MA 2 facile chiuso
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Questions and Answers

In a CVP graph, what is usually represented on the horizontal axis?

  • Total fixed expenses
  • Unit volume (correct)
  • Total variable expenses
  • Dollars

    • What can be used to express the simple profit equation in terms of the unit contribution margin?

  • Total variable expenses
  • Total fixed expenses
  • Unit contribution margin (Unit CM) (correct)
  • Total contribution margin

    • What does the CVP graph express graphically?

  • Total fixed expenses
  • Total variable expenses
  • Relationships among revenue, cost, profit, and volume (correct)
  • Unit contribution margin

    • What is used to prepare the CVP graph?

    <p>Contributions margin income statements</p> Signup and view all the answers

    When a company has only one product, how can the profit equation be further refined?

    <p>By expressing in terms of the unit contribution margin</p> Signup and view all the answers

    What does the profit of $200 in the given example represent?

    <p>Profit earned by selling 401 bikes</p> Signup and view all the answers

    What does target profit analysis involve?

    <p>Estimating the sales volume needed to achieve a specific target profit</p> Signup and view all the answers

    Which method is used to compute the number of units that must be sold to attain a target profit?

    <p>The equation method and the formula method</p> Signup and view all the answers

    What does the margin of safety represent?

    <p>The excess of budgeted or actual sales dollars over the break-even volume of sales dollars</p> Signup and view all the answers

    What does cost structure refer to?

    <p>The relative proportion of fixed and variable costs in an organization</p> Signup and view all the answers

    What does operating leverage measure?

    <p>How sensitive net operating income is to percentage changes in sales</p> Signup and view all the answers

    How does the sales mix affect break-even analysis?

    <p>The sales mix affects the break-even point and contribution margin</p> Signup and view all the answers

    What is the formula for the contribution margin ratio (CM ratio)?

    <p>$\frac{Contribution ext{ }margin ext{ }per ext{ }unit}{Selling ext{ }price ext{ }per ext{ }unit}$</p> Signup and view all the answers

    What is the variable expense ratio?

    <p>$\frac{Variable ext{ }expenses}{Sales}$</p> Signup and view all the answers

    How is the unit sales at break-even calculated using the formula method?

    <p>Each unit sold contributes towards covering fixed expenses</p> Signup and view all the answers

    What is the effect of increasing sales volume on the contribution margin?

    <p>Increase in sales volume will increase contribution margin</p> Signup and view all the answers

    In Example 1, what was the effect of increasing unit sales by 40 units with a $10,000 increase in advertising budget?

    <p>Net operating income decreased by $2,000</p> Signup and view all the answers

    In Example 4, what was the result of switching from fixed salaries to sales commission?

    <p>Net operating income increased by $12,375</p> Signup and view all the answers

    What type of costing system is used for producing multiple products and tracing costs to each job?

    <p>Job-order costing</p> Signup and view all the answers

    Which of the following companies is mentioned as an example of using job-order costing?

    <p>Boeing</p> Signup and view all the answers

    What is the purpose of using an allocation base in job-order costing?

    <p>To allocate manufacturing overhead to individual jobs</p> Signup and view all the answers

    How is the predetermined overhead rate computed in job-order costing?

    <p>It is based on estimated levels of production</p> Signup and view all the answers

    What are the two types of manufacturing overhead costs mentioned in the text?

    <p>Fixed and variable</p> Signup and view all the answers

    Why are predetermined overhead rates used in job-order costing?

    <p>To estimate job costs before the period begins</p> Signup and view all the answers

    What is the formula for calculating the predetermined overhead rate (POR) based on direct labor-hours?

    <p>$POR = \frac{Estimated ext{ }total ext{ }manufacturing ext{ }overhead ext{ }cost}{Estimated ext{ }total ext{ }direct ext{ }labor ext{ }hours}$</p> Signup and view all the answers

    In job-order costing systems, what factor is used to allocate all manufacturing overhead costs to jobs?

    <p>Direct-labor hours usage</p> Signup and view all the answers

    What is the purpose of using multiple predetermined overhead rates in job-order costing systems?

    <p>To improve job cost accuracy</p> Signup and view all the answers

    What is the formula for calculating the overhead applied from both departments to a job, using predetermined overhead rates?

    <p>$Overhead ext{ }applied = POR_{Milling ext{ }Department} \times Machine ext{-}hours + POR_{Assembly ext{ }Department} \times Direct ext{-}labor ext{ }hours$</p> Signup and view all the answers

    What is the formula for calculating the total job cost using predetermined departmental overhead cost and rate?

    <p>$Total ext{ }job ext{ }cost = Direct ext{ }materials ext{ }cost + Direct ext{ }labor ext{ }cost + Overhead ext{ }applied$</p> Signup and view all the answers

    What is the purpose of using cost-plus pricing with a markup percentage in job-order costing systems?

    <p>To establish selling prices for all jobs based on total manufacturing cost</p> Signup and view all the answers

    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.

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    Description

    Test your understanding of job-order costing and learn how to calculate unit product costs with this quiz. Explore topics such as allocation bases, predetermined overhead rates, and the computation of manufacturing overhead costs.

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