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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.

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    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 i n 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 Cost s 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 = Fixe d 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

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