Podcast
Questions and Answers
In a CVP graph, what is usually represented on the horizontal (X) axis?
In a CVP graph, what is usually represented on the horizontal (X) axis?
- Dollars
- Total fixed expenses
- Total variable expenses
- Unit volume (correct)
What can the unit contribution margin (Unit CM) be useful for expressing?
What can the unit contribution margin (Unit CM) be useful for expressing?
- Total fixed expenses
- Total variable expenses
- The simple profit equation (correct)
- The cost-volume-profit (CVP) graph
What does the equation $200 = 401 imes P - 401 imes V$ represent?
What does the equation $200 = 401 imes P - 401 imes V$ represent?
- Break-even point equation
- Cost equation
- Revenue equation
- Profit equation (correct)
How can the relationships among revenue, cost, profit, and volume be expressed?
How can the relationships among revenue, cost, profit, and volume be expressed?
What does the line parallel to the volume axis represent in a CVP graph?
What does the line parallel to the volume axis represent in a CVP graph?
What type of income statements did Racing Bicycle develop at 0, 200, 400, and 600 units sold?
What type of income statements did Racing Bicycle develop at 0, 200, 400, and 600 units sold?
What is the predetermined overhead rate for the Assembly Department based on the given information?
What is the predetermined overhead rate for the Assembly Department based on the given information?
What is the total predetermined overhead cost for the Milling Department?
What is the total predetermined overhead cost for the Milling Department?
How much overhead cost is applied from both departments to Job 407?
How much overhead cost is applied from both departments to Job 407?
What is the total cost of Job 407?
What is the total cost of Job 407?
What is the markup percentage used by the company to establish selling prices?
What is the markup percentage used by the company to establish selling prices?
What factor is used as the predetermined overhead rate allocation base in the Milling Department?
What factor is used as the predetermined overhead rate allocation base in the Milling Department?
What is the formula for the contribution margin ratio (CM ratio)?
What is the formula for the contribution margin ratio (CM ratio)?
How is the variable expense ratio calculated?
How is the variable expense ratio calculated?
What is the formula for calculating unit sales at break-even using the equation method?
What is the formula for calculating unit sales at break-even using the equation method?
What does an increase in sales volume do to the contribution margin?
What does an increase in sales volume do to the contribution margin?
In Example 4, what change resulted in a $12,375 increase in net operating income?
In Example 4, what change resulted in a $12,375 increase in net operating income?
What is the dollar sales at break-even computed using?
What is the dollar sales at break-even computed using?
Which method uses a specific equation to determine the number of units that must be sold to earn a target profit?
Which method uses a specific equation to determine the number of units that must be sold to earn a target profit?
What does the margin of safety measure?
What does the margin of safety measure?
What does operating leverage measure?
What does operating leverage measure?
How does structuring sales commissions based on contribution margin affect conflicts and profits?
How does structuring sales commissions based on contribution margin affect conflicts and profits?
When a company sells more than one product, how does it affect break-even analysis?
When a company sells more than one product, how does it affect break-even analysis?
How does the sales mix affect break-even point and contribution margin?
How does the sales mix affect break-even point and contribution margin?
What is the purpose of using predetermined overhead rates in job-order costing?
What is the purpose of using predetermined overhead rates in job-order costing?
What is the purpose of using an allocation base in job-order costing?
What is the purpose of using an allocation base in job-order costing?
Why are predetermined overhead rates used in job-order costing?
Why are predetermined overhead rates used in job-order costing?
What are examples of companies using job-order costing?
What are examples of companies using job-order costing?
What is the purpose of an allocation base in assigning manufacturing overhead?
What is the purpose of an allocation base in assigning manufacturing overhead?
Why are predetermined overhead rates computed before the period begins?
Why are predetermined overhead rates computed before the period begins?
Flashcards
CVP graph X-axis
CVP graph X-axis
Unit volume
Unit CM use
Unit CM use
The simple profit equation
CVP Graph
CVP Graph
A graphical representation of the relationships between revenue, cost, profit and volume.
