization-sustaining Unused capacity

Which of the following is not a characteristic of operation costing?

Products are homogeneous.

Marjorie's Mugs sold 300 mugs last year for $20 each. Variable costs were $7 per mug and total fixed costs were $1,700. Marjorie's Mugs' profit was ______

Profit = 300 × ($20 - $7) - $1,700 = $2,200.

The journal entry to record issuing materials to be used in production credits ______.

Raw materials

Which of the following statements are true? Multiple select question. Direct labor costs flow through the Raw materials inventory account. Raw materials inventory represents the cost of materials not yet used in production. Raw materials inventory only includes the cost of direct materials. When materials are purchased they are recorded in the Raw materials inventory account.

Raw materials inventory represents the cost of materials not yet used in production. When materials are purchased they are recorded in the Raw materials inventory account.

The assumption that cost behavior is strictly linear is reasonably valid within the of activity.

Relevant range

The percentage of the variation in cost that is explained by activity is ______.

R²

The journal entry to record labor costs credits ______.

Salaries and wages payable

Which of the following items are found above the contribution margin on a contribution margin format income statement?

Sales Variable expenses

Place the following items in the correct order in which they appear on the contribution margin format income statement.

Sales Variable expenses Contribution margin Fixed expenses Net operating income

Cakes by Jacki has $144,000 of fixed costs per year. The contribution margin ratio is 59%. The sales dollars to break-even rounded to the nearest dollar equals ______.

Sales = $144,000 ÷ 0.59 = $244,068

Softie, Inc. produces facial tissues. The company's contribution margin ratio is 77%. Fixed expenses are $240,400. To achieve a target profit of $930,000, Softies' sales rounded to the nearest dollar must be ______.

Sales = ($240,400 + $930,000) ÷ 0.77= $1,520,000

Company A has fixed costs of $564,000 and wishes to earn a profit of $800,000 this year. If Company A has a contribution margin ratio of 62%, sales dollars needed to reach the target profit equals ______.

Sales = ($564,000 + $800,000) ÷ 0.62 = $2,200,000

Chitter-Chatter sells phones and has set a target profit of $975,000. The contribution margin ratio is 65%, and fixed costs are $195,000. Sales dollars needed to earn the target profit total:

Sales = ($975,000 + $195,000)/0.65 = $1,800,000.

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 ______.

Sales volume = ($320,000 + $200,800) ÷ ($90-$28) = 8,400 units

Paula's Perfumes has a target profit of $4,000 per month. Perfume sells for $15.00 per bottle and variable costs are $13.50 per bottle. Fixed costs are $3,200 per month. The number of bottles that must be sold each month to earn the target profit is ______.

Sales volume = ($4,000 + $3,200) ÷($15.00 - $13.50) = 4,800 bottles.

Run Like the Wind sells ceiling fans. Target profit for the year is $470,000. If each fan's contribution margin is $32 and fixed costs total $222,640, the number of fans required to meet the company's goal is:

Sales volume = ($470,000 + $222,640)/$32 = 21,645 fans.

Blissful Blankets' target profit is $520,000. Each blanket has a contribution margin of $21. Fixed costs are $320,000. The number of blankets Blissful Blankets need to sell in order to achieve its target profit is ______.

Sales volume = ($520,000 + $320,000) ÷ $21 = 40,000 blankets.

Which of the following statements are true?

Scattergraphs are a way to diagnose cost behavior. Plotting data on a scattergraph is an important diagnostic step.

Which of the following is NOT an organizational sustaining cost?

Set-up labor wages

Costs that have already been incurred and can not be changed by decisions made in the current period or in future periods are called ____ cost

Sunk

What type of cost is never relevant and should be disregarded when making decisions?

Sunk

A company sells 500 sleds per month for $80. Variable costs are $41 per unit and fixed expenses are $3,500 per month. The company thinks that using a new material would increase sales by 70 units per month. If the new material increases variable costs by $4 per unit, the impact on net income would be a ______.

The current contribution margin is $39 per unit ($80 - $41) or $19,500 (500 units × $39) total. The new contribution margin would be $35 per unit ($39 - $4 new cost) or $19,950 (570 units × $35), an increase of $450.

Which of the following statements is correct?

The higher the margin of safety, the lower the risk of incurring a loss.

Which of the following is not essential for the successful implementation of an ABC system?

Top managers must design the ABC system.

Which of the following items are the same under both ABC and traditional costing?

Total costs Net operating income Total sales

Pretty in Pearls sold 95 necklaces last month. If variable cost per unit is $40 and fixed costs total $3,085, the company's total variable cost was ______.

Total variable cost = 95 ×$40 = $3,800.

Which costing system does not assign selling and administrative costs to products when computing product margin?

Traditional

Which costing method assigns only manufacturing costs to products?

Traditional absorption costing

What causes traditional and activity-based costing systems to report different product margins?

Traditional cost systems allocate all manufacturing overhead costs to products. Traditional cost systems allocate all of the manufacturing overhead costs to products using a volume-related allocation base. The ABC system assigns nonmanufacturing overhead costs to products on a cause-and-effect basis as appropriate.

When using Excel, the intercept (a), slope (b) and R² is determined by selecting any data point in the scattergraph plot and selecting Add

Trendline

A cost that can be traced directly to a specific segment should be charged directly to that segment and not allocated to other segments.

True

True or false: A cost reconciliation report using the weighted-average method reports the same information as a cost reconciliation report using FIFO.

True

True or false: A processing department needs to calculate a separate unit cost for each type of cost incurred.

True

True or false: Presenting fixed costs on an average per unit basis makes them look like they are variable costs.

True

True or false: The equivalent units of production computed under the weighted-average method does not take into account the percentage completed of the beginning inventory.

True

True or false: The flow of costs through manufacturing accounts is basically the same for job-order costing and process costing.

True

True or false: The transfer of costs from one inventory account to the next parallels the physical transfer of goods from one inventory to the next.

