Exam 10: Cost Analysis for Management Decision Making

The difference in cost between two alternatives, such as to make a component part of a final product versus buying the part from an outside supplier is called:

The Tijama Manufacturing Company has determined the cost of manufacturing a unit of product to be as follows, based on normal production of 50,000 units per year: Operating statistics for the month of August and September include: The selling price is $70 per unit. There were no inventories on August 1, and there is no work in process at September 30. Prepare comparative income statements for each month under the following methods: a.Absorption costing method b.Direct costing method

When evaluating profitability of a segment, costs that are directly identifiable with a specific segment are called:

A manager can increase income under absorption costing by

The following data relate to a year's budgeted activity for Jorgensen Corporation, a single product company: Total fixed costs remain unchanged within the relevant range in which the company is currently operating. a.What is the projected annual break-even sales in units? b.What dollar amount of sales would Jorgenson need to achieve operating income of $30,000? c.If fixed costs increased $7,500, how many more units must be sold to break even?

An example of a distribution cost that can be directly assigned to selling activity would be:

If the fixed costs related to a product increase while variable costs and sales price remain constant, what will happen to (1) contribution margin and (2) break-even point?

Which of the following is true about absorption costing?

The margin of safety is the amount:

Bradley Inc. has the capacity to make 100,000 windows. Bradley is currently operating at 100% capacity. The windows usually sell for $20.00 each. Costs for each window follow: The Army has offered to buy 10,000 windows for $12.00 each for barracks. Bradley should:

Consider the following information about the Gumm Company: Budgeted fixed costs are $550,000. The break-even point in total cases is:

Absorption cost is required for:

A basic tenet of variable costing is that fixed overhead costs should be currently expensed. What is the basic rationale behind this procedure?

What costs are treated as product costs under direct costing?

The relative percentage of unit sales among the various products made by a firm is the:

A technique that uses the degrees of cost variability to measure the effect of changes in volume on resulting profits is:

Consider the following information about the Gumm Company: Budgeted fixed costs are $550,000. The weighted-average unit contribution margin is:

The use of either absorption or variable costing will make little difference in companies

Franklin Company is a medium-sized manufacturer of bicycles. During the year a new line called "Radical" was made available to Franklin's customers. The break-even point for sales of Radical is $250,000 with a contribution margin ratio of 40 percent. Assuming that the profit for the Radical line during the year amounted to $80,000, total sales during the year would have amounted to:

What factor related to manufacturing costs causes the difference in net earnings computed using absorption costing and net earnings computed using variable costing?