Acc310 Cost Accounting: Week 1 Study Guide (Version 2)

Acc310 Cost Accounting
Week 1 Study Guide (Version 2)

1. The Blue Company is currently selling its single product for $15. Variable costs are estimated to remain at 70% of the current selling price and fixed costs are estimated to be $4,800 per month. If Blue increases its selling price by 10%, its variable cost ratio will
not change
decrease
increase

2. If the fixed costs for a product decrease and the variable costs (as a percentage of sales dollars) decrease, what will be the effect on the contribution margin ratio and the breakeven point respectively? The contribution margin ratio will _____ and the breakeven point will _____.
Decrease, Increase
Increase, Decrease
Decrease, Decrease
Increase, Increase

3. Which field of accounting emphasizes relevancy over comparability?
cost accounting.
financial accounting.
responsibility accounting.
International accounting

4. The terms direct cost and indirect cost are commonly used in accounting. A particular cost might be considered a direct cost of a manufacturing department but an indirect cost of the product produced in the manufacturing department. Classifying a cost as either direct or indirect depends upon
whether an expenditure is unavoidable because it cannot be changed regardless of any action taken.
whether the cost is expensed in the period in which it is incurred.
the behavior of the cost in response to volume changes.
the cost object to which the cost is being related.

5. In a decision analysis situation, which one of the following costs is not likely to contain a variable cost component? (CMA adapted, 6/96)
A. Labor
B. Overhead
C. Depreciation
D. Selling
E. Material

6. Which of the following statements is (are) true?
(1). An asset is a cost that will be matched with revenues in a future accounting period.
(2). Opportunity costs are recorded as intangible assets in the current accounting period.

7. Which of the following statements is false?
In essence, the value chain and the supply chain are similar; each creates something for which the customer is willing to pay.
Accounting systems are important because they provide all the information for decisions commonly made by managers.
The supply chain is a linked set of organizations that exchange goods and services in combination to provide a final product or service to the customer.
Eliminating nonvalue-added activities always reduces costs without affecting the value of the product to customers.

8. The Cost of Goods Manufactured Statement summarizes the periodic production operations for a company. On the face of that schedule are intermediate calculations supporting the cost of goods manufactured figure. The beginning Work-in-Process inventory plus the total of the manufacturing costs equals
total finished goods during the period.
cost of goods sold for the period.
total work-in-process during the period.
cost of goods manufactured for the period.

9. Pete's Pizza Place wishes to determine which of its costs will vary with the number of pizzas made. The Pizza Place has four pizza makers and ten other employees who take orders from customers and perform other tasks. The four pizza makers and the other employees are paid an hourly wage. How would one classify (1) the wages paid to the pizza makers and other employees and (2) materials (e.g., cheeses, sauce, etc.) used to make the pizza? The employees’ wages would be considered a ______, while the materials to make the pizza are a ______.
fixed cost; fixed cost
fixed cost; variable cost
variable cost; fixed cost
variable cost; variable cost
mixed cost; mixed cost

10. Barnes Corporation manufactures skateboards and is in the process of preparing next year's budget. The pro forma income statement for the current year is presented below.
Sales 1,500,000
Cost of sales:
Direct materials 250,000
Direct labor 150,000
Variable overhead 75,000
Fixed overhead 100,000
Gross profit 925,000
Selling and G & A
Variable 200,000
Fixed 250,000
Operating income 475,000

The breakeven point (rounded to the nearest dollar) for Barnes Corporation for the current year is
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