Exam 1 Concepts
What does the income statement show?
Revenues - Expenses = Net Income
True or False: Process costing is more accurate than job order costing.
False
What is a mixed cost?
Cost that contains a variable and fixed portion.
If assets are 370,0000 and liabilities are 120,000. What is equity?
250,000
Who is the Department Head of Accounting here at K-State?
Dr. Brett Wilkinson
What represents future obligations for the company?
A Liability
What is the formula for the Predetermined Overhead Rate?
Estimated annual overhead / Estimated annual operating activity
What costs remain the same in total regardless of activity level, but the unit cost varies inversely with activity?
Fixed Costs
If I decrease my accounts payable by $20... what account also decreases? By how much?
Decrease Cash (assets) by $20
What are two benefits of budgeting?
Requires management to plan ahead, to set goals/objectives, creates an early warning system, activities more easily coordinated, increases management's awareness of the company's performance, motivates staff to meet objectives
What account increases stockholder's equity?
A. Expenses
B. Revenues
C. Dividends
D. Assets
B. Revenues
Any factor or activity that has a direct cause-effect relationship with the resources consumed is a ?
Cost Driver
What method can be used to break a mixed cost down into its two components?
The high-low method
If the activity level increases by 35%, total variable costs will ...
Increase by 35%
Where is the first place I should look when starting the budgeting process?
Past Performance
What financial statement shows the financial position of the company at a specific point in time?
Balance Sheet
What is the formula for Cost of Goods Manufactured?
Beginning WIP + Total Manufacturing Costs - Ending WIP
Name an alternative that could be considered under incremental analysis... (multiple answers will be correct)
Make vs. buy
Accept/Reject order
Repair/replace
Sell/process further
Eliminate unprofitable business segment
Nike reported the following information for the current year:
Sales (600 units) $6,000, variable costs $2,500, and fixed costs $2,000.
What is Nike's contribution margin ratio?
58%
Which management function is budgeting most related to?
Planning
What are the 3 sections on the Statement of Cash Flows?
Cash flow from operations, cash flow from investing, and cash flow from financing
What is an activity cost pool? Give an 2 examples
The overhead cost attributed to a distinct activity.
Examples: machine setup, manufacturing, ordering materials, factory supervising
How is a Cost Volume Profit Income statement different from a regular income statement?
It computes contribution margin rather than gross profit. It also breaks costs and expenses into variable and fixed components.
Jolie sells toy cars that have a unit selling price of $10, unit variable cost of $5, and total fixed costs of $300,000.
The total break-even units are:
60,000 cars
What makes the budget different from standard costs?
A standard is a unit amount. A budget is a total amount.