True

True or false: Underapplied or overapplied overhead occurs because overhead is applied to jobs using a predetermined rate based on estimates of costs and activity levels.

True

True or false: When a team is created to design and implement an ABC system, it should include members that represent many different functional areas.

True

True or false: When using the high-low method, fixed costs are calculated after variable costs are determined.

True

super-variable costing treats all manufacturing overhead as a fixed cost.

True

Which of the following is a key difference between process and job-order costing?

Under process costing, it makes no sense to try to identify materials, labor and overhead costs with a particular customer order.

Which of the following is needed to calculate profit?

Unit contribution margin, unit sales, and total fixed costs

Company A's product sells for $90 and has a variable cost of $35 per unit. Fixed costs total $550,000. If Company A sells 16,000 units, the contribution margin per unit is ______.

Unit contribution margin= $90 -$35 = $55.

What level of activity is performed each time an item of a product is produced?

Unit-level

Which of the following equations is correct?

Units in beginning WIP + units started or transferred in = Units in ending WIP + units completed and transferred out

Given ending work in process of 400 equivalent units, beginning work in process inventory of 500 equivalent units and 800 units transferred out, equivalent units of production using FIFO is ______.

Units transferred out + Equivalent units in Ending WIP - Equivalent units in Beginning WIP = 700

The Cutting Edge sells ice skates. Total sales are $845,000, total variable expenses are $245,050 and total fixed expenses are $302,000. The variable expense ratio is ______.

Variable expense ratio = $245,050 ÷$845,000 = 29%.

Spice sells paprika for $9.00 per bottle. Each bottle incurs $2.43 in variable cost. Spice incurs annual fixed costs of $825,000. The variable expense ratio for paprika is:

Variable expense ratio=$2.43/$9=27%.

Match the costing method to the manner in which unit costs are calculated.

Weighted-average method matches -> Combines costs and outputs from the current and prior periods. Combines costs and outputs from the current and prior periods. FIFO method matches --> Bases costs solely on the costs and outputs from the current period. Bases costs solely on the costs and outputs from the current period.

Equivalent units of production equals the number of units transferred to the next department (or finished goods) plus equivalent units in ending work in process under which method(s) of costing?

Weighted-average only

All the cost appearing on the job cost sheets of the jobs that are being worked on are found in the ______ account.

Work in Process

Units that are partially complete are found in ______.

Work in Process

Prior to being recorded on the income statement, manufacturers' product costs flow through ______.

Work in Process Finished Goods Raw Materials

A product requires processing in two departments, A and B. Products start in Dept. A. Costs transferred out of Dept. A will be transferred to ______.

Work in Process - Dept. B

The journal entry to record direct materials costs in processing Department #1 is debit ______.

Work in Process-Department #1 and credit Raw Materials

Manufacturing overhead is applied with a debit to ______.

Work in process

A company incurred $10,000 in direct labor costs and $8,000 in indirect labor costs. The journal entry to record this transaction debits ______.

Work in process $10,000 and Manufacturing overhead $8,000 and credits Salaries and wages payable $18,000

The journal entry to record $10,000 in manufacturing overhead applied to Job #40 debits ______.

Work in process $10,000 and credits Manufacturing overhead $10,000

A company requisitioned $40,000 in direct materials and $30,000 in indirect materials from the storeroom to be used in production. The journal entry to record this transaction would debit ______.

Work in process $40,000, debit Manufacturing overhead $30,000 and credit Raw materials $70,000

The journal entry to apply overhead cost to processing Department #1 is to debit ______.

Work in process-Department #1 and credit Manufacturing overhead

The journal entry to record direct labor costs in processing Department #1 is debit ______,

Work in process-Department #1 and credit Salaries and wages payable

When a company produces and sells multiple products ______.

a change in the sales mix will most likely change the break-even point each product most likely has a unique contribution margin. each product most likely creates a unique total of fixed costs.

Discontinuing a profitable segment results in ______.

a reduction in the overall profits of the company the loss of the segment's revenues

Cost behavior is considered linear whenever ______.

a straight line approximates the relationship between cost and activity

Advocates of costing believe fixed costs are an essential part of product production.

absorption

In order to comply with GAAP and IFRS, the ______ costing method must be used for external reporting in the United States.

absorption

Managers who believe that all manufacturing costs must be assigned to products in order to properly match the cost of production with sales are advocates of costing.

absorption

The use of costing can lead to the omission of segment costs because nonmanufacturing costs are not included as costs of a product.

absorption,

Costs are categorized by function when using costing and by behavior when using costing.

absorption, variable

In process costing, manufacturing overhead costs are distributed to each department ______.

according to the amount of the allocation base incurred in the department

Differences between job-order and process costing include that process costing ______.

accumulates costs by department. is used for indistinguishable products.

The first major step in implementing ABC is to identify the that will form the foundation for the system

activities

In ABC, any event that causes consumption of overhead resources is a(n)

activity

In activity-based costing, each cost pool accumulates costs that relate to a single measure in the ABC system

activity

Focusing on activities to eliminate waste, decrease processing time, and reduce defects is the basis of

activity based management

A "bucket" in which costs are accumulated that relate to a single activity measure in the ABC system is a(n) ______.

activity cost pool

Overhead includes both manufacturing and nonmanufacturing costs under ______ costing.

activity-based

The Manufacturing Overhead account is debited when ______.

actual overhead costs are incurred

Overhead is overapplied if ______.

actual overhead is less than applied overhead

Overapplied or underapplied overhead is the difference between ______.

actual total overhead and total overhead applied

A journal entry debiting Salaries expense and crediting Salaries and wages payable could record ______.

administrative salaries

Discretionary fixed costs include ______.

advertising management training programs

Under activity-based costing, overhead includes ______.

all indirect costs

The contribution margin equals sales minus ______.

all variable costs

The more accurate method of closing out the balance in Manufacturing overhead is ______.

allocating it among Work in process, Finished goods, and Cost of goods sold

In activity-based costing, the consumption of overhead resources is caused by ______.

an activity

The journal entry to record selling and administrative salaries debits ______.

