D196 Principles of Financial and Managerial Accounting - Set 4 - Part 1

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Product costs include costs directly involved in producing goods, such as direct labor, raw materials, and manufacturing overhead.

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Period costs, such as office rent, are expensed in the period in which they are incurred and are not tied directly to the production process.

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Break-even point in units is calculated by dividing fixed costs by the contribution margin per unit. ($12,000 / $3 = 4,000 units).

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Cash is considered a current asset, as it can be converted into other assets within a year.

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Nails are considered indirect materials because their cost is not significant and cannot be traced to a specific product unit.

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Job order costing is used for custom or unique jobs, while process costing is used for mass production of identical items.

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Fixed costs remain constant in total but decrease on a per-unit basis as production increases.

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The sales budget is typically prepared first because it forecasts the company’s sales, which drives the rest of the budgeting process.

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Retained earnings represent the portion of a company’s profits that are reinvested in the business and are classified under equity.

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Borrowing money is a financing activity, as it involves raising capital for the business.

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Managerial accounting provides internal information to help managers make informed business decisions.

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Manufacturing overhead includes all indirect costs related to production, such as factory utilities, indirect labor, and depreciation of equipment.

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Break-even in sales dollars is calculated by dividing fixed costs by the contribution margin ratio. ($24,000 / 0.40 = $60,000).

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Buying equipment is an investing activity, as it involves acquiring long-term assets.

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Overapplied overhead occurs when more overhead is applied to production than was actually incurred.

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Property taxes are typically noncontrollable costs, as they are determined by external factors and cannot be easily changed by management.

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CVP analysis is used to understand how changes in costs, sales volume, and price affect a company's profit.

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Mortgage payable is a long-term liability because it is not expected to be paid within the next year.

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Utilities are considered a mixed cost because they have both a fixed component (base charge) and a variable component (usage charge).

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Contribution margin ratio is calculated by dividing the contribution margin by the selling price. ($30 / $75 = 0.40).