Sample Test Materials
Select only one answer for each question.
1. At what point does depreciation on equipment used to produce a table become an expense? a. At the end of the period when the depreciation is recorded b. When the table is started
c. When the table is completed
d. When the table is sold
2. Which of the following describes an opportunity cost?
a. The largest net benefit given up by choosing one action that precludes taking other actions. b. The costs associated with taking advantage of a business opportunity. c. The costs that appear in the cost of goods sold section of the income statement. d. The revenues that a company will earn when it takes advantage of a business opportunity.
3. Managerial accounting differs from financial accounting in that financial accounting is a. More oriented toward the future
b. Concerned with nonquantitative information
c. Heavily involved with decision analysis and implementation of decisions d. Primarily concerned with external financial reporting
4. A cost that remains unchanged on a per unit basis in a given time period despite changes in the level of activity should be considered a. A variable cost
b. A fixed cost
c. An overhead cost
d. A relevant cost
5. All costs related to the manufacturing function in a company are a. Prime costs
b. Direct costs
c. Product costs
d. Conversion costs
6. Period costs
a. Are always expensed in the period in which they are incurred b. Vary from one period to the next
c. Remain unchanged over a given period of time
d. Are associated with the periodic inventory method
7. Contribution margin is
a. Sales price minus fixed conversion cost
b. Sales price minus direct materials cost
c. Sales price minus variable conversion cost
d. Sales price minus total variable cost
8. Breakeven analysis assumes that
a. Unit variable cost is constant
b. Total revenue is constant
c. Unit fixed cost is...
...or trading, require costaccounting to track their activities. Costaccounting has long been used to help managers understand the costs of running a business. Modern costaccounting originated during the industrial revolution, when the complexities of running a large scale business led to the development of systems for recording and tracking costs to help business owners and managers make decisions.
In the early industrial age, most of the costs incurred by a business were what modern accountants call "variable costs" because they varied directly with the amount of production. Money was spent on labor, raw materials, power to run a factory, etc. in direct proportion to production. Managers could simply total the variable costs for a product and use this as a rough guide for decision-making processes.
Some costs tend to remain the same even during busy periods, unlike variable costs, which rise and fall with volume of work. Over time, these "fixed costs" have become more important to managers. Examples of fixed costs include the depreciation of plant and equipment, and the cost of departments such as maintenance, tooling, production control, purchasing, quality control, storage and handling, plant supervision and engineering. In...
If you are starting out in a new business, especially a service/manufacturing business, understanding the costaccounting system and which costaccounting system will work best for your company, is the first step to being successful. Once you find someone to help you navigate those waters, let them help you sail the rough seas of direct and indirect inventory, direct and indirect labor costs, and how to allocate factory overhead as well. While it all may sound confusing, having the right person with the right knowledge and advice, can make all the difference to you and the success of your business.
We learned in Chapter 19 that costaccounting systems calculate, register, and record product costs. Once these costs have been recorded, administrators and supervising personnel can use these costs for setting their product prices, controlling operations and developing financial statements. These reports can play an important role in the financial decision making process for your company so it is imperative that they are accurate and detailed.
There are two different types of costaccounting systems. There are called job order cost systems and process cost systems. While both systems are used by manufacturing companies, the job order cost system is...
...1/ Variable Costs: The variable cost will be 40% higher [ an increase of 21,000 - 15,000=6,000 units]
Direct Material used 1,060,000 Variable Costs:
Direct Labor 1,904,000 Direct material used [ 1,060,000 *1.4] 1,484,000 Unit costs [ 6,335,600 / 21,000] =$ 301.7
Indirect Materials and supplies 247,000 Direct Labor [ 1,904,000 * 1.4] 2,665,600 Variable Cost/ Unit = 228.27 at both 15k & 21k units
Power to run plant eqip 213,000 Indirect Materials and supplies [247,000 * 1.4] 345,800 Total Variable Cost @ 15k units =
Fixed Cost: Power to run plant eqip [ 213,000 *1.4] 298,200 1,060,000+1,904,000 + 247,000+ 213,000 = 3,424,000
Supervisory salaries 926,000 Total Variable Cost 4,793,600 Unit Variable Cost = 3,424,000/15k units or
Plant Utilities 281,000 Fixed Costs: 4,793,600/21k units = $228.27/unit
Depreciation on P&P(S-L, time basic) 141,000 Supervisory salaries 926,000
Property tax on building 194,000 Plant Utilities 281,000
Required: Unit Variable Cost and total fixed costs Depreciation on P&P(S-L, time basic) 141,000
are expected to remain unchanged next month. Property tax on building 194,000
Calculate unit cost and total cost if...
...would calculate the cost of an individual product, service or activity using relevant examples. In doing this you should clearly explain any areas where judgement was required or limitations in your methodology. Finnally you should comment on whether or not you would be happy to use your calculations for decision making purposes.
Costaccounting as an important job of cost management, it aims to reflect thecosts of organizational operation. To maintain long term profitability, the business must sell their production at a price which exceeds their costs of productions. So mangers make better decision and achieve greater control in the material costs by analyzing their costaccounting. However, there are many intrinsic limitations and flaws in the traditional cost calculation methods.
So in this paper, we are going to calculate the cost of cooking food by using traditional costing. Next, we would like to compare the traditional costing method with absorption costing and activity-based costing, to discuss whether the traditional approach effectively reflects the correct cost, and what the limitation in these costing methods. At last, we would like to explain which costing methods should use for decision making purposes.
Traditional costing methods
Whatever the nature of the...
...calculation of the selling price variance.
A closer look at the variance components reveals some major deviations from plan. Contradictory to the favourable variance for Sales Revenue, the overall contribution margin (-$9057) and operating profit (-$12,057) reflected unfavourable variances instead. These unfavourable variances were caused by the more than required variable resources being consumed with Barnes bearing responsibility for all unforeseen situations that happened and absorbing the additional costs incurred. Actual variable costs increased from $218 to $247.50, causing an unfavourable flexible-budget variable cost variance of $59 457. The next section, 3.2 Variable and Fixed Variance Analysis, will look into the specific causes of this increased in cost and resources consumed. Understanding the reasons why actual results differ from budgeted amounts can help Barnes better manage its costs and pricing decisions in the future. If Barnes have not been able to pass these costs on to customers, losses would have been considerable in the future.
3.2 Variable and Fixed Variance Analysis
3.2.1 Sales Volume and Selling Price Variance Analysis
Both Sales Volume and Selling Price variances reflected favourable variance as there was an increase in both the selling price per course and also increase in total number of participants (units). The increase in number of participants is not...
...Management, the Controller, and CostAccounting
According to Henry Fayol's Industrial and General Administration, "to manage is to forecast and to plan, organize, to command, to co-ordinate and to control". To an organization, those various activity can be narrowed to Planning, Organizing and Control by three groups of management: operating management, middle management and executive management with different role in each level.
Planning is the process of sensing external opportunities and threats, determining desirable objectives and employing resources to accomplish these objectives. Effective planning takes the company’s business (what, where, who), major policies (how), and timings (when) into account. Organizing is the establishment of the framework within which activities are to be performed. A company is usualy divided into two or more functional units/divisions suited to the company’s operation. Each units/divisions has specialized job/function, but still parts of an interdependent system that works as a whole, that’s where organizing takes place. All those objectives, all factors affecting them, and company’s activity are monitored, compared, and followed through a systematic effort or what you call “control” in management.
Although management’s planning, organizing and control seems to be a separate processes, in reality they sync together and can dynamicaly affects each other. Especially planning and control, they...