an expense account and credits Cash or a liability

When using process costing, materials, labor and overhead may be added in ______ processing department.

any

Raw materials

any materials that go into the final product

A journal entry that debits Work in process and credits Manufacturing overhead is recording the ______.

application of manufacturing overhead costs

To calculate total manufacturing costs, add direct materials, direct labor and ______.

applied manufacturing overhead

Work in Process consists of ______.

applied manufacturing overhead actual direct labor cost actual direct materials cost

Super-variable costing will have higher net operating income than variable costing when units produced ______ units sold.

are less than

Advocates of variable costing believe fixed manufacturing costs ______.

are not caused by and cannot be meaningfully traced to specific units of production are period expenses

Actual manufacturing overhead costs are recorded in the Manufacturing Overhead account ______.

as they are incurred

Raw Materials is a(n) _________ account.

asset

Raw materials inventory is an ______.

asset

Customer cost analysis using time-driven activity-based costing (TDABC) ______.

assists with measuring customer profitability uses estimates based on practical capacity

ABC is not used for external reporting because would not be comfortable using allocations based on employee interviews.

auditors

Similarities between job-order costing and process costing include the ______.

basic purpose to assign and compute product costs flow of costs through the manufacturing accounts manufacturing accounts used

Contribution margin ______.

becomes profit after fixed expenses are covered

To calculate cost per equivalent unit using the weighted-average method, add the cost of ______ work in process inventory to costs added during the period and divide by equivalent units of production.

beginning

To calculate cost per equivalent unit using the weighted-average method, add the cost of work in process inventory to costs added during the period and divide by equivalent units of production.______

beginning

In both the FIFO and weighted-average methods, costs to be accounted for include ______ work in process inventory, while costs accounted for include ______ work in process inventory.

beginning ending

Units in work in ______ process inventory + units started or transferred in = Units in ______ work in process inventory + units completed and transferred out.

beginning ending

When computing the equivalent units of production under the weighted-average method, partially completed ______ inventory is ignored.

beginning work in process

To calculate cost of goods manufactured add ______.

beginning work in process to total manufacturing costs, then deduct ending Work in process

How individual costs react to changes in activity level is referred to as cost __________

behavior

A systematic approach that can identify improvement opportunities is ______.

benchmarking

Interdepartmental services are services provided ______.

between service departments

Activity based costing provides managers with information that affects ______.

both fixed and variable costs

When compared with weighted-average costing, the FIFO method is ______ complex.

both more accurate and more

Costs per equivalent unit are used to value ______.

both units in ending inventory and units transferred to the next department

Multiplying unit selling price times the number of units required to break-even is one way to calculate ______.

break-even sales dollars

Using the contribution margin ratio, the impact on net income for a change in sales dollars is ______.

change in sales dollars × contribution margin ratio

To prepare a scattergraph plot in Excel, highlight the data and select the "Scatter" subgroup from the ______ group within the Insert tab

chart

One reason service departments allocate costs to operating departments is to enable ______.

calculating various unit costs

A contribution approach income statement ______.

can assist with management decision making separates costs into their fixed and variable components

Step-variable costs ______.

can be adjusted quickly as conditions change may include total salaried employee expense

Activity-based costing data ______.

can be easily misinterpreted

Differential costs ______.

can be fixed or variable

Time-driven activity-based costing (TDABC) performs to evaluate employee idle time.

capacity analysis

In activity-based costing, nonmanufacturing and manufacturing costs are assigned to products on a(n) ______ basis.

cause-and-effect

When a company sells one unit above the number required to break-even, the company's net operating income will ______.

change from zero to a net operating profit

When making a decision using incremental analysis consider the ______.

change in cost resulting specifically from the decision change in sales dollars resulting specifically from the decision

The variable cost per unit using the high-low method is calculated as ______.

change in cost ÷ change in units (activity)

When using the high-low method, if the high or low levels of cost do not match the high or low levels of activity, ______.

choose the periods with the highest and lowest levels of activity and their associated costs

The simpler method of closing out the balance of Manufacturing overhead is ______.

closing it out to Cost of goods sold

A change in profits that occurs due to a change in sales and fixed expenses may be calculated as ______.

cm ratio × change in sales - change in fixed expenses

Fixed costs that cannot easily be changed and often lock a company into a multi-year decision are called _______ fixed costs.

committed

If a segment is eliminated, fixed costs that are not traced to the segment will not change.

common

One mistake companies make when preparing segmented income statements is arbitrarily assigning fixed costs to segments.

common

When a segment is eliminated, a ______.

common fixed cost will remain unchanged traceable fixed cost will disappear

A journal entry that debits Finished goods and credits Work in process records the ______.

completion of a job

Finished goods ______.

consists of completed, unsold goods

Contribution margin ratio is equal to ______ divided by ______.

contribution margin sales

An income statement focusing on product and period costs has been prepared using a(n) ____ format, while a(n) ____ income statement makes a distinction between fixed and variable costs.

contribution traditional

To calculate profit, multiply the ______ per unit by sales volume and subtract total fixed cost.

contribution margin

Users can easily judge the impact on profits of changes in selling price, cost or volume when using an income statement constructed under the ______ approach.

contribution margin

To calculate the effect on profits of a planned increase in sales, you need the increase in units sold, any change in fixed costs and the ______.

contribution margin per unit

The degree of operating leverage = ______.

contribution margin ÷ net operating income

The calculation of contribution margin (CM) ratio is ______.

contribution margin ÷ sales

Variable costing net income may be computed by multiplying the number of units sold by the per unit and subtracting total expenses.

contribution margin, fixed

To calculate the variable cost per unit using the high-low method, the change in ______ , Correct Unavailable is divided by the change in ______ activity.

cost activity

In activity based costing another term for activity measure is ______.

cost driver

In activity-based costing, another term for allocation base or activity measure is

cost driver

The amount transferred from Work in Process to Finished Goods is ______.

