D196 Principles of Financial and Managerial Accounting - Set 2 - Part 1

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A cost driver is a factor that causes overhead costs to increase or decrease, and in manufacturing, direct labor hours can be a significant cost driver.

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A manufacturing overhead budget includes indirect costs such as utilities, indirect labor, and depreciation, but excludes direct costs like direct materials.

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Operating expenses include costs related to running the business, such as salaries for sales staff, which are not directly tied to production.

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Process costing is typically used by businesses that produce homogeneous products in large quantities, such as a cereal manufacturer.

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The balance sheet shows a company's assets, liabilities, and shareholders' equity, providing a snapshot of its financial position at a specific point in time.

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Variable costs change in proportion to the level of production, such as the wages of assembly line workers, which increase as production increases.

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Contribution margin ratio is calculated by subtracting variable costs from sales price and then dividing by the sales price. (40 - 25) / 40 = 0.375.

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Period costs are non-manufacturing costs and include expenses such as sales commissions, which are expensed in the period in which they occur.

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Product costs include all costs necessary to produce goods, such as raw materials, direct labor, and manufacturing overhead.

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In a job order costing system, costs are accumulated for each job or batch of products, which are typically unique or custom-made.

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Break-even point is calculated by dividing fixed costs by the contribution margin per unit. ($100,000 / ($50 - $30)) = 5,000 units.

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Manufacturing overhead includes indirect costs related to production, such as the factory supervisor's salary, which cannot be directly traced to a product.

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Accounts receivable is an asset account that appears on the balance sheet, representing amounts owed to the company by customers.

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A cash budget helps companies manage their cash inflows and outflows to ensure they have enough liquidity to cover expenses.

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Fixed costs, such as rent, remain constant regardless of production levels, unlike variable costs like raw materials or direct labor.

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Direct costs can be directly traced to a specific product or job, such as wages paid to assembly line workers.

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The correct order is sales budget, production budget, and then direct materials budget, as production depends on the expected sales.

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Product costs include all costs associated with manufacturing, such as factory utilities, while administrative salaries and sales commissions are period costs.

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Break-even sales revenue is calculated by dividing fixed costs by the contribution margin ratio. $120,000 / 0.40 = $300,000.

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The statement of cash flows reports cash inflows and outflows related to operating, investing, and financing activities.