D101 Cost and Managerial Accounting - Set 2 - Part 1

Correct Answer: Direct labor hours

In traditional costing systems, manufacturing overhead is typically allocated based on direct labor hours as it is an easily measurable activity that relates to production.

Correct Answer: Cost drivers

Cost drivers in ABC systems represent the activities that cause costs to be incurred, which helps to allocate overhead more precisely compared to traditional methods.

Correct Answer: Non-manufacturing costs

ABC systems allocate costs related to both manufacturing and non-manufacturing activities, allowing for a more comprehensive understanding of product costs.

Correct Answer: Using multiple cost drivers

ABC uses multiple cost drivers, each related to different activities, to allocate overhead more accurately, as opposed to traditional methods that use a single cost driver.

Correct Answer: Total fixed costs

The vertical intercept on the CVP graph represents total fixed costs, as these are the costs incurred even if no units are produced.

Correct Answer: Manufacturing overhead and direct labor

Conversion costs include direct labor and manufacturing overhead, as these are the costs needed to convert raw materials into finished products.

Correct Answer: The percentage of sales above breakeven

Margin of safety shows how much sales can drop before the company reaches its breakeven point, which is a measure of risk.

Correct Answer: Manufacturing overhead

When manufacturing overhead is applied, the manufacturing overhead account is credited, reducing the balance of overhead to be applied.

Correct Answer: Sales revenue minus variable costs

Contribution margin is the amount remaining from sales after variable costs are subtracted, which can be used to cover fixed costs.

Correct Answer: Total fixed costs divided by contribution margin per unit

The break-even point in units is the number of units that must be sold to cover fixed costs, calculated by dividing fixed costs by the contribution margin per unit.

Correct Answer: Process costing

Process costing is used in industries where identical products are produced in large quantities and costs are assigned evenly across all units.

Correct Answer: Process costing averages costs over a continuous flow of units.

Process costing assigns costs to a continuous flow of identical units, while job order costing assigns costs to individual, distinct jobs.

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Correct Answer: They are applied based on a single cost driver.