cost of goods manufactured

Beginning merchandise inventory + Purchases - Ending merchandise inventory =

cost of goods sold

Gross margin is calculated by subtracting ______ from ______.

cost of goods sold; sales

Within the relevant range of activity,

costs and activity can be approximated by a straight line fixed costs remain constant in total

When using the step-down method, after a service department's costs have been allocated ______.

costs of other service departments are not reallocated back to it

The break-even point calculation is affected by ______.

costs per unit selling price per unit sales mix

When managers allocate organization-sustaining and unused capacity costs to products ______.

costs will be overstated incorrect decisions may be made

Incorrectly or arbitrarily assigning common costs to segments ______.

could reduce the overall profits of the company distorts the profitability of segments holds managers responsible for costs they cannot control

When overhead is underapplied, a _____ must be made to the Manufacturing overhead account to close it out.

credit

The __________ side of the manufacturing overhead account is always used to record manufacturing overhead applied to production and the _________ side is always used to record the actual manufacturing costs incurred.

credit debit

The correct journal entry to apply manufacturing costs to processing Department #1 is (debit/credit) Manufacturing overhead and (debit/credit) Work in process-Department #1.

credit debit

The journal entry to record labor cost in the first department is (debit/credit) Wages payable and (debit/credit) Work in process-Department #1.

credit debit

When a customer's order is filled and units are sold, there is a ______ to Finished Goods and a ______ to Cost of Goods Sold.

credit debit

Actual manufacturing overhead was $50,000, while overhead applied to jobs was $45,000. The entry to dispose of underapplied or overapplied overhead ______.

credits Manufacturing overhead $5,000 Underapplied overhead results in a $5,000 debit balance in the overhead account. To dispose of it, Manufacturing overhead should be credited for $5,000.

FIFO is considered better than the weighted-average method because ______.

current performance is based on current period costs it provides more up-to-date cost data

The most appropriate activity measure for a cost pool consisting of the costs of resources consumed taking and processing individual customer sales is the number of ______.

customer orders

A cost pool including costs to entertain clients and make sales calls is a(n) ______ activity.

customer-level

The journal entry to record material cost in the second department includes a (debit/credit) to Work in Process-Department #2.

debit

The journal entry to record the transfer of completed units to finished goods is (debit/credit) Finished Goods and (debit/credit) Work in Process.

debit credit

Actual manufacturing overhead is ______ to the Manufacturing overhead account.

debited

The difference between the entries to record depreciation on office equipment and depreciation on factory equipment is that one ______.

debits Depreciation expense, while the other debits Manufacturing overhead

Actual manufacturing overhead was $50,000, while overhead applied to jobs was $45,000. Work in process contained 10% of applied overhead, Finished goods contained 40%, and Cost of goods sold contained 50%. The entry to dispose of underapplied or overapplied overhead using the allocation method ______.

debits Work in process $500 Overhead is underapplied by $5,000. To dispose of the underapplied overhead, overhead is credited and the other accounts including Work in process, Finished goods, and Cost of goods sold are debited by $500 (10%), $2,000 (40%), and $2,500 (50%), respectively.

Assuming sales price remains constant, an increase in the variable cost per unit will ______ the contribution margin per unit.

decrease

Sweet Dreams sells pillows for $25 each. Variable costs are $15 per pillow. The company is considering improving the quality of materials which will increase variable costs to $19. The company currently sells 1,200 pillows per month and expects that the improved materials would increase sales to 1,500 per month. The impact of this change on total contribution margin would be a(n) ______ (increase/decrease) of $

decrease 3,000

Net operating income is less under absorption costing than under variable costing when inventory for the period ______.

decreases

When inventory increases, absorption costing net operating income is higher than variable costing net income due to the fixed manufacturing overhead ______.

deferred in the inventory account on the balance sheet

An example of a traceable fixed cost for General Motors' Corvette Division is the ______.

depreciation cost on the equipment used to manufacture the Corvettes

A journal entry that debits Depreciation expense and credits Accumulated depreciation records ______.

depreciation on office equipment

A change in revenues between two alternatives is known as revenue or incremental revenue.

differential

The method of allocating service department costs that ignores services provided by one service department to other service departments is the ______ method.

direct

Differences in net operating income between super-variable and variable costing occur because of the treatment of ______ costs under the two methods.

direct labor

Costs assigned and/or traced when computing product margin in a traditional cost system are ______.

direct labor direct material manufacturing overhead

A journal entry that debits Manufacturing overhead and credits Accounts payable would not be used to record ______.

direct labor costs

Common activity bases include ______.

direct labor hours machine hours units sold

In the 19th and 20th centuries ______.

direct labor hours was a satisfactory overhead allocation base

Conversion costs are ______.

direct labor plus manufacturing overhead

The direct method allocates service department costs ______.

directly to operating departments

Fixed costs that usually arise from annual spending decisions by management are called _______ fixed costs.

discretionary

Fixed costs that can be cut-back or eliminated without significant damage to a company's long-term goals are _________ fixed cost and _______ fixed costs can not be easily changed or eliminated

discretionary committed

A journal entry that involves Manufacturing overhead, Work in process, Finished goods, and Cost of goods sold is recorded to ______.

dispose of underapplied or overapplied overhead

The contribution approach to constructing income statements ______.

distinguishes between fixed and variable costs aids in decision making

Time-driven activity-based costing (TDABC) ______ require extensive interviews with employees.

does not

Customer cost analysis using time-driven activity-based costing (TDABC) ______.

does not require employee interviews helps manage customer mix enables estimating customer service employee needs

When constructing a CVP graph, the vertical axis represents ______.

dollar

The amount of time required to perform an activity is measured by a(n) driver.

duration

To calculate direct materials on the schedule of cost of goods manufactured, add purchases to beginning raw materials inventory and subtract ______.

ending raw materials inventory and Indirect materials used

Estimating the fixed and variable components of a mixed cost using the ______ approach involves a detailed analysis of what cost behavior should be.

engineering

On an absorption costing income statement, selling and administrative expenses ______.

