Chapter 2
The collection of cost data in an organized way, such as in various categories such as materials, labor, and manufacturing overhead is called...
cost accumulation
How do you find the contribution margin?
Revenue/Sales - Variable Costs
The budgeted indirect-cost rate for each cost pool is computed as ________
budgeted annual indirect costs / budgeted annual quantity of cost allocation base
Setting up machines, billing customers, and performing tests at a lab are all examples of a(n) ______.
activity
the assignment of indirect costs to the chosen cost object
cost allocation
Sparkle Jewelry sells 800 units resulting in $9,000 of sales revenue, $3,000 of variable costs, and $1,500 of fixed costs. Contribution margin per unit is ________.
$7.50 pet unit
Lancelot Manufacturing is a small textile manufacturer using machine hours as the single indirect cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. Lancelot budgets $45,000 in MOH with 100,000 mhs. Job #1411 uses $2,000 in DM, $400 in DL, and 900 mhs. What is the total manufacturing cost for this Job #1411?
$2,805
estimated overhead per activity / estimated use of cost drivers per activity
A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the ________.
Relevant Range
What is the equation to find the Contribution Margin Ratio?
(Sales Revenue – Variable Costs ) / (Sales Revenue)
Smith Office Equipment Company's budgeted manufacturing overhead is $5,400,000. Overhead is allocated on the basis of direct labor hours. The budgeted direct labor hours for the period are 30,000. What is the manufacturing overhead rate?
$180/DLH
The activity rate for the Customer Orders activity pool is $20 per order. If there are 400 customer orders for a product, the total overhead cost assigned to this product for customer orders is $_____.
$8,000
What are the differences between direct costs and indirect costs?
Direct costs are costs that can be traced easily to the product manufactured or the service rendered.
Indirect costs cannot be easily identified with individual products or services rendered, and are usually assigned using allocation formulas.
As the volume of production and output increases, do variable and fixed costs per unit increase or decrease?
Variable costs per unit stay the same.
Fixed costs per unit decrease.
What is the difference between an actual cost system and a normal cost system?
Both systems trace direct costs to jobs the same way. An actual cost system traces indirect costs to jobs using actual indirect cost rates, but a normal cost system uses budgeted indirect cost rates to trace indirect costs to jobs.
What are the 4 activity levels?
unit level, batch level, product level, facility level
Puritan Apparels is a clothing retailer. Unit costs associated with one of its products, Product AHF 130, are as follows:
- Direct materials $110
- Direct manufacturing labor 90
- Variable manufacturing overhead 45
- Fixed manufacturing overhead 33
- Sales commissions (2% of sales) 10
- Administrative salaries 28
What are the direct variable manufacturing costs per unit associated with Product AHF 130?
Direct Materials ($110), Direct Manufacturing Labor ($90), Variable Manufacturing Overhead ($45).
Total = $245
Tally Corp. sells software during the recruiting seasons. During the current year, 10,000 software packages were sold resulting in $470,000 of sales revenue, $130,000 of variable costs, and $48,000 of fixed costs.
If sales increase by $80,000, operating income will increase by ________. (Round interim calculations to two decimal places and the final answer to the nearest whole dollar.)
$57,872
What differentiates job costing from process costing?
Process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches.
Job costing is the logical choice when the production process has many distinct products or many heterogeneous jobs, while process costing is typically used when it is not necessary to keep separate cost records for individual jobs and the products are relatively homogeneous.
A company assigns overhead using a plantwide rate. If total estimated manufacturing overhead is $900,000 and the total estimated activity is 30,000 machine-hours, the overhead cost assigned to a product using 12,000 machine-hours is ______.
$360,000