Section 4: Decision Making

Question 1

Total Costs Formula

Answer 1

TC = Fixed + VC(x)

Question 2

Manufactoring Costs

Answer 2

Product Costs

1. Direct Materials
2. Direct Labor
3. Manufactoring Overhead

Question 3

Prime Costs

Answer 3

DM + DL

Question 4

Conversion costs

Answer 4

DL + MFG O/H

Question 5

Non-Manufacturing Costs

Answer 5

Period Costs
SG&A, Marketing, Freight, Abnormal Spoilage,

Expense in the Period

Question 6

Actual Cost System

Answer 6

DM, DL, MFG O/H are all actual costs

Question 7

Standard Costs System

Answer 7

All costs based on standards

Question 8

Normal Cost System

Answer 8

DM & DL based on actual, MFG O/H based on standards

Question 9

Predetermined O/H Rate

Answer 9

Est. O/H costs / Est. DL $/hr = Predet. O/H rate * Actual Production = Applied O/H

Question 10

Direct Materials Used

Answer 10

Beg. DM Inventory
+ DM purchased
-End DM Inventory
= DM used

Question 11

Cost of Goods Manufactured

Answer 11

DM Used
\+DL incurred
\+O/H applied
=Costs added to production
\+Beg WIP
-End WIP
=COGM

Question 12

Cost of Goods Sold

Answer 12

Beg. Finished Inventory
\+COGM
=COGAS
-End Finished Inv.
=Cost of Sales

Question 13

Break Even in Units

Answer 13

(FC +Profit(Loss))

/ (Selling Price - VC(CM))

Question 14

Break Even in Sales Dollars

Answer 14

Fixed Costs + Profit(Loss)

/ CM Ratio (CM/Sales Price)

Question 15

Margin of Safety

Answer 15

Total Sales - Break Even Sales