D101 Cost and Managerial Accounting - Set 4 - Part 2

Correct Answer: They remain constant in total regardless of production levels

Fixed costs, such as rent, remain the same in total regardless of how much production increases or decreases.

Correct Answer: Sales revenue - variable costs

The contribution margin is the amount remaining from sales revenue after variable costs have been subtracted, and it contributes to covering fixed costs and generating profit.

Correct Answer: As debits to the work-in-process account

When direct materials are used in production, they are debited to the work-in-process account, as they are part of the cost of producing the job.

Correct Answer: Total fixed costs divided by the contribution margin per unit

The break-even point in units is calculated by dividing total fixed costs by the contribution margin per unit, which shows how many units need to be sold to cover all fixed costs.

Correct Answer: The total cost of goods transferred from work-in-process to finished goods

The cost of goods manufactured represents the total cost of goods that have been completed and transferred from work-in-process to finished goods during the period.

Correct Answer: They are included in manufacturing overhead

Indirect materials, like indirect labor, cannot be directly traced to specific jobs, so they are included in manufacturing overhead and then allocated to jobs.

Correct Answer: Direct labor

Direct labor is a direct cost of production, whereas manufacturing overhead includes indirect costs like factory utilities, insurance, and depreciation.

Correct Answer: To estimate the number of units to be produced

The production budget estimates how many units need to be produced to meet sales demands and maintain the desired level of finished goods inventory.

Correct Answer: Allocating overhead based on several cost drivers

Activity-based costing allocates overhead costs based on multiple cost drivers that more accurately reflect the activities that generate overhead.

Correct Answer: Sales price per unit - variable cost per unit

The contribution margin per unit is the amount remaining after variable costs are deducted from the sales price, which contributes to covering fixed costs.

Correct Answer: It increases

When overhead is underapplied, the actual overhead incurred is greater than what was applied, leading to an increase in the cost of goods sold to account for the difference.

Correct Answer: The use of time tickets

Direct labor costs are recorded in a job order costing system when employees fill out time tickets showing the amount of time they worked on a particular job.

Correct Answer: Total fixed costs / contribution margin ratio

The break-even point in sales dollars is calculated by dividing total fixed costs by the contribution margin ratio, which shows the proportion of each sales dollar available to cover fixed costs.

Correct Answer: A group of similar overhead costs that are allocated together

In activity-based costing, cost pools are groups of similar overhead costs that are accumulated and then allocated to products based on appropriate cost drivers.

Correct Answer: It accumulates costs for each process or department

Process costing is used for mass production of similar products and accumulates costs by process or department rather than by individual job.

Correct Answer: By using a predetermined overhead rate

Manufacturing overhead costs are applied to jobs using a predetermined overhead rate, which is based on estimated overhead and an activity base like direct labor hours or machine hours.

Correct Answer: Direct materials + direct labor + manufacturing overhead

Total manufacturing costs are the sum of direct materials, direct labor, and manufacturing overhead incurred in producing goods.

Correct Answer: Cost of goods sold is decreased

When overhead is overapplied, more overhead has been allocated than was actually incurred, leading to a decrease in the cost of goods sold to correct the difference.

Correct Answer: To record the costs of materials, labor, and overhead for a specific job

A job cost sheet tracks the costs of materials, labor, and overhead associated with a particular job in a job order costing system.

Correct Answer: Departments or processes

In process costing, costs are accumulated by department or process, as the focus is on mass production of similar products.