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Flashcards in Deck 3 Deck (20):
1

Goal of production report

Keep track of the flow of units and costs

2

Equivalent units under weighted average method (two steps) =

Units completed + WIP ending (percentage complete)

3

Equivalent units under FIFO (3 steps) =

(Beg. WIP x per. to be completed) + (units completed - beg WIP) + (End WIP x per. completed)

4

Most widely used method to allocate service costs is

Direct Method (total costs are directly allocated to production department)

5

Separable costs

Costs incurred after the split off point

6

Breakeven point in units =

Total Fixed costs / contribution margin per unit

7

Breakeven point in sales =

Total Fixed costs / CM ratio or Breakeven point in units x unit price

8

Margin of safety =

current sales = breakeven sales

9

Absorption costing will produce higher net income than variable costing when:

Production is greater than sales (This means inventory increased)

10

Breakeven analysis assumes that over the relevant range all variable costs and revenues are

Constant per unit and are linear

11

How is Fixed OH treated under variable costing (contribution approach, not GAAP) vs. Absorption costing (GAAP)?

VC: period cost and expensed; AC: product cost and inventoriable

12

Does contribution margin change with volume?

NO

13

Units sold to achieve profit =

(Fixed costs + pre tax Profit) / CM per unit

14

What is the relevant range?

Range over which cost relationships are valid (Fixed costs are fixed and variable cost per unit don't change)

15

What ratio is used to determine which product should be sold to a customer?

Use CM ratio (sell the product with the highest ratio)

16

Breakeven point is the point at which

Revenues equal total costs

17

Compute the change in income =

Change in inventory unites (produced vs. sold) x fixed cost per unit

18

Sales dollars needed to achieve profit =

(Fixed costs + pre tax profit) / CM ratio

19

Profit based on volume =

Units above the breakeven point x contribution margin per unit

20

Sale price per unit based on volume =

(FC + VC + Profit) / # of units sold