chapter18,21 true false – Flashcards
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Total variable costs change in proportion to changes in volume of activity.
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As the volume increases, fixed cost per unit of output remains constant.
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Cost-volume-profit analysis requires management to classify all costs as either fixed or variable with respect to production or sales volume within the relevant range of operations.
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The dollar amount of sales needed to achieve a target income is computed by dividing the sum of fixed costs plus the target income by the contribution margin ratio.
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The contribution margin ratio is the percent of each sales dollar that remains after deducting the total unit variable cost.
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The high-low method of deriving an estimated cost line uses all the data points available.
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The break-even point is the sales level at which a company neither earns a profit nor incurs a loss.
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To calculate the break-even point in units, one must know unit fixed cost, unit variable cost, and sales price.
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Managerial accounting reports and information are used by external users and financial accounting by internal users.
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Both financial and managerial accounting affect user's decisions and actions.
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The concept of total quality management focuses on continuous improvement.
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Just-in-time manufacturing is a system that acquires inventory and produces product only when needed for an order.
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Costs may be classified by many different cost classifications.
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Straight line depreciation, rent and manager salaries are examples of variable costs.
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Cost concepts such as variable, fixed, mixed, direct and indirect apply only to manufacturers and not to service companies.
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A variable cost changes in proportion to changes in the volume in activity.
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Product costs are capitalized as inventory on the balance sheet and period costs are expenses on the income statement.
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Selling and administrative expenses are normally period costs.
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Prime costs consist of direct labor and factory overhead.
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The collection of cost sheets for unfinished jobs makes up a subsidiary ledger controlled by the Work in Process Inventory account in the general ledger.
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Job cost sheets are used to track all of the costs assigned to a job, including direct materials, direct labor, overhead, and all selling and administrative costs.
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Both direct and indirect labor costs are recorded on the individual job cost sheets.
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The cost of all direct materials issued to production is debited to Work in Process Inventory.
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The predetermined overhead rate is used to allocate overhead cost to jobs.
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In a job order costing system, indirect labor costs are debited to the Factory Overhead account.
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Direct materials and direct labor are examples of costs that are debited to the Factory Overhead account in a job costing system.
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The schedule of cost of goods manufactured for a job costing system includes total actual factory overhead.
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The managers of process operations focus on the series of repetitive processes, or steps, resulting in a noncustomized product or service.
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In a process costing system costs are measured upon completion of each job.
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Equivalent units of production refer to the number of units that could have been started and completed given the costs incurred during the period.
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Equivalent units of production for direct materials and direct labor are usually the same.
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Conversion cost per equivalent unit is the combined costs of direct materials and factory overhead.
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In a process costing system, the purchase of raw materials is debited to the Raw Materials Inventory.
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In a process costing system, the entry to record cost of materials assigned to a production department requires a debit to the Raw Materials Inventory account and a credit to the Work in Process Inventory account for that department.
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If a department that applies process costing starts the reporting period with 40,000 physical units that were 80% complete with respect to direct materials and 50% complete with respect to direct labor, it must add 8,000 equivalent units of direct materials and 20,000 equivalent units of direct labor to complete them.
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The cost of units transferred from Work in Process Inventory to Finished Goods Inventory is called the cost of goods manufactured.
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