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Cost Accounting Basics

16. Mossfeet Shoe Company is a single product firm. Mossfeet is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year?

Contribution Break-Even
Margin Ratio Point
A) Increase Decrease
B) Decrease Decrease
C) Increase No Effect
D) Decrease No Effect

22. If a company applies overhead to production on the basis of a predetermined rate, a debit balance in the Manufacturing Overhead account at the end of the period means that:
A) actual overhead cost was greater than the amount charged to production.
B) actual overhead cost was less than the amount of direct labor cost.
C) more overhead cost has been charged to production than has been charged to finished goods during the period.
D) actual overhead cost was less than the amount charged to production.

Solution Preview

Answer 16: (A)
Since price increase and the number of units sold remain the same , the margin per unit will increase. ...

Solution Summary

The solution uses the facts provided in the question below to explain a couple of basic points about cost accounting namely - break even point and overheads.