Exam 2: Different Costs for Different Purposes

The Cycle Centre currently produces 1000 bicycles per month.The following per unit data apply for sales to regular customers: Direct materials \ 50 Direct manufacturing labour 5 Variable manufacturing overhead 14 Fixed manufacturing overhead Total manufacturing costs \ 79 The plant has capacity for 3000 bicycles and is considering expanding production to 2000 bicycles.What is the per unit cost of producing 2000 bicycles?

A variable cost changes per unit in proportion to changes in the related level of total activity or volume.

A cost object is anything for which a measurement of costs is desired.

Budgeted costs are:

Conversion costs include all direct manufacturing costs.

Ways to 'produce for inventory' that result in increasing operating profit include:

Variable costing is a less than perfect term to describe this inventory costing method because not all variable costs are inventoriable costs;only ________ manufacturing costs are inventoriable.

At a plant where a union agreement sets annual salaries and conditions,annual labour costs usually:

Products,services,departments,and customers may be cost objects.

Under Australian Accounting Standards,only manufacturing costs can be assigned to inventories in the financial statements.

Companies have recently been able to reduce inventory levels because:

Retail sector companies only hold two types of inventories: retail inventory,and direct material.

Cost objects may be jobs,products,or customers.

Each of the following items pertains to one of these companies: Bedell Electronics (a manufacturing company),Gregory Food Retailers (a merchandising company),and Larson Real Estate (a service sector company).Classify each item as either inventoriable (I)costs or period (P)costs. _____________________________________________________________________________________________ _____________________________________________________________________________________________

The contribution-margin format of the income statement:

Answer the following questions using the information below: Jindabyne Pillows produces and sells a decorative pillow for $75.00 per unit.In the first month of operation, 2000 units were produced and 1750 units were sold.Actual fixed costs are the same as the amount budgeted for the month.Other information for the month includes: Variable manufacturing costs \ 20.00 per unit Variable marketing costs \ 3.00 per unit Fixed manufacturing costs \ 7.00 per unit Administrative expenses, all fixed \ 15.00 per unit Ending inventories: Direct materials -0- WIP -0- Finished goods 250 urits -What is 'operating profit' using variable costing?

Costs are accounted for in two basic stages: assignment followed by accumulation.

When 50 000 units are produced the fixed cost is $10 per unit.Therefore,when 100 000 units are produced fixed costs will remain at $10 per unit.

Explain the difference between an inventoriable cost and a period cost.What potential problems does an inaccurate classification of product and period costs cause? _____________________________________________________________________________________________ _____________________________________________________________________________________________

The only inventoriable cost for a retailer is the cost of merchandise,which corresponds to the cost of finished goods manufactured for a manufacturing company.