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Flashcards in Cost Accounting - Graphic Deck (12):
1

Under the high low method, how is the variable cost calculated?

(Total cost at the highest level of activity – total cost at the lowest level of activity) / (number of units / labour hour at the highest level of activity - number of units / labour hour at the lowest level of activity)

2

Under the high low method, how is fixed cost calculated?

By subtracting total variable cost from total cost

3

Under what method is variable cost calculated the following way?

(Total cost at the highest level of activity – total cost at the lowest level of activity) / (number of units / labour hour at the highest level of activity - number of units / labour hour at the lowest level of activity)

The high low method

4

5

Under what method is fixed cost calculated the following way?

By subtracting total variable cost from total cost

The high low method

6

How is the predetermined rate calculated for job order costing?

Estimated total manufacturing cost overhead / Estimated total amount of the allocation base

7

8

How is the predetermined rate different from machine overhead rate per machine hour?

It also includes a portion of the fixed cost allocated to the unit.

9

What happens to over applied overhead?

It is credited against cost of goods sold.

10

11

For example, Lowry Locomotion is considering the purchase of new equipment to expand the production capacity of its toy tractor product line. The addition will increase Lowry's operating costs by $100,000 per year, though sales will also be increased. Relevant information is noted in the following table:

The table reveals that both the _________ and profits worsen slightly as a result of the equipment purchase, so expanding production capacity is probably not a good idea.

margin of safety

12

For example, Lowry Locomotion is considering the purchase of new equipment to expand the production capacity of its toy tractor product line. The addition will increase Lowry's operating costs by $100,000 per year, though sales will also be increased. Relevant information is noted in the following table:

The table reveals that both the margin of safety and profits worsen slightly as a result of the equipment purchase, so _______________ is probably not a good idea.

expanding production capacity