Cost exam 2 questions 2024 with 100%
correct answers
Revenue and cost assumptions - ANSWERS1) Sales price per unit is constant (depends on product) ex.
gasoline is constantly changing
2) Variable cost per unit is constant, total fixed costs are constant, mixed costs can be separated into
variable and fixed components, company operates in relevant range--> break mixed into components
3) product mix remains constant- proportions of each product that you are selling (multi product
company, all dif products)
CM - ANSWERSSales- Variable costs
Breakeven point - ANSWERSprofit is zero, no loss or gain
BE formula - ANSWERSRx - VCx - FC= P
CM ratio - ANSWERSCM/sales
Variable cost ratio - ANSWERSVC/ sales
components of the ratios - ANSWERSvc and cm ratio sum to 1, larger the cm ration, smaller the vc ratio
What do companies think of when it comes to special order? - ANSWERSFirst considers if we can do it?
Then, is it profitable?
target profit - ANSWERSpractice questions....
TP= Rx - VCx - FC
Margin of safety - ANSWERShow far above breakeven is the company?
, Margin of safety- units - ANSWERSActual units - breakeven units
Margin of safety- dollars - ANSWERSActual sales- breakeven sales
margin of safety % - ANSWERSMargin of safety units or dollars/ actual sales in units or money
Absorption - ANSWERSall product costs, materials, labor, both variable and fixed OH, consistent with
GAAP, used for external reporting
gross margin/gross profit is interim figure
Variable - ANSWERSonly variable cost of production including materials, labor, and variable OH. Fixed
MOH is treated as a PERIOD EXPENSE.
NOT product cost. NOT consistent w GAAP.
Contribution margin is interim figure
2 factors that cause a difference between absorption and variable cost income? - ANSWERSInventory
and Fixed OH
treat fixed OH differently and hold inventory
More Ending Inventory... - ANSWERSCOGS lower and absorption is higher
More Beginning Inventory... - ANSWERSVariable is higher
Variable cost per unit - ANSWERSmaterials + labor + variable OH
Absorption - ANSWERSadd in fixed OH based on predetermined rate
Variance - ANSWERScomparing actual and expected results, doing an analysis and learning for the
future. Every company should do this analysis.
correct answers
Revenue and cost assumptions - ANSWERS1) Sales price per unit is constant (depends on product) ex.
gasoline is constantly changing
2) Variable cost per unit is constant, total fixed costs are constant, mixed costs can be separated into
variable and fixed components, company operates in relevant range--> break mixed into components
3) product mix remains constant- proportions of each product that you are selling (multi product
company, all dif products)
CM - ANSWERSSales- Variable costs
Breakeven point - ANSWERSprofit is zero, no loss or gain
BE formula - ANSWERSRx - VCx - FC= P
CM ratio - ANSWERSCM/sales
Variable cost ratio - ANSWERSVC/ sales
components of the ratios - ANSWERSvc and cm ratio sum to 1, larger the cm ration, smaller the vc ratio
What do companies think of when it comes to special order? - ANSWERSFirst considers if we can do it?
Then, is it profitable?
target profit - ANSWERSpractice questions....
TP= Rx - VCx - FC
Margin of safety - ANSWERShow far above breakeven is the company?
, Margin of safety- units - ANSWERSActual units - breakeven units
Margin of safety- dollars - ANSWERSActual sales- breakeven sales
margin of safety % - ANSWERSMargin of safety units or dollars/ actual sales in units or money
Absorption - ANSWERSall product costs, materials, labor, both variable and fixed OH, consistent with
GAAP, used for external reporting
gross margin/gross profit is interim figure
Variable - ANSWERSonly variable cost of production including materials, labor, and variable OH. Fixed
MOH is treated as a PERIOD EXPENSE.
NOT product cost. NOT consistent w GAAP.
Contribution margin is interim figure
2 factors that cause a difference between absorption and variable cost income? - ANSWERSInventory
and Fixed OH
treat fixed OH differently and hold inventory
More Ending Inventory... - ANSWERSCOGS lower and absorption is higher
More Beginning Inventory... - ANSWERSVariable is higher
Variable cost per unit - ANSWERSmaterials + labor + variable OH
Absorption - ANSWERSadd in fixed OH based on predetermined rate
Variance - ANSWERScomparing actual and expected results, doing an analysis and learning for the
future. Every company should do this analysis.
