Cost Accounting Exam 2 review for MC

Equivalent units of production

Calculated as (Ending Inventory * % complete) to determine production output.

Job Order Costing

A cost accounting system used for unique products, with costs accumulated by job.

Process Costing

A cost accounting system used for continuous production processes, with costs accumulated by department.

Contribution Margin

Calculated as Sales - Variable Costs, indicating how much sales contribute to fixed costs and profits.

Contribution Margin Income Statement

A financial report that emphasizes how sales affect profitability by highlighting the contribution margin.

Fixed Costs

Costs that remain constant regardless of the level of production or sales.

Variable Costing

An accounting method that includes direct materials, direct labor, and variable manufacturing overhead while excluding fixed manufacturing overhead.

Traceable Fixed Cost

A fixed cost that can be directly traced back to a specific department or segment of a business.

Break Even Point

The level of sales at which total revenue equals total costs, resulting in no profit or loss.

Unit Sales to Break Even

Calculated as Fixed Costs divided by Contribution Margin.

Contribution Margin Ratio

Calculated as Contribution Margin divided by Sales, indicating the percentage of each sales dollar that contributes to covering fixed costs.

Variable Expense Ratio

Calculated as Variable Expenses divided by Sales, showing the proportion of sales consumed by variable costs.