Product Costing & Overhead
These three costs—DM, DL, and MOH—are combined to calculate this inventory account.
What is Work in Process?
Fixed costs divided by contribution margin per unit gives you this.
What is the break-even point in units?
Costs that differ between decision alternatives are called this.
What are relevant costs?
This variance calculates the difference between AP and SP for materials.
What is the materials price variance?
When applied manufacturing overhead is greater than actual manufacturing overhead, this has occurred.
What is overapplied overhead?
This ratio tells you how much of each sales dollar becomes contribution toward fixed costs and profit.
What is the contribution margin ratio?
A past cost that cannot be changed and should be ignored in decision-making.
What is a sunk cost?
This variance measures whether workers used more or fewer hours than the standard allowed.
What is the labor efficiency variance?
This is the flow of inventory costs in a manufacturing company.
What is Raw Materials → Work in Process → Finished Goods → COGS?
This CVP tool allows a company to plan changes like “What if we lower price?” or “What if variable costs increase?”
What is sensitivity or what-if analysis?
If a department shows a loss, this analysis determines whether its contribution to covering fixed costs justifies keeping it.
What is a keep-or-drop analysis?
Management uses this report to compare budgeted and actual results side-by-side.
What is a performance report?
This financial statement format reports Gross Margin before deducting selling and administrative expenses.
What is a traditional income statement?
If variable cost per unit decreases while price stays constant, this happens to the break-even point.
What is it decreases?
In a make-or-buy decision, this cost is often the most important but is frequently overlooked by students.
What is opportunity cost (e.g., lost capacity)?
These costs are expensed immediately and never included in inventory.
What are period costs?
This income statement format organizes expenses by behavior rather than function.
What is a contribution margin income statement?
When a company faces a constraint (machine hours, labor hours), this metric determines what product should be emphasized.
What is contribution margin per unit of the constrained resource?