equal the amounts reported on a variable costing income statement are reported as a single amount

A company has reached its break-even point when the contribution margin ______ fixed expenses.

equals

To report ending inventory, partially completed units are translated into ______ units.

equivalent

Equivalent units of production under the weighted-average method equal ______.

equivalent units in ending work in process plus units transferred out

Super-variable costing will have lower net operating income than variable costing when units produced ______ units sold.

exceed

Individual product costs calculated using ABC are not listed on ______ reports.

external

Using variable costing and the contribution approach for internal decision making ______.

facilitates explaining changes in net income enables CVP analysis supports decision making

True or false: In an activity-based costing system, it is best to combine activities that are not highly correlated.

false

True or false: The margin of safety is the excess of break-even sales dollars over budgeted (or actual) sales dollars.

false

Completed units that have not yet been sold are found in ________ ________ inventory.

finished goods

In activity-based costing, the process of assigning overhead costs to activity cost pools is ______ stage allocation.

first

Employees may be asked to estimate their time spent dealing with cost pool activities so that ______.

first-stage allocations will be more accurate

As the level of activity moves outside of the relevant range, _______ costs increase or decrease in discrete steps rather than an linear fashion.

fixed

In a least-squares regression line, the vertical intercept (a) of the line represents the total ______ cost

fixed

Within the relevant range of activity, ______ costs remain constant in total.

fixed

The contribution approach to constructing income statements distinguishes between ______ costs.

fixed and variable

Within the relevant range of activity ______.

fixed costs remain constant in total costs and activity can be approximated by a straight line

Total contribution margin equals ______.

fixed expenses plus net operating income

A change in sales mix ______.

from high-margin to low-margin items may cause total profits to decrease despite an increase in total sales from low-margin to high-margin items may cause total profits to increase despite a decrease in total sales

The step-down method begins allocating cost with the department that provides the ______ amount of service to other service departments.

greatest

Absorption costing net income is calculated by subtracting selling and administrative expenses from

gross margin

sales minus cost of goods sold equals

gross margin

An absorption costing income statement calculates ______.

gross margin by deducting cost of goods sold from sales

A segment should be discontinued when the segment ______.

has a contribution margin that cannot cover traceable fixed costs cannot cover its own costs

A company with three segments has $10,000 in common fixed expenses. All three segments are at the break-even point. As a result, the company ______.

has an overall net operating loss of $10,000

Because the variable cost per unit equals the slope of the straight line, the steeper the slope, the ______ the variable cost per unit.

higher

If operating leverage is high, a small percentage increase in sales produces a (higher/lower) percentage increase in net operating income than if operating leverage is low.

higher

Contribution margin computed using super-variable costing will be ______ than the contribution margin computed using traditional variable costing.

higher than

Net operating income under absorption costing is generally ______ net operating income under variable costing in periods in which inventory increases.

higher than

The company-wide break-even sales will always be ______ the sum of the segment break-even sales.

higher than

Total fixed costs on a super-variable costing income statement will be ______ than total fixed costs on a traditional variable costing income statement.

higher than

When units sold exceed units produced, net income under variable costing will generally be _______ net income under absorption costing.

higher than

In a processing department, all units of output are .

homogeneous

In a processing department, all units of output are

homogeneous, identical, uniform, indistinguishable, or equivalent

A processing department produces ________ units.

identical homogeneous

The first major step when implementing an ABC system is ______.

identify the activities

Under the FIFO method, the cost of units transferred out consists of the cost ______.

in beginning work in process inventory to complete beginning work in process inventory of units started and completed during the period

A fixed cost remains fixed ______ within the relevant range of activity.

in total

Variable costs vary ______ within the relevant range of activity.

in total

ABC does not conform to GAAP because it ______.

includes some nonmanufacturing costs excludes some manufacturing costs

Cost of goods manufactured ______.

includes the manufacturing costs of goods finished during the period

Selling and administrative costs first appear on the ______.

income statement

Absorption costing can lead managers to mistakenly believe that fixed manufacturing overhead costs will ______ in total as the number of units produced increases.

increase

In recent years, direct labor as a percentage of total cost began declining, which caused overhead to

increase

As the level of activity moves outside of the relevant range, fixed costs, ______.

increase or decrease in discrete steps

When the analysis of a change in profits only considers the costs and revenues that will change as the result of the decision, the decision is being made using ______ analysis.

incremental

Labor costs charged to Manufacturing Overhead represent ______.

indirect labor costs

In a least-squares regression equation, a represents the ______ and b represents the ______

inercept slope

The contribution margin statement is ordinarily used by those ______.

inside the company only

The journal entry to record a cash payment of $400 for insurance on administrative office equipment debits ______ and credits cash.

insurance expense

Services provided between service departments are known as ______ services.

interdepartmental

ABC is generally used for ______ reporting.

internal

Example service departments include ______.

internal auditing cafeteria Human resources

The contribution margin statement is primarily used for ______.

internal decision making

When using absorption costing and explaining changes in operating income, financial statement users need to be aware of changes in levels.

inventory

The statistic R² ______.

is a measure of goodness of fit

An activity-based costing system ______.

is costly to maintain produces different numbers than a traditional system requires substantial resources

The degree of operating leverage ______.

is greatest at sales levels near the break-even point is not a constant decreases as sales and profits rise

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 is more likely to experience greater profits when sales are up than a company with mostly variable costs.