Line parallel to volume axis in CVP graph
Line parallel to volume axis in CVP graph
Signup and view all the flashcards
Income statement type for bikes sold
Income statement type for bikes sold
Signup and view all the flashcards
Assembly Department Overhead Rate
Assembly Department Overhead Rate
Signup and view all the flashcards
Milling Department Predetermined Overhead Cost
Milling Department Predetermined Overhead Cost
Signup and view all the flashcards
Overhead Cost applied to Job 407
Overhead Cost applied to Job 407
Signup and view all the flashcards
Total cost of Job 407
Total cost of Job 407
Signup and view all the flashcards
Markup percentage
Markup percentage
Signup and view all the flashcards
Milling Department allocation base
Milling Department allocation base
Signup and view all the flashcards
Contribution Margin Ratio (CM Ratio) formula
Contribution Margin Ratio (CM Ratio) formula
Signup and view all the flashcards
Variable Expense Ratio
Variable Expense Ratio
Signup and view all the flashcards
Unit sales at break-even formula
Unit sales at break-even formula
Signup and view all the flashcards
Higher Sales Volume's Effect
Higher Sales Volume's Effect
Signup and view all the flashcards
$12,375 Profit Increase Cause
$12,375 Profit Increase Cause
Signup and view all the flashcards
Dollar sales at break-even computation
Dollar sales at break-even computation
Signup and view all the flashcards
Target Profit Formula Method
Target Profit Formula Method
Signup and view all the flashcards
Margin of Safety
Margin of Safety
Signup and view all the flashcards
Operating Leverage
Operating Leverage
Signup and view all the flashcards
Sales commissions based on contribution margin
Sales commissions based on contribution margin
Signup and view all the flashcards
Break-even analysis with multiple products
Break-even analysis with multiple products
Signup and view all the flashcards
Sales mix effect
Sales mix effect
Signup and view all the flashcards
Predetermined overhead rates use
Predetermined overhead rates use
Signup and view all the flashcards
Allocation base purpose
Allocation base purpose
Signup and view all the flashcards
Why use predetermined overhead rates?
Why use predetermined overhead rates?
Signup and view all the flashcards
Examples of job-order costing companies
Examples of job-order costing companies
Signup and view all the flashcards
Allocation base purpose
Allocation base purpose
Signup and view all the flashcards
Why compute predetermined overhead rates before the period?
Why compute predetermined overhead rates before the period?
Signup and view all the flashcards
Study Notes
Job-Order Costing: Calculating Unit Product Costs
- Job-order costing systems are used for producing multiple products, manufacturing to order, and tracing costs to each job.
- Examples of companies using job-order costing include Boeing, Bechtel International, and Walt Disney Studios.
- Product costs are related to manufacturing and can be inventoried, while period costs are non-manufacturing and go directly to the P/L.
- Direct material and direct labor are easily associated with the job order, but allocating manufacturing overhead is more complex.
- An allocation base, such as direct labor hours or machine hours, is used to assign manufacturing overhead to individual jobs.
- Predetermined overhead rates are used to apply overhead to jobs before the period begins, based on estimated data.
- The predetermined overhead rate is computed using a four-step process, including estimating total fixed and variable manufacturing overhead costs.
- Overhead costs can be fixed (e.g., depreciation) or variable (e.g., consumption and electricity bills) and are applied using a predetermined overhead rate.
- PearCo estimates it will require 160,000 direct labor-hours, with total fixed manufacturing overhead at $200,000 and variable manufacturing overhead costs of $2.75 per direct labor hour.
- The allocation base is a cost driver that causes overhead, and the predetermined overhead rate is based on estimated levels of production.
- Predetermined overhead rates are used because actual overhead for the period may not be known until the end, inhibiting the ability to estimate job costs.
- Actual overhead costs can fluctuate seasonally, misleading decision makers, so predetermined rates relying on estimated data are often used.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
