CH 3 AND 5 Managerial AC SmartBooks

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

Least squares

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

linear cost behavior

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

margin of safety

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

only direct

The difference between overhead applied to work in process and actual overhead is

over/underapplied overhead

The variable expense ratio is the ratio of variable expense to

sales

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

sales, variable

When calculating the cost of direct materials on the schedule of cost of goods manufactured, the cost of indirect materials is:

subtracted from raw materials used in production

schedule of cost of goods sold

summarizes the portions of those costs that remain in ending Finished Goods inventory and that are transferred out of Finished Goods into Cost of Goods Sold

Manufacturing overhead is applied with a debit to

work in process

units of product only partially completed contained in

work in process inventory

The Manufacturing Overhead account is debited when

actual overhead costs are incurred

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

administrative salaries

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.

What side of the Manufacturing overhead account is applied manufacturing overhead entered on?

always credit side

What side of the Manufacturing overhead account is actual manufacturing overhead entered on?

always debit side

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

CVP analysis allows companies to easily identify the change in profit due to changes in:

costs. volume. selling price.

Manufacturing overhead costs include ______

- the factory supervisor's salary - factory insurance

schedule of cost of goods manufactured

A schedule showing the direct materials, direct labor, and manufacturing overhead costs incurred during a period and the portion of those costs that are assigned to Work in Process and Finished Goods.

To calculate the degree of operating leverage

Contribution Margin / Operating Income

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

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

FALSE

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

FALSE

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

Raw Materials

Overhead is underapplied if ______.

actual overhead is more than applied overhead

Manufacturing overhead applied to production is always recorded on the ______ side of the manufacturing overhead account and the ____ side is always used to record the actual manufacturing costs incurred.

credit, debit

Actual manufacturing overhead is ______ to the Manufacturing overhead account.

debited

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

direct labor

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

Labor costs charged to Manufacturing Overhead represent ______.

indirect labor costs

Gross margin minus selling and administrative expenses equals ______.

net operating income

To prepare a CVP graph, lines must be drawn representing total revenue, ______.

total expense, total fixed expenses

The contribution margin equals sales minus all ______ expenses.

variable

The term "cost structure" refers to the relative proportion of

variable and fixed expenses

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

zero