Ch 2 - Identifying and Estimating Costs and Benefits
Ch 3 Cost Flows and Cost Terminology
Ch 4 - Techniques for Estimating Fixed and Variable Costs
Ch 5 - Cost Volume Profit Analysis
100
This branch of accounting serves decision-makers inside the firm.
What is Managerial Accounting?
100
Assume that sales commissions are calculated on 5% of sales. Sales commissions would be classified as this type of cost
What is variable?
100
__________ costs are all manufacturing costs (e.g., materials and labor used in production, depreciation of production equipment, rent on factory building)
What are product costs?
100
This type of statement separates fixed costs from variable costs
What is a contribution margin income statement?
100
This type of analysis summarizes the relationship between profit and sales volume (#units) or sales revenue (in $) in a single equation
What is CVP
200
This branch of accounting must follow specific standards such as GAAP and FASB
What is financial accounting?
200
This type of cost remains constant on a per unit basis as activity volume increases
What are variable costs?
200
____________ costs are expensed in the period in which they were incurred (not flown through inventory accounts)
What are period costs?
200
These are the three methods for estimating fixed costs and unit variable costs.
This is the formula for the cost-volume-profit relationship (main version or version 1)
What is Profit = unit CM × Volume – FC
300
In choosing the best decision alternative, we should
What is maximize profit?
300
In the ___________ term, capacity resources cannot be adjusted and are therefore irrelevant for decision-making
What is short?
300
This is the formula known as the inventory equation for a merchandising firm
What is cost of beginning inventory + cost of goods purchased during the period – cost of ending inventory = cost of goods sold
300
This is the formula for calculating the unit variable cost using the high low method.
What is:
(TC high - TC low) / (Volume high - Volume low)
300
Sales volume at which profit=0 (i.e., your break even). Provide the formula.
What is: breakeven volume = FC / unit CM
400
To save time, one can ignore ________ costs and only focus on _________ costs
What is irrelevant and relevant
400
FC + unit VC × volume is the formula to calculate this.
What is total cost?
400
Wallmart is a small retailer. Its beginning inventory in 2009 was $15,000. It purchased $60,000 worth of merchandise in 2009. Its ending inventory for 2009 was $25,000. Its sales revenue for 2009 was $80,000. _________ is the amount of the COGS.
What is 50,000
400
Your firm produces between 1500-3000 units per month. ?You’ve estimated:
Fixed costs = $25,000
Unit variable costs = $12
The total cost of producing 200,000 units per month?
What is not enough information. 200,000 is outside the relevant range.
400
These are two common measures for evaluating operating risks
What are margin of safety and operating leverage
500
You own a lemonade stand. At a price of $1, you sell 160 units per day. The wholesale cost of the lemonade is $0.50 and the rent is $60 per day. Your profit per day is?
Variable costs per unit are as follows:
Raw materials $2.15
Direct labor $1.45
Fixed costs are $5,000 per month
If the company produces 4,000 units in the month of March their total costs will be:
What is $19,400.
TC = FC + Unit VC * Volume
TC = 5,000 + [ (2.15+1.45) * 4000 ] = 5,000 + 14400 = 19,400
500
Costs per unit at current production volume of 1,000 units is as follows: DL = $10; DM = $20; Variable OH = $5, Fixed OH = $5; Variable SG&A costs = $10, Fixed SG&A costs = $10. Total costs will change by this amount if we produce and sell 10 additional units
What is $450.
Unit VC = 10 + 20 +5 + 10 = $45 per unit
TC = FC + Unit VC * Volume, where FC is constant
Change in TC = Change in Unit VC * Volume
Change in TC = $45 * 10 = $450
500
Joe the Plumber recently opened a plumbing business. His fixed costs are $500 per month. During the first month, the company had 100 service calls at a price of $100 per call. The unit variable costs are $20 per call.
Joe expects 120 service calls for next month (120 is within the relevant range). Compute expected profit for next month.
What is 9,100
Rev = (120 * $100) = 12,000
VC = (120 * $20) = 2,400
CM = 9,600
FC = 500
NI = 9,100
500
Sales revenue is $5,000, total VC is $3,000, and total FC is $1,000. How much do you need to sell in dollars to meet a profit target of $2,000?