D196 Principles of Financial and Managerial Accounting - Set 5 - Part 2

Correct Answer: Factory utilities

Factory utilities are classified as manufacturing overhead because they are indirect costs associated with the production process.

Correct Answer: Balance sheet

The balance sheet shows a companys assets, liabilities, and equity at a specific date.

Correct Answer: Job order costing

Job order costing is used for unique or custom products where costs can be traced to individual jobs or batches.

Correct Answer: Utilities

Utilities are a mixed cost because they have both fixed and variable components, depending on the level of production.

Correct Answer: Income statement

The income statement shows revenues and expenses over a specific period, resulting in net income or loss.

Correct Answer: Debit raw materials; credit accounts payable

When raw materials are purchased on credit, raw materials inventory is debited, and accounts payable is credited.

Correct Answer: Accounts payable

Accounts payable is a current liability because it is expected to be settled within one year.

Correct Answer: 0.625

Contribution margin ratio is calculated by dividing the contribution margin per unit by the sales price per unit. (15 / 40 = 0.625).

Correct Answer: Raw materials

Direct costs, such as raw materials, can be traced directly to the production of a product.

Correct Answer: Sales budget

The sales budget forecasts expected sales revenue and is the starting point for budgeting in most companies.

Correct Answer: Debit depreciation expense; credit accumulated depreciation

Depreciation expense is debited, and accumulated depreciation is credited to record the depreciation of factory equipment.

Correct Answer: Fixed costs / Contribution margin per unit

Break-even in units is calculated by dividing fixed costs by the contribution margin per unit.

Correct Answer: Statement of retained earnings

The statement of retained earnings shows how retained earnings have changed during the period.

Correct Answer: $15 per labor hour

The predetermined overhead rate is calculated by dividing estimated overhead by estimated labor hours. ($300,000 / 20,000 = $15 per labor hour).

Correct Answer: Purchasing equipment

Purchasing equipment is classified as an investing activity because it involves acquiring long-term assets.

Correct Answer: Direct materials

Direct materials are a variable cost because they vary in total with the level of production.

Correct Answer: Factory rent

Manufacturing overhead includes indirect costs, such as factory rent, related to the production process.

Correct Answer: Balance sheet

The balance sheet provides information about a company's liquidity by showing current assets and liabilities.

Correct Answer: $20

Contribution margin is calculated by subtracting variable costs from the sales price. ($30 - $10 = $20).

Correct Answer: Land

Land is a long-term asset because it is expected to provide benefits for more than one year.