ways to classify costs

Behavior (fixed/variable), financial accounting (product/period), traceability (direct/indirect)

sheet steel in a file cabinet made by the company

manufacturing equipment depreciation

which one is a direct cost

Raw materials used in production

which would be considered a period rather than a product cost in a manufacturing company

property taxes on corporate headquarters

manufacturing equipment depreciation

what is a relevant range

The relevant range is the range of activity over which fixed costs remain constant and variable costs per unit remain unchanged.

The relevant range is the period during which a company operates.

The relevant range refers to the maximum output capacity of a factory.

The relevant range is the total cost of production.

behavior of total fixed costs within the relevant range

Total fixed costs are constant within the relevant range.

Total fixed costs are zero within the relevant range.

Total fixed costs vary with production levels.

Total fixed costs increase within the relevant range.

behavior of total variable cost within the relevant range

Total variable cost increases with production volume within the relevant range.

Total variable cost remains constant regardless of production volume.

Total variable cost decreases as production volume increases.

Total variable cost is fixed within the relevant range.

behavior of per unit fixed cost within the relevant range

Per unit fixed cost decreases as production increases within the relevant range.

Per unit fixed cost increases as production increases within the relevant range.

Per unit fixed cost remains constant regardless of production levels.

Per unit fixed cost is irrelevant to production levels.

behavior of per unit variable cost within the relevant range

Per unit variable cost is constant within the relevant range.

Per unit variable cost is variable within the relevant range.

Per unit variable cost decreases within the relevant range.

Per unit variable cost increases within the relevant range.

what is the equation of mixed cost

Total Mixed Cost = Fixed Cost + (Variable Cost per Unit × Number of Units)

Total Mixed Cost = Fixed Cost + Variable Cost per Unit + Total Units

Total Mixed Cost = Fixed Cost - (Variable Cost per Unit ÷ Number of Units)

Total Mixed Cost = Variable Cost + (Fixed Cost × Number of Units)

define high-low method

A cost estimation method that uses the highest and lowest activity levels to determine fixed and variable costs.

A method for calculating average costs over time.

A technique for analyzing market trends in pricing.

A strategy for maximizing profit margins based on sales data.

cost classification for decision making

differential cost, opportunity cost, sunk cost

Fixed Variable Costs: Costs that are both fixed and variable depending on production.

Controllable Costs: Costs that can be influenced by management decisions.

Marginal Costs: The cost of producing one additional unit.

definition of differential cost and revenue

Differential cost is the difference in costs between two alternatives, while differential revenue is the difference in revenues between those alternatives.

Differential cost is the total cost of production.

Differential revenue refers to the total sales revenue.

Differential cost is the average cost per unit sold.

define opportunity cost

the potential benefit that is given up when one alternative is selected over another

Opportunity cost is the total cost of all alternatives considered.

Opportunity cost refers to the monetary cost of a decision.

Opportunity cost is the time spent making a decision.

A sunk cost is a cost that has already been incurred and cannot be recovered.

A sunk cost is a future expense that can be avoided.

A sunk cost is a cost that can be recovered later.

A sunk cost is an investment that yields ongoing returns.

cost flow in a manufacturing firm

DL+DM+MOH (Product Cost) -> Work-in-Progress -> Finished Goods -> Cost of Goods Sold.

Raw Materials -> Finished Goods -> Work-in-Progress -> Cost of Goods Sold

Work-in-Progress -> Raw Materials -> Cost of Goods Sold -> Finished Goods

Finished Goods -> Work-in-Progress -> Raw Materials -> Cost of Goods Sold

Sales - COGS - Period Cost (S&A)

Net Income is the same as gross profit.

Net Income can be calculated as total revenue minus total expenses.

Gross margin is the profit made after all operating expenses are deducted.

Gross margin is the total expenses incurred by a business.

Gross margin is the total revenue generated by a company.

basic equation for inventory accounts

Begginning Balance + Additions = Ending Balance + Withdrawals

Ending Inventory = Purchases - COGS

Ending Inventory = Beginning Inventory - Purchases + COGS

Ending Inventory = Beginning Inventory + COGS - Purchases

Use the basic accounting equation to find COGM

Beginning WIP + DL + DM+ MOH = Ending WIP + COGM

COGM = Total Manufacturing Costs + Ending WIP - Beginning WIP

COGM = Beginning WIP - Total Manufacturing Costs + Ending WIP

COGM = Ending WIP + Total Manufacturing Costs + Beginning WIP

use the basic accounting equation to find COGS

Beginning FG + COGM = Ending FG + COGS

COGS = Purchases + Ending Inventory - Beginning Inventory

COGS = Ending Inventory - Purchases + Beginning Inventory

COGS = Beginning Inventory - Purchases + Ending Inventory

Cost-Volume-Profit equation:

Profit = (Sales Price per Unit - Fixed Costs) * Quantity - Variable Cost per Unit

Profit = (Sales Price per Unit * Quantity) - Variable Cost per Unit - Fixed Costs

Profit = Sales Price per Unit + Variable Cost per Unit - Fixed Costs

difference between traditional statement and contribution format

The traditional statement focuses on functional costs, whereas the contribution format emphasizes variable and fixed costs.

The traditional statement emphasizes variable costs, while the contribution format focuses on functional costs.

Both formats present costs in the same way, with no significant differences.

