Instructions: Designate whether each of the following statements dealing with th
ID: 2496672 • Letter: I
Question
Instructions: Designate whether each of the following statements dealing with the process cost accounts and cost-volume-profit relationship is true or false. T=True and F=False.
T or F 1. Contribution margin is the amount of revenue left over to cover selling and administrative costs after manufacturing costs have been deducted.
T or F 2. The method of assigning costs is essentially the same in job order and process cost accounting.
T or F 3. The flow of costs is essentially the same in job order and process cost accounting.
T or F 4. In activity-based costing (ABC), the cost of a product is equal to the sum of the costs of all activities performed to manufacture it.
T or F 5. A cost reconciliation schedule is prepared to assign total costs to units transferred out and in ending work in process.
T or F 6. The margin of safety is the difference between actual sales and target net income sales.
T or F 7. Manufacturing costs in beginning work in process are ignored in computing the cost of units transferred out and the cost of ending work in process.
T or F 8. A contribution format income statement classifies costs by function, but a traditional income statement classifies costs by cost behavior (variable or fixed).
T or F 9. A company’s break-even point can be decreased by increasing the contribution margin ratio.
T or F 10. At the break-even point, total contribution margin is equal to total fixed costs.
Explanation / Answer
1)
Contribution margin is calculated by the following formula
= Sales - Variable manufacturing costs
So, it is True that contribution margin is the amount of revenue left over to cover selling and administrative costs after manufacturing costs have been deducted.
2)
Under process costing, average cost is assigned to each unit produced whereas in Job order costing, individual cost of production is assigned to each unit. So, both are reverse of each other. So, the method of assigning costs is different in both
So, the statement is False
3)
The flow of cost is different in job order and process cost accounting. So, the statement is False
4)
Activity Based Costing is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each.
So, the above statement is True