McGraw Hill questions (201-300)

Product costs _____.

"attach" to units of product as they are produced or purchased for resale , are also called inventoriable costs

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 must be _____.

$1,520,000

Raw materials inventory was $5,000 at the beginning of the year and $12,000 at the end of the year. During the year, a total of $27,000 in raw materials were purchased, including $4,000 of indirect materials that were put into manufacturing overhead during the period. Calculate the cost of direct materials used during the period.

$16,000

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

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 _____.

$695,000

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

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

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $ _____.

2

Spice sells paprika for $9.00 per bottle. Variable cost is $2.43 per bottle and Spice's annual fixed costs are $825,000. The variable expense ratio for paprika is _____.

27%

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 _____.

29%

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

The accounts involved in closing underapplied or overapplied overhead using the simpler method are _____.

Cost of goods sold and Manufacturing overhead

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

Depreciation expense and credits Accumulated depreciation

Simple CVP analysis can be relied on for changes in volume outside the relevant range.

False

The journal entry to record a completed job debits _____.

Finished goods

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

Linear

The journal entry to record accrued property taxes for a factory building debits _____.

Manufacturing overhead and credits Property taxes payable

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

R²

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

True

The transfer of costs from one inventory account to the next parallels the physical transfer of goods from one inventory to the next.

True

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

Work in Process, Raw Materials, Finished Goods

The journal entry to record a completed job credits _____.

Work in process

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

The journal entry to record issuing both direct and indirect materials into production debits _____.

Work in process and Manufacturing overhead

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

accounts payable

To analyze mixed costs with the high-low method, begin by identifying the periods with the lowest and highest level of _____.

activity

To analyze mixed costs with the high-low method, begin by identifying the period with the lowest level of _____.

activity and its related cost

The Manufacturing Overhead account is debited when _____.

actual overhead costs are incurred

The contribution approach to constructing income statements _____.

aids in decision making, distinguishes between fixed and variable costs

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

an expense account and credits Cash or a liability

The type and quantity of each type of direct material needed to complete a unit of product is listed on the _____.

bill of materials

Solving for the sales level needed to achieve a profit of zero is the same process as solving for the sales level needed to _____.

break-even

The sales volume level at which profits equal zero is the _____.

break-even point

Step-variable costs _____.

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

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

change in cost ÷ change in units (activity)

The degree of operating leverage = _____.

contribution margin ÷ net operating income

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

contribution margin ÷ sales

Sales revenue minus variable expenses equals _____ _____.

contribution, margin

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

cost of goods manufactured

Premium brands such as Ritz-Carlton and Nordstrom tend to rely on a(n) _____ strategy.

customer intimacy

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

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 spend $60,000 on advertising and reduce the selling price by $2 per box. Management believes this plan 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 _____.

decrease by $16,000

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 expects the improved materials will increase sales from 1,200 to 1,500 pillows per month. The impact of this change on total contribution margin would be a(n) _____ (increase/decrease) of $ _____.

decrease, 3000

The adjustment for overapplied overhead _____ net income.

decreases cost of goods sold and increases

Raw materials whose cost can be easily and conveniently traced to the finished product are _____ materials.

direct

Prime costs include _____.

direct materials, direct labor

Selling and administrative costs are _____ costs.

direct or indirect

The traditional income statement _____.

does not distinguish between fixed and variable costs, adds all selling and administrative expenses together, is useful for external reporting purposes

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

fixed and variable

To calculate the break-even point (in unit sales and dollar sales), managers can use the equation method or the _____ method.

formula

Simple CVP analysis is _____.

generally not valid outside the relevant range

Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the

income statement

Selling and administrative costs first appear on the _____.

income statement

The adjustment for underapplied overhead _____ net income.

increases cost of goods sold and decreases

The difference in revenues between two alternatives is called _____.

incremental revenue

Salaries of factory supervisors and factory maintenance personnel are examples of _____ labor costs.

indirect

The statistic R² _____.

is a measure of goodness of fit

The high-low method _____.

is easy to apply, uses only two data points

The degree of operating leverage _____.

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

The lean production management approach _____.

is often called just-in-time production, tends to result in fewer defects, organizes resources around the flow of business processes

Target profit analysis _____.

is similar to break-even analysis, estimates sales needed to earn a given profit

The document that records the materials, labor, and manufacturing overhead costs charged to a job is the _____.

job cost sheet

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

least-square regression

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

The sum of all amounts transferred from work in process to the finished goods accounts represents the cost of good _____.

manufactured

The margin of safety percentage is _____.

margin of safety in dollars ÷ 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 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

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

overapplied or underapplied overhead

The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find _____.

overhead applied to the job

The Manufacturing Overhead account is credited when _____.

overhead is applied to Work in Process

The primary role of managerial accountants is to

partner with co-workers within the organization to improve performance

Selling and administrative costs incurred are treated as _____.

period expenses

The management activity of _____ includes specifying how to achieve established goals.

planning

Three activities vital to the role of managerial accounting are _____.

planning, controlling and decision making

The formula for applying overhead to a specific job is: _____ amount of allocation base incurred by job.

predetermined overhead rate ×

The sum of direct materials and direct labor is called _____ cost.

prime

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

profit or loss

The contribution margin as a percentage of sales is referred to as the contribution margin or CM _____.

ratio

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

raw materials

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

relevant, range

The variable expense ratio is the ratio of variable expense to _____.

sales

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

sales mix

The break-even point can be affected by _____.

sales mix, total fixed costs, contribution margin per unit

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

Selling costs include _____.

sales salaries, sales commissions, advertising

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

sales, mix

The break-even point calculation is affected by _____.

selling price per unit, sales mix, costs per unit

The schedule of cost of goods _____ 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.

sold

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

the break-even point, profit equals zero

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

the high-low method

The profit graph allows users to easily identify _____.

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

The document that provides an hour-by-hour summary of the employee's activities throughout the day is called a _____.

time ticket

The unit product cost is the same as the _____.

total job cost divided by number of units, average product cost per unit

The term often used to describe how an organization's functional departments interact with one another to form business processes is _____ _____.

value, chain

The contribution margin equals sales minus all _____ expenses.

variable

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

variable

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

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