ViCtory Is NeAr

Question 1

WHAT are your Product Costs?

Answer 1

ALL manufacturing costs (direct materials, direct labor, and manufacturing overhead) must be treated as product costs

i.e. Product costs (also called “inventoriable” costs) are capitalized as part of finished goods inventory, and eventually become a component of cost of goods sold

Question 2

WHAT account is increased with the issuance of indirect materials to a production department under a traditional Job-order cost system?

Answer 2

This increases the Factory Overhead Account

i.e. As overhead is incurred, factory overhead control is debited and accounts payable, supplies, etc., are credited

WHEN overhead is applied, work-in-process is debited and factory overhead applied is credited

Question 3

HOW would you calculate your contribution margin ratio?

Answer 3

You would use the difference between your cost percentage of sales and subtract that from one

e.g. If variable costs are 25% of sales, your contribution margin ratio would be: (1 - .25)

Question 4

WHAT is the best method of setting standard costs?

Answer 4

By using Activity Analysis

WHY? - Because it helps to identify, describe, and evaluate the activities and resources needed to produce a particular output

Question 5

Fill in the Blank.

Breakeven analysis assumes over the relevant range that __________.

Answer 5

Total costs are linear

i.e. Breakeven analysis assumes that the cost and revenue factors used in the formula are linear and do not fluctuate with volume

WHY? - Because fixed costs are deemed to be fixed over the relevant range of volume, and variable cost per unit remains constant as volume changes within the relevant range

Question 6

HOW do you calculate the Break Even Point (BEP) in Dollars?

Answer 6

BEP in dollars = Fixed costs ÷ CMR

Question 7

HOW would you calculate your Contribution Margin Ratio (CMR)?

Answer 7

CMR = Fixed costs ÷ BEP in dollars

Question 8

How would I calculate Ending Inventory?

Answer 8

Ending Inventory = Beginning inventory + Purchases (or other inventory additions) - Cost of Goods Sold

Question 9

WHAT are your incremental cost(s)?

Answer 9

THE difference in total cost between two decisions

Question 10

How can I find my total variable cost WHEN it involves mixed costs?

Answer 10

BY using the High-Low Method

Question 11

WHAT is my “Margin of Safety?”

Answer 11

THE excess of sales over breakeven sales (Break Even Sales is found by dividing the Fixed Costs by the Contribution Margin Ratio)

Question 12

WHAT is the equation for cost-volume-profit analysis to calculate expected unit sales?

Answer 12

THAT is your Target Unit Volume

which = Fixed Costs + Target Operating Income / Unit Contribution Margin

Question 13

HOW would you calculate the sale of scrap from a manufacturing process?

Answer 13

AS a Decrease in factory overhead control

i.e. This is usually recorded by crediting factory overhead control

The effect is to allocate the net cost of the scrap (historical cost – disposal proceeds) to the good units produced

Question 14

WHAT are (2) Components of the Master Budget?

Answer 14

THE:

(1) Operating Budget; and
(2) Financial Budget

Question 15

HOW are selling and administrative expenses accounted for on the income statement using the variable costing method?

Answer 15

THEY are used in the computation of the Contribution Margin

i.e. the Contribution Margin equals sales minus all variable costs, which include the variable selling and administrative expenses as well as variable manufacturing costs

Question 16

HOW is Cost of Goods Manufactured calculated?

Answer 16

Beginning Work-in-Process (BWIP) + All costs incurred during the period - costs in Ending -in-Process (EWIP)

Question 17

WHAT type of Overhead is used when calculating the Cost of Goods Manufactured?

Answer 17

THIS is the “Applied” Overhead NOT the Manufacturing Overhead

Question 18

HOW is Factory Overhead reflected in the general ledger under a job-order costing system?

Answer 18

IT is recorded as an increase in “Work-in-Process” Control

Question 19

WHAT is the General Ledger entry involved in the transfer of inventory from work-in-process to finished goods?

Answer 19

THIS would involve a debit to finished goods and a credit to work-in-process

NOTE: This entry involves jobs completed during the period

Question 20

WHY are ideal standards used in a manufacturing environment replaced with attainable ones?

Answer 20

Accuracy

i.e. Budgeting and Forecasting require “accuracy”

Standards must be realistic and achievable if they are to be used in budgeting and forecasting