The contribution format is used exclusively for non-profit organizations.

contribution margin =

Contribution margin = Total Sales Revenue - Total Variable Costs

Contribution margin = Total Fixed Costs - Total Sales Revenue

Contribution margin = Total Sales Revenue + Total Variable Costs

Contribution margin = Total Revenue - Total Costs

CM Ratio = (Sales Revenue - Variable Costs) / Sales Revenue

CM Ratio = (Sales Revenue + Variable Costs) / Sales Revenue

CM Ratio = (Sales Revenue - Fixed Costs) / Sales Revenue

CM Ratio = (Variable Costs - Sales Revenue) / Variable Costs

the meaning of a 40 % CM Ratio

each dollar in sales results in a total contribution margin increase of 40 cents

40% of sales revenue is profit.

40% indicates a loss in sales revenue.

40% of fixed costs are covered by sales revenue.

Breakeven Sales (BES) =

Breakeven Sales = Fixed Costs / CM Ratio

Breakeven Sales = Fixed Costs + Variable Costs

Breakeven Sales = Variable Costs / (Sales Price - Fixed Costs)

Breakeven Sales = Total Revenue - Total Costs

Breakeven Quantity (BEQ) =

BEQ = Fixed Costs / CM per unit

BEQ = Selling Price - Variable Cost

BEQ = Fixed Costs + Variable Cost

BEQ = Fixed Costs * (Selling Price + Variable Cost)

what is margin of safety in management accounting

The margin of safety is the difference between actual sales and break-even sales.

The margin of safety is the total profit made by a company.

The margin of safety is the amount of debt a company can take on.

The margin of safety is the percentage of sales that exceed fixed costs.

margin of safety in percentage of sales

Margin of Safety (%) =Margin of Safety/ Actual Sales * 100

Margin of Safety (%) = (Actual Sales + Break-even Sales) / Actual Sales * 100

Margin of Safety (%) = (Break-even Sales - Actual Sales) / Actual Sales * 100

Margin of Safety (%) = (Actual Sales - Break-even Sales) / Break-even Sales * 100

margin of safety in terms of units sold

Margin of safety in units = margin of safety/price per unit

Margin of Safety = Break-even Sales - Actual Sales

Margin of Safety = Actual Sales + Break-even Sales

Margin of Safety = Actual Sales / Break-even Sales

define operating leverage

how sensitive net operating income is to percentage changes in sales

Operating leverage is the ratio of total assets to total liabilities.

Operating leverage measures the impact of interest rates on a company's profitability.

Operating leverage refers to the ability to reduce variable costs.

how to calculate operating leverage

Degree of operating Leverage = % contribution margin/ Net Operating Income

Operating Leverage = Total Revenue / Total Expenses

Operating Leverage = % Change in Net Income / % Change in Assets

Operating Leverage = Fixed Costs / Variable Costs

what does an operating of 5 means

if Racing revenue increases 10%, net operating income would increase 50%

An operating of 5 indicates poor performance or quality.

An operating of 5 signifies exceptional performance or quality.

An operating of 5 represents a failing score or rating.

high fixed cost structure leads to

high sensitivity of operating income to change in sales

Decreased risk of bankruptcy and improved cash flow.

Enhanced flexibility and reduced financial obligations.

Lower operational costs and increased market share.

low fixed costs lead to

low sensitivity of operating income to change in sales

Higher variable costs and increased financial risk.

Reduced operational efficiency and higher fixed expenses.

Increased complexity and greater financial obligations.

Sales mix is the ratio of different products or services sold by a business.

Sales mix is the average price of all products sold by a business.

Sales mix is the total number of products a business offers.

Sales mix refers to the total revenue generated by a single product.

key assumptions of CVP analysis

Key assumptions of CVP analysis include fixed and variable cost classification, linear cost and revenue behavior, all units produced being sold, constant sales price per unit, and a constant sales mix.

All units produced are not necessarily sold in CVP analysis.

Sales prices fluctuate constantly in CVP analysis.

All costs are variable in CVP analysis.

basic purposes of costing systems

to assign direct costs and moh to products and provide a mechanism for computing unit cost

To manage customer relationships

which type of firm use job order costing?

Firms that produce unique or custom products.

Firms that mass-produce identical products.

Firms that provide consulting services.

Firms that operate on a subscription model.

which types of firm use process costing?

Manufacturing firms, food processing firms, chemical companies.

Comm 112

Quiz

•

Other

•

University

•

Practice Problem

•

Hard

Nguyen Bach

FREE Resource

53 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

is accouting an art or a science

art

science

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

how old is accounting

3000 years old

1500 years old

around 500 years old

100 years old

3.

MULTIPLE SELECT QUESTION

45 sec • 1 pt

management accounting system consists of what?

planning

directing and motivating

controlling

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

planning consists of

Analyzing data, creating reports, and conducting surveys.

identify alternatives, select the best alternative that further the org's objectives, develop budgets to guide progress toward the alternative

Choosing a location, hiring staff, and marketing products.

Implementing strategies, measuring performance, and reviewing policies.

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

directing and motivating are activities:

Motivating is more important than directing in leadership.

Leadership is solely about making decisions.

employee work assignments, routine problem solving, conflict resolution, effective communications

Directing and motivating are irrelevant to leadership.

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

decentralization is:

Decentralization is the process of centralizing decision-making power.

Decentralization is the delegation of decision-making authority throughout an organization

Decentralization is the concentration of power in a single authority.

Decentralization refers to the complete absence of any authority.

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

what is lean production

Lean production is a manufacturing approach that emphasizes efficiency and waste reduction by creating products after orders.

Lean production is a strategy for expanding workforce size.

Lean production is a method for increasing product variety.

Lean production focuses solely on maximizing profits.

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Comm 112

53 questions

is accouting an art or a science

how old is accounting

management accounting system consists of what?

planning consists of

directing and motivating are activities:

decentralization is:

what is lean production

ways to classify costs

which is not a MOH

which one is a direct cost

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