ACC 310F Study Guide - Quiz Guide: Gross Margin, Income Statement, Expense

Determine whether each statement is true or false.

A. Freight costs incurred in shipping products to customers isproperly referred to as a product rather than period cost of theselling company.

B. Period costs include all selling and administrative costs,both variable and fixed.

C. The salary of a manufacturing quality control inspector wouldtypically be accounted for as manufacturing overhead.

D. A retail merchandising company's cost of goods sold typicallyincludes part of store utility costs.

E. A manufacturing company's cost of goods sold includes onlyproduct costs.

F. The basis used to apply manufacturing overhead in a job ordercost system based on a predetermined overhead rate should be ameasurable activity which correlates with or drives overheadcosts.

G. Managerial accounting is governed by rules issued by theAICPA

H. If sales price and fixed costs remain constant while variablecosts per unit increase, the number of units needed to be sold toreach the break-even point increases.

I. Unrecoverable past costs are always irrelevant in evaluatingfuture business decision alternatives.

How to reply to the below Discussion response.

Managerial accounting provides internal managers the use ofaccounting to plan and control business operations(Pearsoncustom.com, n.d). The internal nature of managerialaccounting is opposite to financial accounting which is used inregards to external entities (investors, creditors and government).Management accounting focuses on the cost-benefit analysis tooperating procedures within an organization.

Associated with the two forms of accounting are two coststructures used in an income statement: absorption and variable.The two cost structures identify the cost of a product butabsorption costing includes the fixed manufacturing overhead.Variable costing identifies fixed manufacturing overhead as aperiod cost thus not including it in the price of a unit produced(EducationUnlocked, 2014). Absorption costing is typically utilizedin financial accounting for external entities. Variable costing istypically used in managerial accounting because they focus on onlyvariable costs which eliminate skewed results from fixed overheadin unused inventory. In the short-run managers don’t need toinclude fixed costs because they are regarded as sunk costs nomatter how many units are produced or sold.

A variable costing income statement generates a contributionmargin. The contribution margin reflects the sale price of aproduct less all variable costs (EducationUnlocked, 2014). The contribution margin gains insight into costs thatcan be calculated in units. The contribution margin can helpmanagers understand profit per unit based on the variable expensesincurred. As the contribution margin doesn’t include fixed expensesit can quickly identify if a company is going to be profited ableby subtracting the fixed expenses from the contribution margin.

Yoder Furniture Works

Yoder Furniture Works manufactures a high-quality, woodenrocker-recliner. A key differentiating feature of thisrocker-recliner is the ease with which a hand-operated lever raisesand lowers the footrest. Yoder left the prototype phase and begancommercial production on January 1, 2015. A retired accountant ofthe founder, Steve Yoder, maintained the accounting records on atemporary basis through January 31, 2015. Now, Yoder is searchingfor a replacement. Potential candidates are being askedto evaluate the information from the first month of commercialoperation as follows:

Based on the above information, answer the followingquestions:

Classify costs as either product costs or period costs using theformat shown below. Enter the dollar amount for each cost in theappropriate column and total each classification.

Classify costs as either variable costs or fixed costs. Assumethere are no mixed costs. Enter the dollar amount for each cost inthe appropriate column and total each classification. Use theformat shown below. Assume that Utilities for production equipmentand factory building are a fixed cost

Prepare a schedule of cost of goods manufactured for the monthof January 2015.