Cost structure ______.

is the relative proportion of each type of cost in an organization

A journal entry that debits Work in process and Manufacturing overhead and credits Raw materials records the ______.

issuance of materials

Strengths of time-driven activity-based costing (TDABC) include ______.

it helps estimate the financial impact of aligning capacity with demand it is easy to update employees do not have to self-report idle time

Examples of products that may use operation costing include ______.

jewelry shoes clothing

Operations costing is similar to process costing because ______.

labor and overhead costs are accumulated by operation or department

It makes sense to perform a high-low or regression analysis if a scattergraph plot reveals ______ ______ behavior.

linear cost

The most appropriate activity measure for a cost pool consisting of equipment depreciation and power to run machines is ______.

machine hours

In the 19th and 20th centuries, cost systems relied on allocation bases such as ______.

machine hours labor hours

The cost of goods ______ is the sum of all amounts transferred from Work in process to Finished goods during a period.

manufactured

The cost of goods ________ is the sum of all amounts transferred from Work in process to Finished goods during a period.

manufactured

The schedule of cost of goods ______ Blank 1Blank 1 sold , Incorrect Unavailable summarizes costs that remain in Work in process inventory and that have been transferred from Work in process to Finished goods inventory.

manufactured

The schedule of cost of goods ______ summarizes costs that remain in Work in process inventory and that have been transferred from Work in process to Finished goods inventory.

manufactured

Manufacturing overhead consists of all ______.

manufacturing costs other than direct labor and direct materials

Actual overhead costs may not be proportional to the actual amount of the allocation base used because ______.

many actual overhead costs are fixed overhead spending may not be under control

Customer sales minus direct material, direct labor, and overhead cost pools used for each customer equal customer

margin

The amount by which sales can drop before losses are incurred is the ______ ______

margin safety

The segment margin represents the ______.

margin available after a segment has covered all of its own costs

The margin of safety percentage is:

margin of safety in dollars divided by total budgeted (or actual) sales in dollars

The cost of producing one more unit is the ______ cost.

marginal

The revenue from selling one additional unit is called ______ revenue.

marginal

The revenue obtained from selling one additional unit of product is called ____ revenue

marginal

The revenue obtained from selling one additional unit of product is called ____ revenue.

marginal

The best team to create an ABC system should include employees from ______.

marketing

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

Activity-based costing ______ include activities that do not relate to the number of units produced.

may

Under activity-based costing, nonmanufacturing costs ______.

may be allocated to products based on cause

When a segment cannot cover its own costs, that segment should ______.

may be prepared for activities at many levels in a company

An activity base ______.

measures whatever causes costs to vary is sometimes called a cost driver

A cost than contains both variable and fixed costs elements is called ____ a(n) cost.

mixed

A cost that contains both variable and fixed cost elements is a(n) ______ cost.

mixed

Compared to traditional systems, activity-based costing uses ______ cost pools and unique measures of activity.

more

The greater number of activities in an ABC system, the (more/less) costly it is for the company to develop.

more

In ABC, the greater the number of activities, the ______.

more accurate the costs are likely to be more costly the system will be to design

Companies allocate service department costs to operating departments to ______.

motivate managers evaluate managerial performance

If the total contribution margin is less than the total fixed expenses, a ______ occurs.

net loss At the break-even point total contribution margin = total fixed expenses.

Operating leverage is a measure of how sensitive ______ is to a given percentage change in sales dollars.

net operating income

At the break-even point ______.

net operating income is zero total revenue equals total cost

Terry's Trees has reached its break-even point and has a contribution margin ratio of 70%. For each $1 increase in sales ______.

net operating income will increase by $0.70 total contribution margin will increase by $0.70

The FIFO and weighted-average methods will produce identical results if there are ______ ending inventories.

never any

If a segment is entirely eliminated, common fixed costs will ______.

not change

Applied manufacturing overhead will most likely ______ actual manufacturing overhead.

not equal

An example of a transaction driver is the ______.

number of bills sent out to a customer

Under the FIFO method, the cost of units transferred out consists of the cost ______.

of units started and completed during the period to complete beginning work in process inventory in beginning work in process inventory

If some products are overcosted and some are undercosted the errors will ______.

offset each other in cost of goods sold and inventory valuations

Using absorption costing for segmented income statements can lead to ______.

omission of upstream and downstream costs under-costing of segments

When labor costs are incurred, _________ are added directly to the Work in Process account.

only direct labor costs

In traditional costing, ______ costs are assigned to products.

only manufacturing

Segment break-even calculations include ______.

only traceable fixed expenses

Costs should be allocated to segments for internal decision-making purposes ______ the allocation base actually drives the cost being allocated.

only when

Costs should be allocated to segments for internal decision-making purposes ______.

only when the allocation base actually drives the cost being allocated

Most large organizations have both ______ departments where the central purposes of the organization are carried out and departments that provide assistance.

operating service

The two types of departments in large organizations are ______.

operating and service

In situations where products have some common characteristics and some individual characteristics, ______ costing is used.

operation

Products such as clothing that are produced in batches but can vary considerably from model to model may use ______ costing.

operation

A potential benefit that is forfeited or lost when one decision is chosen over another is called a(n) ______ ______

opportunity cost

Activities that occur regardless of which customers are served, which products are produced or how many batches are run or units made are facility-level or - activities.

organization-sustaining

One way to compute equivalent units under the FIFO method is to add units transferred to equivalent units in work in process inventory and then subtract the equivalent units in work in process inventory.

out ending beginning

A credit balance in the Manufacturing Overhead account means overhead was

overapplied

A credit balance in the Manufacturing Overhead account means overhead was ______.

overapplied

Time-driven activity-based costing (TDABC) ______.

overcomes some important limitations of ABC does not assume employees will self-report idle time

Usually, traditional costing ______ high-volume products and ______ low-volume products.

overcosts; undercosts

In activity-based costing, first-stage allocation assigns costs to activity cost pools.

overhead

If ABC is not implemented correctly and organization-sustaining costs are included in product costs, then product costs will be ______ and margins will be ______.

overstated; understated

Under both variable costing and absorption costing, variable and fixed selling and administrative costs are treated as ______ costs.

p

To assist in first-stage allocations in ABC, employees designated as indirect factory workers should provide the ______.

percentage of employee time spent for each activity pool

The basis of benchmarking is comparing ______.

performance within the same industry

Activity-based costing treats organization-sustaining costs as expenses

period

Selling and administrative costs incurred are treated as ______.

period expenses

Activity-based costing uses more cost than traditional costing.

pool

The final step in implementing ABC is ______.

