Accounting exam 2

When calculating contribution margin, all of the items below are needed except

Gross Profit

If all other items stay the same, but sales price drops – which of the following is true?

Both contribution margin and NOI will go down

Mad Dog Fence Company sets their price p/fence @$700. They have fixed supervisor salary and equipment costs of $42,000, and variable costs of $300 p/fence to cover wood and gate hardware. How many fences do they have to sell to breakeven?

105

how to find break-even units

fixed costs / price per unit - variable cost per unit

how to find contribution margin

price - variable cost / price

Which of the following is a true statement?

As production levels decrease, FC per unit will increase.

When performing Least Squares Regression Analysis, a highly reliable equation means

R Squared is above .8

When units produced are greater than units sold

Operating income is greater under absorption costing than variable costing

Which of the following is appropriate for external reporting?

Absorption Costing

When preparing budgets in a manufacturing company, what is the logical order to follow?

Sales Budget, Production Budget, Direct Materials Budget

Using master budget information, then adjusting this for actual volume is called:

A flexible budget

Why are flexible budgets so important?

Business conditions change and the master budget should be adjusted to reflect new assumptions
Flexible budgets help management understand the source of variances
Flexible budgets assist in a fair assessment of department performance results
ALL OF THE ABOVE IS CORRECT

If a company has a favorable spending variance for variable costs, this means that:

The actual results were less than the flexible budget for variable costs

If a company has an unfavorable activity variance for revenue, this means that.

Less units were sold than originally planned for
The Flexible Budget for revenue was less than the Planning Budget for Revenue
The company has a favorable activity variance for variable costs
ALL OF THE ABOVE IS CORRECT

cm ratio

total sales - total variable expenses / total sales

BE in sales

total fixed cost / cm ratio

margin of safety

Actual sales - break even sales

Required contribution margin

fixed expenses + target income / units needed

cm per unit

selling price - variable cost per unit

variable costing I/S

sales - variable expenses = CM then CM - fixed costs = NOI

merchandising required purchases

COGS + DEI - BI

FMOH p/unit

Fixed mfg. overhead / units produced

Absorption MOH

FMOH + VMOH + DM + DL

COGS for absorption costing

Units sold X absorption MOH