ACCT321 COST ACCOUNTING UNIVERSITY OF MARYLAND UNIVERSITY COLLEGE
This paper focuses on cost accounting principles, helping students understand how to allocate costs and manage financial performance in businesses.
Sarah Robinson
Contributor
4.9
53
about 1 month ago
Preview (2 of 4)
Sign in to access the full document!
Page 1 of 4
UNIVERSITY OF MARYLAND UNIVERSITY COLLEGE
COST ACCOUNTING
ACCT321
WEEK ONE HOMEWORK ASSIGNMENT
I. Questions
1. Provide three examples of a cost pool, its cost driver and the cost
object.
Answer:
A cost is incurred when a resource is used by firm for some purpose.
• Costs are assembled into meaningful groups which called cost pools
(e.g., by type of cost or source, washing machine manufacturer motor,
assembly and packing are cost pools.)
• Any factor that has the effect or changes the level of total cost is
called a cost driver. E.g. labor hours, machine hours and set up.
• A cost object is any product, service, customer, activity, or
organizational unit to which costs are assigned for example washing
machine, car, computer etc.
2. What are the costs included in work-in-process?
Answer:
The following costs are included in work in process;
• Direct Material
• Direct Labor
• Overheads
3. What is the formula for computing; 1) gross margin, 2) contribution
margin and operating income.
Answer:
Gross Margin = Sales Revenue – Cost of Goods Sold
Contribution Margin = Sales Revenue – Variable Cost
Operating Income = Contribution Margin – Fixed Costs
4. If current sales increased, would the margin of safety increase or
decrease.
Answer:
With the increase in current sales volume, margin of safety will
increase.
5. If variable costs increased with all other factors (amounts) not
changing; would the breakeven point in units increase or decrease.
Answer:
If there is increase in variable cost then Break Even Point in units is
bound to increase as BEP in units = Fixed Cost / CM per unit and CM per
unit = SP per unit – VC per unit.
II. Exercises
1. The following information is provided for International Paper
Manufacturing Inc. for 2015: (Amounts are in thousands)
Beginning finished goods, 1/1/15 $125,000
Net income $ 65,000
Gross margin $245,000
UNIVERSITY OF MARYLAND UNIVERSITY COLLEGE
COST ACCOUNTING
ACCT321
WEEK ONE HOMEWORK ASSIGNMENT
I. Questions
1. Provide three examples of a cost pool, its cost driver and the cost
object.
Answer:
A cost is incurred when a resource is used by firm for some purpose.
• Costs are assembled into meaningful groups which called cost pools
(e.g., by type of cost or source, washing machine manufacturer motor,
assembly and packing are cost pools.)
• Any factor that has the effect or changes the level of total cost is
called a cost driver. E.g. labor hours, machine hours and set up.
• A cost object is any product, service, customer, activity, or
organizational unit to which costs are assigned for example washing
machine, car, computer etc.
2. What are the costs included in work-in-process?
Answer:
The following costs are included in work in process;
• Direct Material
• Direct Labor
• Overheads
3. What is the formula for computing; 1) gross margin, 2) contribution
margin and operating income.
Answer:
Gross Margin = Sales Revenue – Cost of Goods Sold
Contribution Margin = Sales Revenue – Variable Cost
Operating Income = Contribution Margin – Fixed Costs
4. If current sales increased, would the margin of safety increase or
decrease.
Answer:
With the increase in current sales volume, margin of safety will
increase.
5. If variable costs increased with all other factors (amounts) not
changing; would the breakeven point in units increase or decrease.
Answer:
If there is increase in variable cost then Break Even Point in units is
bound to increase as BEP in units = Fixed Cost / CM per unit and CM per
unit = SP per unit – VC per unit.
II. Exercises
1. The following information is provided for International Paper
Manufacturing Inc. for 2015: (Amounts are in thousands)
Beginning finished goods, 1/1/15 $125,000
Net income $ 65,000
Gross margin $245,000
Preview Mode
Sign in to access the full document!
100%
Study Now!
XY-Copilot AI
Unlimited Access
Secure Payment
Instant Access
24/7 Support
Document Chat
Document Details
University
University of Maryland
Subject
Accounting