prepare management reports

Decision-making problems that could occur when using absorption costing include inappropriate ______ decisions, and decisions made to ______ products that are, in fact, profitable.

pricing; drop

The weighted-average method includes costs for ______.

prior and current periods

When a segment cannot cover its own costs, that segment should ______.

probably be dropped

Work is performed on products, and materials, labor, and overhead costs are added to products in a(n) ______ department.

processind

When allocating fixed manufacturing overhead cost to units under absorption costing, the total fixed overhead costs must be divided by the number of units

produced

A product's _________ is a function of sales and the direct and indirect costs that the product causes.

product margin

The profit from a product is also called the

product margin

In activity-based costing, ______ are different from those calculated using traditional costing.

product margins

On a traditional income statement, cost of goods sold reports the ____ costs attached to merchandise sold during the period, while selling and administrative expenses report all ____ costs that have been expensed as incurred.

product or manufacturing period

The most common management reports using ABC data are ______.

product profitability customer profitability

Activity-based costing only charges products for the cost of the capacity used because ______.

products are only assigned the costs of resources they actually use it results in a more stable unit product cost

A simpler form of the CVP graph is called the ______ graph.

profit

The single point where the total revenue line crosses the total expense line on the CVP graph indicates:

profit equals zero the break-even point

The vertical distance between the total revenue line and the total expense line on a CVP graph represents the total:

profit or loss

A journal entry that debits Raw Materials and credits Accounts Payable is recording the ______.

purchase of materials

Any purchased materials that will go into the finished product are first recorded in the __________ _____________inventory account.

raw material

The journal entry to record the purchase of materials debits ______.

raw materials

Company A has sales of $500,000, variable costs of $350,000, and fixed costs of $150,000. Company A has ______.

reached the break-even point a contribution margin equal to fixed costs

A journal entry that debits Manufacturing overhead and credits Property taxes payable records the ______.

recognition of accrued property taxes

Cost behavior ______.

refers to how a cost will change as activity level changes categorizes costs as fixed, mixed and variable

variable costs

remain constant per unit and vary in total.

Super-variable costing and variable costing will ______.

report the same net operating income when units produced equal units sold

U.S. GAAP and IFRS ______ publicly traded companies include segmented financial data prepared for external users that use the same methods used in internal segment reports.

require

GAAP and IFRS rules ______.

require that the same method be used for both internal and external segment reporting create problems in reconciling internal and external reports require segmented financial data be included in annual reports

The equation used to calculate the variable expense ratio using total values is total variable expenses divided by total ______.

sales

Individual customer minus individual customer equals customer margin.

sales cost

Customer-level activities include ______.

sales calls mailing catalogs

The relative proportions in which a company's products are sold is referred to as .

sales mix

The term used for the relative proportion in which a company's products are sold is ______.

sales mix

When preparing a multi-product break-even analysis, the assumption is ordinarily made that the ______ will not change.

sales mix

To convert the margin of safety in dollars to the margin of safety in terms of the number of units sold, divide the margin of safety in dollars by the ______.

sales price per unit

Contribution margin is ______.

sales revenue minus variable costs

Activity rates are used to apply overhead costs to products and customers in the -stage allocation.

second

Activity-based costing uses activity rates to apply overhead costs to products in ______ stage allocation.

second

From a decision making point of view, margin is most useful for major capacity decisions and margin is most useful for short-term sales volume decisions.

segment contribution

Assigning common fixed costs to segments impacts ______.

segment margin only

The contribution margin income statement allows users to easily judge the impact of a change in ______ on profit.

selling price volume cost

Contribution Approach to Income Statement

separates costs into their fixed and variable components can assist with management decision making

Organization-sustaining activities include ______.

setting up a computer network preparing annual reports heating a factory

Activities that could be combined into one batch-level activity are the number of ______.

shipped orders customer orders received

Costs that can be easily traced to individual products include ______.

shipping costs sales commission warranty repair costs

Costs that can be traced directly to a segment ______.

should not be allocated to other segments

Within the relevant range, fixed costs ______.

should not be expressed on a per unit basis when making decisions generally include rent and supervisor salaries remain constant in total regardless of changes in activity

The schedule of cost of goods ______ summarizes costs that remain in Finished goods inventory and that have been transferred to Cost of goods sold.

sold

The schedule of cost of goods _______ summarizes costs that remain in Finished goods inventory and that have been transferred to Cost of goods sold. (

sold

Cost behavior patterns such as salaried employees are often called ____ - ____ costs.

step variable

Service department costs are allocated to both operating departments and some, but not all, service departments when using the ______ method.

step-down

Customer service employees are a ______ cost.

step-fixed

To reconcile ABC product margin to net income ______.

subtract overhead costs not assigned to products

Cost of goods manufactured is the ______.

sum of all jobs transferred from Work in process to Finished goods

Costs that have already been incurred and can not be changed by decisions made in the current period or in future periods are called costs.

sunk

All direct labor and manufacturing overhead is treated as fixed under ______ costing.

super-variable

Examples of operating departments include ______.

surgery department at a hospital production department at a manufacturer geography department at a university

A reason that activity-based costing is not often used for external reporting is ______.

the ABC system may not conform to GAAP

Marginal cost is ______.

the cost incurred to produce one more unit of a product

The value of work in process is equal to ______.

the cost of all unfinished jobs

Differential cost is ______.

the difference in cost between two alternatives also known as incremental cost

The rise-over-run formula for the slope of a straight line is the basis of __.

the high-low method

Cost of Goods Manufactured

the manufacturing costs associated with the goods that were finished during the period

Pete's Putters sells each putter for $125. The variable cost is $60 per putter and fixed costs total $400,000. Based on this information ______.

the sale of 12,000 putters results in net operating income of $380,000 the contribution margin per putter is $65.

