A306 Overview and Chapter 1 questions

A factory manager's salary is an example of a(n) Blank______ cost.

Indirect

Minor items such as nails and glue are usually considered to be Blank______.

Indirect materials

Indirect labor costs include ______.

assembly-line supervisor salary factory security guard wages

Any item for which cost data is desired is called a(n) _______.

cost object

Indirect materials and indirect labor are classified as Blank______. Multiple choice question.

manufacturing overhead

When making a decision Blank______ should be considered.

only relevant costs and benefits

Product costs Blank______.

"attach" to units of product as they are purchased for resale or produced are also called inventoriable costs

A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements, Blank______.

$300 is reported as a expense and $900 is reported as an asset ($100 per month over 3 months with 9 months left)

Given: Sales of $360,000, Gross Margin of $140,000, Contribution Margin of $110,000, and Total Selling & Administrative Exp. of $60,000, net income using the traditional income statement format equals ______.

$80,000 Reason: Gross Margin of $140,000 - Total Selling & Admin. Exp. of $60,000 = $80,000.

A manager selecting a course of action is performing a Blank______ activity.

Decision Making

Costs that can be easily and conveniently traced to a specific product are called Blank______ costs.

Direct

Fantastic Furniture makes custom order couches. The material used to make a couch is a(n) Blank______ cost of the customer placing the order.

Direct

Labor costs that can be easily and conveniently traced to specific products are Blank______ costs.

Direct

Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are _______ materials.

Direct

T or F: To be traced to a cost object such as a particular product, the cost must be incurred to make the product.

False To be traced to a cost object such as a particular product, the cost must be caused by the cost object.

Which of the following statements are true?

Period costs are expensed when incurred. Period costs do not flow through the inventory accounts.

Which of the following are differences between the traditional and contribution format to income statements?

Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior. Contribution format statements make it easier to predict how decisions affect the future.

Opportunity costs Blank______. Multiple select question.

are benefits that are given up when selecting one alternative over another should be considered in decision making

How individual costs react to changes in activity level is referred to as cost ________.

behavior

Cost behavior Blank______.

categorizes costs as fixed, mixed and variable refers to how a cost will change as activity level changes

Decision Making involves ______.

determining where to focus marketing efforts for the next year

Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are ________ materials.

direct

A laptop computer manufacturer would consider the computer's processor chip to be a(n) Blank______ cost.

direct material

Managerial Accounting ______

emphasizes relevance emphasizes the future is not mandatory reports to managers inside the organization

Planning involves Blank______.

establishing goals and specifying how to achieve them

Planning involves ______.

establishing goals for the company preparing annual budgets

Administrative costs include Blank______.

executive compensation and public relations costs

Costs that remain constant in total are Blank______ costs. Multiple choice question.

fixed

The difference in revenues between two alternatives is called Blank______.

incremental revenue Reason: This is also called differential revenue.

Manufacturing costs include Blank______. Multiple select question.

manufacturing overhead direct labor direct materials

A cost that contains both variable and fixed costs elements is called a(n) _______ cost.

mixed

Indirect materials include Blank______.

nails, glue, and thread Reason: Relatively insignificant materials are treated as indirect because it isn't worth the effort to trace the costs.

The management activity of _______ includes specifying how to achieve established goals.

planning

Three activities vital to the role of managerial accounting are Blank______.

planning, controlling and decision making

Direct materials, direct labor, and manufacturing overhead are all Blank______ costs.

product

When making a decision, the decision maker should consider Blank______. Multiple select question.

relevant benefits relevant costs

The assumption that cost behavior is strictly linear is reasonably valid within the ______________ of activity

relevant range

Selling costs include Blank______.

sales commissions sales salaries advertising

Contribution margin is Blank______. Multiple choice question.

sales revenue minus variable costs

Direct labor is also called _____ labor.

touch

A potential benefit that is forfeited or lost when one decision is chosen over another is called a(n) ___________

Opportunity cost

Sales revenue minus variable expenses equals __________.

contribution margin

Factory materials, such as cleaning supplies, that are not components of finished products are classified as Blank______.

Manufacturing Overhead

The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is recognized is known as the ________ principle.

Matching

Parties more interested in managerial accounting data than in financial accounting data include Blank______.

production managers sales managers

The materials that go into making a product are _____ materials.

raw

Differential cost is ______.

A difference in cost between two alternatives. Also known as incremental cost

Which of the following are most likely fixed costs?

Administrative salaries Factory insurance Factory rent

Direct materials and direct labor are both Blank______ costs.

Manufacturing

The finished product of one company can become raw materials for another company.

True Raw materials are anything that go into a finished product. For example, a computer chip is a finished product for the chip manufacturer and a raw material for the computer manufacturer.

Cost of goods sold for a merchandising company, direct materials and commissions are all examples of Blank______ costs.

Variable

Which type of cost changes in total, in direct proportion to changes in activity level?

Variable

Cost classifications for predicting cost behavior are used on Blank______. Multiple choice question.

contribution format income statements only Reason: Contribution format statements separate costs into fixed and variable components which is useful for predicting cost behavior.

Cost objects include:

customers. organizational subunits. anything for which cost data is desired.

Controlling involves ______.

gathering feedback to ensure plans are being properly executed or modified as needed

Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the Blank______. Multiple choice question.

income statement

As the level of activity moves outside of the relevant range, fixed costs, Blank______.

increase or decrease in discrete steps

The difference in costs between two alternatives is called a(n) Blank______ cost.

incremental Reason: This is also called a differential cost.

Salaries of factory supervisors and factory maintenance personnel are examples of Blank______ labor costs. Multiple choice question.

indirect Reason: Only labor costs that can be physically and conveniently traced to individual units of product are considered direct labor costs.

Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as Blank______.

manufacturing overhead

On a traditional income statement, cost of goods sold reports the _______ costs attached to the merchandise sold and selling and administrative expenses report all ________ costs that have been incurred.

product or manufacturing, period

Period costs are always expensed on the income statement in the period in which Blank______.

they are incurred