A306 FINAL EXAM QUICK CHECKS QUESTIONS &
ANSWERS VERIFIED 100% CORRECT!!
/. Margin of safety - Answer-The difference between actual or expected sales and sales
at the break-even point.
Margin of safety in $ = actual sales - break even sales
Margin of safety % = (actual sales - break even sales)/actual sales
/.direct costs - Answer-Costs that can be specifically identified with a particular project
or activity.
direct materials
direct labor
/.indirect costs - Answer-Costs that cannot be easily and accurately traced to a cost
object.
- manufacturing overhead
/.Manufacturing Costs - Answer-direct materials, direct labor, manufacturing overhead
/.nonmanufacturing costs - Answer-selling costs and administrative costs
/.prime costs - Answer-costs to primarily make products, helps set selling price to
achieve required profits
- direct materials
- direct labor
/.conversion costs - Answer-costs that gauge efficiency in the production process
- direct labor
- manufacturing overhead
/.product costs - Answer-costs that are a necessary and integral part of producing the
finished product. capitalized on the balance sheet and income statement
- manufacturing costs (direct materials, direct labor, MOH)
/.period costs - Answer-costs that are taken directly to the income statement as
expenses in the period in which they are incurred or accrued
- nonmanufacuring costs (selling and general and admin.)
/.variable costs - Answer-costs that vary directly with the level of production
- total cost increases and decreases in proportion to the change in activity level
- per unit cost stays the same
, /.fixed costs - Answer-costs that remain constant as output changes
- total fixed costs not affected by changes in activity level
- per unit cost decreases as the activity level rises and increases as the activity level
falls
/.Total Cost Formula - Answer-TC = (UVC * # of units) + FC
/.Hi-Lo Pricing - Answer-pricing strategy that starts with a high price, then runs
promotions to lower prices and increase demand; similar to price skimming
- advantages: straightforward to calculate, uses aggregate numbers, subject to data
available
- disadvantages: assumes costs are relatively stable, rough estimate
/.regression analysis - Answer-A method of predicting sales based on finding a
relationship between past sales and one or more independent variables, such as
population or income
- advantages: uses all available data, minimizes deviations
disadvantages: needs lots of data, more knowledge and work
/.Mixed Costs - Answer-costs that have both a fixed and a variable component
/.differential cost - Answer-a difference in cost between any two alternatives
- incremental, avoidable, differ between options
/.opportunity cost - Answer-value of the next best option, what is given up
/.Sunk costs - Answer-costs that have already been incurred and cannot be recovered
-paid for in the past, not relevant
/.contribution margin income statement - Answer-the income statement that groups cost
by behavior - variable or fixed - and highlights the contribution margin
- for internal reporting and decision making only
/.Traditional GAAP Income Statement - Answer-organizes by product and period costs
/.Cost-Volume-Profit Analysis - Answer-uses cost behavior to determine how revenues,
expenses, and profits will react to changes in volume
/.Unit Contribution Margin - Answer-selling price - variable cost
/.Contribution Margin Ratio - Answer-Contribution Margin / Sales
/.units to breakeven - Answer-(fixed costs + target profit)/CM per unit
/.revenue to breakeven - Answer-(fixed costs + target profit)/CM
ANSWERS VERIFIED 100% CORRECT!!
/. Margin of safety - Answer-The difference between actual or expected sales and sales
at the break-even point.
Margin of safety in $ = actual sales - break even sales
Margin of safety % = (actual sales - break even sales)/actual sales
/.direct costs - Answer-Costs that can be specifically identified with a particular project
or activity.
direct materials
direct labor
/.indirect costs - Answer-Costs that cannot be easily and accurately traced to a cost
object.
- manufacturing overhead
/.Manufacturing Costs - Answer-direct materials, direct labor, manufacturing overhead
/.nonmanufacturing costs - Answer-selling costs and administrative costs
/.prime costs - Answer-costs to primarily make products, helps set selling price to
achieve required profits
- direct materials
- direct labor
/.conversion costs - Answer-costs that gauge efficiency in the production process
- direct labor
- manufacturing overhead
/.product costs - Answer-costs that are a necessary and integral part of producing the
finished product. capitalized on the balance sheet and income statement
- manufacturing costs (direct materials, direct labor, MOH)
/.period costs - Answer-costs that are taken directly to the income statement as
expenses in the period in which they are incurred or accrued
- nonmanufacuring costs (selling and general and admin.)
/.variable costs - Answer-costs that vary directly with the level of production
- total cost increases and decreases in proportion to the change in activity level
- per unit cost stays the same
, /.fixed costs - Answer-costs that remain constant as output changes
- total fixed costs not affected by changes in activity level
- per unit cost decreases as the activity level rises and increases as the activity level
falls
/.Total Cost Formula - Answer-TC = (UVC * # of units) + FC
/.Hi-Lo Pricing - Answer-pricing strategy that starts with a high price, then runs
promotions to lower prices and increase demand; similar to price skimming
- advantages: straightforward to calculate, uses aggregate numbers, subject to data
available
- disadvantages: assumes costs are relatively stable, rough estimate
/.regression analysis - Answer-A method of predicting sales based on finding a
relationship between past sales and one or more independent variables, such as
population or income
- advantages: uses all available data, minimizes deviations
disadvantages: needs lots of data, more knowledge and work
/.Mixed Costs - Answer-costs that have both a fixed and a variable component
/.differential cost - Answer-a difference in cost between any two alternatives
- incremental, avoidable, differ between options
/.opportunity cost - Answer-value of the next best option, what is given up
/.Sunk costs - Answer-costs that have already been incurred and cannot be recovered
-paid for in the past, not relevant
/.contribution margin income statement - Answer-the income statement that groups cost
by behavior - variable or fixed - and highlights the contribution margin
- for internal reporting and decision making only
/.Traditional GAAP Income Statement - Answer-organizes by product and period costs
/.Cost-Volume-Profit Analysis - Answer-uses cost behavior to determine how revenues,
expenses, and profits will react to changes in volume
/.Unit Contribution Margin - Answer-selling price - variable cost
/.Contribution Margin Ratio - Answer-Contribution Margin / Sales
/.units to breakeven - Answer-(fixed costs + target profit)/CM per unit
/.revenue to breakeven - Answer-(fixed costs + target profit)/CM
