Builder's Guide to Accounting 10

Question 1

1. About how much of your DIRECT COSTS will be for MATERIALS?

Answer 1

50%, therefore, the most professional builders pay a GREAT DEAL of attention to MATERIALS HANDLING AND CONTROL.

Question 2

2. It is estimated that ________% of LABOR COSTS are spent just to move materials form the curb to where they are installed.

Answer 2

8% to 10%

Question 3

3. p 141. BUDGETS serve as a measure against which you operate. Again: BUDGETS SERVE AS A MEASURE AGAINST WHICH YOU OPERATE. Without budgets, your company does NOT have:

Answer 3

a FINANCIAL ROADMAP

Question 4

4. What are SELLING EXPENSES and how do they behave?

Answer 4

COMMISSIONS, ADVERTISING, etc.

They usually VARY with sales.

Question 5

5. What is FIXED OVERHEAD and how does it behave?

Answer 5

RENT, PHONE, etc.

They are fairly uniform whether sales go up or down.

Question 6

6. What is the difference between DIRECT COSTS and OVERHEAD EXPENSES?

Answer 6

DIRECT COSTS are identified with a project.

VARIABLE OVERHEAD EXPENSES are not associated with a single job, though they vary with sales volume.

Question 7

7. What is the difference between LABOR and UNION WELFARE EXPENSE?

Answer 7

LABOR is a DIRECT COST.
UNION WELFARE EXPENSE is a VARIABLE EXPENSE.
The labor that goes into a project is a necessary part of the PRODUCTION PROCESS, it GENERATES INCOME.
The UNION WELFARE paid does not produce sales, but it is a necessary expense OF DOING BUSINESS.

Question 8

8. Why is UNION WELFARE paid a VARIABLE EXPENSE?

Answer 8

Because the expense varies according to the cost of producing that INCOME with LABOR.

Question 9

9. You should define EXPENSES as VARIABLE or FIXED according to:

Answer 9

how much that expense is influenced by SALES VOLUME.

Question 10

10. VARIABLE EXPENSES are stable/unstable?

Answer 10

While NOT a part of the PRODUCTION PROCESS, VARIABLE EXPENSES VARY BROADLY WITH SALES.

Question 11

11. FIXED EXPENSES are stable/unstable?

Answer 11

They are not related to SALES and DIRECT COSTS, and DON’T VARY with changes in VOLUME and GROSS PROFIT.

Question 12

12. VARIABLE EXPENSES are controllable as far as:

Answer 12

SALES and DIRECT COSTS are controllable.

Question 13

13. How can an EXPENSE be both variable and fixed?

Answer 13

Payroll taxes on direct labor are VARIABLE.

Payroll taxes on Office Salaries are FIXED.