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Chapter 5
Chapter 5
Chapter 6
Chapter 6
Mixed
100
1. Identify whether the following situations are managerial or financial accounting: 1) Helps creditors make lending decisions 2)Helps in planning and controlling operations 3)Main focus is on the future
What is 1) Financial Accounting 2) Managerial Accounting 3)Managerial Accounting
100
What is the difference between a period cost and a product cost?
A period cost is an operating cost that is expensed in the accounting period in which it is incurred. A product cost is the cost of purchasing or making the product.
100
How do you calculate contribution margin and contribution margin ratio?
contribution margin= sales -variable costs; or CMU = sales per unit - variable costs per unit; CM ratio = contribution margin(or cmu)/ Sales(or sales per unit)
100
If the company expects to sell 300 units and the breakeven point is 140 units what is the margin of safety?
Expected sales – Breakeven sales =Margin of safety in units answer: 300-140=160 units
100
How do you calculate total manufacturing costs incurred during the year? Also how do you compute cost of goods manufactured?
total manufacturing costs incurred = DM+DL+MOH; Costs of goods manufactured = Beginning WIP + DM +DL +MOH - ending WIP
200
What are the 3 categories of product costs?
What is Direct materials, direct labor, manufacturing overhead.
200
How do you calculate direct materials used in production?
beginning direct materials (aka raw materials) + purchases + Freight in = direct materials/ raw materials for use - ending direct materials (aka raw materials)
200
What happens to the contribution margin and breakeven point if there is an increase in selling price per unit? What if selling price per unit decreases?
contribution margin increases and breakeven point decreases; CM decreases and BE increases
200
How do variable costs in total and on a per unit basis respond to changes in the level of activity?
VC in total changes as volume increases; VC remains constant per unit basis
200
How do you calculate Cost Of Goods Sold? and unit product cost?
Beginning finished goods inventory +cost of goods manufactured - ending finished goods inventory;
300
Bob's Landscaping Data is as follows: Direct materials used are $425,000 Direct labor incurred $275,000 Manufacturing overhead incurred $480,000 and Operating Expenses $185,000. Calculate the total period costs and then the total product costs
What is total period costs=$185,000; total product costs=$1,180,000
300
Label each of the following, fixed cost, variable cost, mixed cost 1)Property taxes 2)Wages of production workers 3)Compensation for sales representatives paid on a salary plus commission basis 4)Salary of a plant manager
What is 1) fixed 2)variable 3)mixed 4)fixed
300
The phone company charges you $10 per month and $0.20 per minute. If your current bill is $40, how many minutes did you use?
a. 40-10=30 variable costs b. 30/.2=150 minutes
300
How do fixed costs in total and on a per unit basis respond to changes in the level of activity?
FC in total remain constant when volume changes; FC per unit changes when volume changes
300
Following is a list of costs for a furniture manufacturer that specializes in wood tables.Classify the following costs as variable, fixed or mixed relative to tables produced and sold. 1. Wood used to build tables 2. depreciation on saws and other manufacturing equipment 3. compensation for sales representatives paid on salary plus commission basis 4. supervisors salary 5. wages of production workers
1. variable 2. fixed 3. mixed 5. fixed 5. variable
400
Worksheet: a. How much are period costs? b. How much are product costs? c. How much is manufacturing overhead?
a.)245,000+2300+1850+4500=253650 b.)145,000+65,000+55,000+26500+23500+50000+130000=495,000 c.)65,000+55000+26500+23500+13000=183,000
400
Bob’s Landscaping has fixed costs of $250,000. Total costs, both fixed and variable costs are $325,000 when 38,000 units are produced. How much is the variable cost per unit?
a. 325,000-250,000=75000/38000= $1.97
400
A furniture manufacturer specializes in wood tables. The tables sell for $100 and incur $40 in variable costs. The company has $6,000 in fixed costs per month. Calculate the breakeven point in units
i. Required sales in units = (FC + Target profit)/ CMU =($6,000 + $0)/$60 per unit= 100 units
400
How do you calculate break even point in units and in sales dollars?
BE in units: sales per unit-variable costs per unit- fixed costs = 0 BE in dollars: BE in unites * sales price per unit or BE in dollars = FC/ CM ratio
400
What is the contribution margin income statement? How is it constructed?
Sales revenue - variable costs = Contribution margin - fixed costs = operating income
500
Bob was reviewing his equipment bill for his Landscaping and determined that his highest bill was $1,200 and occurred in July when he mowed 650 lawns, and his lowest bill, $800 occurred in May when he mowed 400 lawns. What is the variable cost per lawn associated with Bob’s equipment bill and then calculate the fixed cost?
a. High low method = (High cost-lowest cost)/(highest volume-lowest volume) (1200-800)/(650-400)= 400/250=$1.60 b. Fixed cost= total mixed cost- total variable cost 1.6x650= 1040 1200-1040=160 1.6x400=640 800-640=160 fixed cost = $160
500
10. Bob’s Landscaping provides services for $500 per lawn, variable costs are $275 each, and fixed costs are $12,000 per month. If Bob desires to earn $6,000 in profits each month, how many lawns must he mow?
Required sales in units = (Fixed costs + Target profit)/ CM per unit => ($12,000 + $6,000)/ $225 per unit = 80 units
500
Bob’s Landscaping sells two products, Product X and Product Y. Product X is sold for $35 per unit and has a variable cost of $15. Product Y sells for $45 and has a variable cost of $20. Total fixed costs for the company are $24,000. Bob typically sells 4 units of Product X for every unit of Product Y. What is the breakeven point in total units?
1143 units
500
What is margin of safety and how do you find it?
margin of safety is the # of sales unites or amount of sales dollars by which ACTUAL sales can fall below planned sales WITHOUT resulting in a loss. Planned sales= # units * sales price; BE sales dollars = #units to BE * sales price; Planned sales -BE sales dollars = margin of safety
500
A furniture manufacturer specializes in wood tables. The tables sell for $100 and incur $40 in variable costs. The company has $6000 in fixed costs per month. Expected sales are 200 tables per month. A.) calculate the margin of safety in units. B.) the company begins manufacturing wood chairs to match the tables. Chairs sell for $50 each and have variable costs of $30. The new production process increases fixed costs to $7000 per month. The expected sales mix is 1 table for every 4 chairs. Calculate the BE point.
a.) Be = 100 units, margin of safety is 100 tables b.) Cm per table = $60, CM per chairs = $80 = $140 with 5 units weighted average contribution margin per unit is 140/5 = $28