Exam 3 (Ch 20, 21, 22)

Question 1

FORMULA: Conversion Cost

Answer 1

= DL + MOH

Question 2

A short-term financial plan used to coordinate the activities needed to achieve the short-term goals of the company

Answer 2

operational budget

Question 3

Method used to determine the average cost of equivalent units of production by combining beginning inventory costs with current period costs

Answer 3

Weighted-Average Method

Question 4

A report prepared by a processing department for equivalent units of production, production costs, and the assignment of those costs to the completed and in process units.

Answer 4

Production Cost Report

Question 5

Used to measure the amount of materials added to or work done on partially completed units and expressed in terms of fully completed units.

Answer 5

Equivalent Units of Production (EUP)

Question 6

An accounting system that accumulates costs by process;

Used by companies that manufacture identical units through a series of uniform production steps or processes.

Answer 6

Process Costing System

Question 7

The cost to convert raw materials into finished goods.

Answer 7

Conversion Costs

Question 8

A method used to separate mixed costs into their variable and fixed components, using the highest and lowest activity level.

Answer 8

High-Low method

Question 9

Costs that were incurred in a previous process and brought into a later process as part of the product’s cost.

Answer 9

Transferred-in Cost

Question 10

FORMULA: (4 variations of the equation)

Contribution Margin Ratio

Answer 10

= CM / T.R. = (TR - TVC) / TR = (P - V) / P = CM per unit / P

Question 11

FORMULA: (both for units and dollars)

Sales req’d to earn desired profit

Answer 11

(Units) = (TFC + desired profit) / CM per unit

OR

(Dollars) = (TFC + desired profit) / CMR

Question 12

FORMULA:

Variable cost per unit

Answer 12

= Chg in tot. cost / Chg in volume of activity

= (Hi cost - Lo cost) / (Highest volume - Lowest volume)

Question 13

An accounting system that accumulates costs by job;

Used by companies that manufacture unique products or provide specialized services.

Answer 13

Job Order Costing System

Question 14

A planning tool that expresses the relationships among costs, volume and prices and their effects on profits and losses.

Answer 14

Cost-Volume-Profit (CVP) Analysis

Question 15

FORMULA:

Contribution Margin per unit

Answer 15

= Price - Volume

Question 16

A budget prepared for only one level of sales volume.

Answer 16

static budget

Question 17

FORMULA:

Margin of safety in units

Answer 17

= expected sales - breakeven sales

Question 18

A cost that increases or decreases in total in direct proportion to increases or decreases in the volume of activity.

Answer 18

Variable Cost

Question 19

FORMULA:

Margin of safety ratio

Answer 19

= margin of safety in units / expected sales in units

Question 20

FORMULA:

Breakeven (units)

Answer 20

= TFC / CM per unit

Question 21

A financial plan that managers use to coordinate a business’s activities.

Answer 21

Budget

Question 22

Contribution Margin Ratio

Answer 22

The ratio of contribution margin to net sales revenue.

Question 23

FORMULA:

Cost per EUP for transferred in

Answer 23

= Tot transferred in costs / Equivalent units of production for transferred in

Question 24

The sales level at which operating income is zero;

Total revenue = Total cost

Answer 24

Breakeven

Question 25

FORMULA:

Margin of safety in dollars

Answer 25

= margin of safety in units x sales price per unit

Question 26

FORMULA:

Total fixed cost

Answer 26

= Total mixed cost - Total variable cost

= Total mixed cost - (variable cost per unit x # of units)

Question 27

The budget that details how the business expects to go from the beginning cash balance to the desired ending cash balance.

Answer 27

cash budget

Question 28

The amount that contributes to covering the fixed costs and then to providing operating income.

Answer 28

Contribution margin

Question 29

FORMULA:

Cost per EUP for direct materials

Answer 29

= Tot. DM Cost / Equivalent units of production for DM

Question 30

A cost that remains the same in total, regardless of changes over wide ranges of volume of activity.

Answer 30

Fixed Cost

Question 31

A long-term financial plan used to coordinate the activities needed to achieve the long0term goals of the company.

Answer 31

strategic budget

Question 32

The budget that includes the cash budget and the budgeted financial statements

Answer 32

financial budget

Question 33

The range of volume where total fixed costs and variable cost per unit remain constant.

Answer 33

Relevant range

Question 34

The set of budgeted financial statements and supporting schedules for the entire organization; includes operating, capital expenditures and financial budgets.

Answer 34

Master budget

Question 35

The budget that presents the company’s plan for purchasing property, plan, equipment, and other long-term assets.

Answer 35

capital expenditures budget

Question 36

FORMULA:

Cost per EUP for conversion cost

Answer 36

= Tot conversion cost / Equivalent units of production for conversion costs

Question 37

FORMULA:

Breakeven (dollars)

Answer 37

= TFC / CMR

Question 38

A budget prepared for various levels of sales volume.

Answer 38

flexible budget

Question 39

The set of budgets that projects sales revenue, cost of goods sold, and selling and administrative expenses, all of which feed into the cash budget and then the budgeted financial statements.

Answer 39

operating budget

Question 40

The excess of expected sales over breakeven sales;

The amount sales can decrease before the company incurs an operating loss.

Answer 40

Margin of safety

Question 41

The income statement that groups cost by behavior - variable or fixed - and highlights the contribution margin.

Answer 41

Contribution Margin Income Statement