The profit graph allows users to easily identify ______.

the sales volume required to reach the break-even point the profit at any given sales volume

Selling and administrative expenses are ______ on both the absorption and variable costing income statements.

the same amount

When there is no change in inventory, net operating income will be ______.

the same under both absorption costing and variable costing

When calculating the profit impact of discontinuing a segment, consider _____.

the segment's traceable fixed costs the segment's contribution margin

When comparing the FIFO method of computing equivalent units to the weighted-average method ______.

the weighted-average method blends together work and costs from prior periods with the current period whereas FIFO separates the two periods

Absorption costing and variable costing net operating income will be equal when ______.

there is no beginning and no ending inventory the number of units produced equals the number of units sold

An example of a duration driver is the ______.

time spent preparing invoices

Differences in net operating income between absorption costing and variable costing is due to the ______.

timing of when fixed manufacturing overhead is expensed

The break-even point can be affected by ______.

total fixed costs contribution margin per unit sales mix

The break-even point is reached when the contribution margin is equal to ______.

total fixed expenses

In the equation Y= a + bX, Y is the ______.

total mixed cost

Only costs that would disappear over time if a segment disappeared should be treated as fixed costs.

traceable

Bart's Inc. operates retail stores in various cities. Segmented income statements are prepared for each store and for each product line in each store. The property tax for the store is a(n) fixed cost for the store, and a(n) fixed cost for each product line sold in the store.

traceable common

Arbot Co. manufactures appliances at three manufacturing facilities in the United States. Each location has a plant manager who oversees the manufacturing process for that location. Segmented income statements are prepared for each plant and for each product manufactured in the plant. The salary of each plant manager is a ______ for the individual product lines made in the plant.

traceable fixed cost to the plant and a common fixed cost

When preparing a segment margin income statement ______.

traceable fixed expenses are deducted from contribution margin cost of goods sold consists of only variable manufacturing costs

The segment margin is obtained by deducting the ______ fixed costs of a segment from the segment's ______.

traceable; contribution margin

All manufacturing costs are assigned to products in costing.

traditional

An income statement focusing on product and period costs has been prepared using a(n) ____ format, while a(n) ____ format income statement makes a distinction between fixed and variable costs.

traditional or GAAP contribution

Simple counts of the number of times an activity occurs are drivers.

transaction

When unit costs are transferred from Department A to Department B, Department B will treat the costs as ______.

transferred in

The equivalent units completed are valued the same as units ______ for purposes of determining the cost per unit.

transferred out

Treating direct labor costs as variable can lead to bad decisions.

true

True or false: Activity-based costing can be used for process improvement.

true

True or false: In an automated environment, using traditional allocation bases based on volume may distort unit product costs.

true

True or false: Some manufacturing costs may be excluded from product cost when using ABC.

true

When only a portion of the units involved in a job are sold, the ______.

unit product cost is used to calculate the amount transferred from finished goods to cost of goods sold

When preparing a CVP graph, the horizontal axis represents ______.

unit volume

Work in process

units of product that are only partially complete and will require further work before they are ready for sale to the customer

Finished goods

units of product that have been completed but not yet sold to customers

When using absorption costing, fixed manufacturing overhead cost per unit = Total fixed manufacturing overhead divided by ______.

units produced

Absorption costing is ______.

used by most companies for both internal and external reports required by GAAP and IFRS

An activity-based costing system ______.

uses numerous overhead cost pools may exclude some manufacturing costs from product costs

The high-low method ______.

uses only two data points is easy to apply is based on periods where the activity tends to be unusual

Using the high-low method, the fixed cost is calculated __.

using either the high or low level of activity after the variable cost per unit is calculated

A cost that changes in direct proportion to changes in the activity level is a ______ cost.

variable

Advocates of costing believe the matching principle dictates that fixed costs should be recognized as an expense in the current period.

variable

The number of units produced does not affect net operating income when using costing.

variable

The slope of the regression line represents the ______ cost per unit of activity.

variable

When using the high-low method, the slope of the line equals the ______ cost per unit of activity.

variable

Variable expenses ÷ Sales is the calculation for the ______ ______

variable expense

Profit = (selling price per unit × quantity sold) - (______ expense per unit × quantity sold) - ______ expenses

variable fixed

The term "cost structure" refers to the relative proportion of ______ ______ in an organization.

variable fixed

he term "cost structure" refers to the relative proportion of _____ and ______ costs in an organization.

variable fixed

The equation that should be used in setting a target selling price for a special order bulk sale that does not affect a company's normal sales is: selling price per unit = ______.

variable cost per unit + desired profit per unit

When a company only produces a single product, the total variable cost can be calculated with the equation ______.

variable cost per unit multiplied by quantity of units sold

CM ratio is equal to 1 - ______ ______ ratio.

variable expense

Within the relevant range of activity, variable costs ______.

vary in total remain constant per unit

Traditional cost systems allocate all manufacturing costs using ______ allocation base(s).

volume-related

Prior costs are blended with current period costs when using the ______ method(s).

weighted-average

A processing department is an organization unit ______.

where work is performed on a product, and materials, labor and overhead are added

Costs transferred in from Department A to Department B ______.

will always be 100% complete with respect to Department A

If there are no beginning or ending inventories, then the FIFO and weighted-average methods will produce identical results because unit costs ______.

will be based on just the current period's costs

Costs of partially completed units are accounted for in ______.

work in process

Recording the transfer of partially completed products from one processing department to another, requires a journal entry that affects the ______ account of both processing departments.

work in process

When a job is completed, the job costs are transferred OUT OF ______.

work in process

A non-profit organization is trying to determine the fixed and variable costs of providing meals. During the first six months of the year, the following meals were served and the following costs were incurred. Month Meals Costs January 1,500 $5,200 February 1,700 $5,700 March 1,200 $4,100 April 1,100 $4,200 May 1,150 $4,250 June 1,650 $5,550

y = $1,450 + $2.50x. The high-low method uses the highest and lowest level of activity, not costs. February (1,700 meals and $5,700) and April (1,100 meals and $4,200) are the high and low activity months.

The break-even point is the level of sales at which the profit equals .

zero

To convert the formula for sales dollars required to attain a target profit to sales dollars required to break-even, set the target profit to $ .

zero