ACCT 2020- Test 1

In a small manufacturing facility, one welder is needed for every 200 hours of machine-hours or fewer in a month. The welder is paid a monthly salary of $2,500. If the total monthly requirement is 1,300 machine-hours, the total salaried employee expense is ________.

$17,500

Audio Corporation purchased $20,000 of DVDs during the current year. The company had DVD inventory of $15,000 at the beginning of the year. An end of the year audit revealed that the company had DVD inventory of $10,000. The amount that would be reported as cost of goods sold in the income statement for the current year is ________.

$25,000

Differential cost is:

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

_________ is a measure of whether or not a delivered product meets its design specifications.

Conformance quality

The traditional income statement uses which of the following cost categories?

Cost of goods sold and selling and administrative expenses.

All of the following are uses of a quality cost report EXCEPT ________. -helps managers see the financial significance of defects -helps managers identify the relative importance of quality problems faced by their company -helps managers see the lost sales arising from customer ill will -helps managers see the distribution of their quality costs

Helps managers see the lost sales arising from customer ill will

Which of the following is true of the contribution approach? -It is mainly used for external reporting purposes. -It separates costs into fixed and variable categories. -It is not useful for merchandising companies. -It calculates gross margin by deducting cost of goods sold from sales.

It separates costs into fixed and variable categories.

________ is an example of an internal failure cost.

Net cost of scrap

________costs support activities whose purpose is to reduce the number of defects.

Prevention

________ best describe the wages of a sheet metal worker in a fabrication plant.

Product costs

A report that details prevention, appraisal, internal failure and external failure costs is called a ________

Quality cost report

Cost assumptions are reasonably valid within the...

Relevant Range

The level of activity within which variable and fixed cost assumptions are valid is known as the

Relevant Range

Mixed costs are also commonly known as

Semi-variable costs

________ is always an irrelevant cost.

Sunk cost

In the equation, Y = a + bX, X represents ________.

The level of activity

Which observation is true of period costs? -They are expensed in the period in which they are incurred. -They are included as part of the cost of manufactured goods. -They include costs that are incurred to convert materials into the finished product. -They are also known as inventoriable costs.

They are expensed in the period in which they are incurred.

Manufacturing costs include all of the following except ________. -administrative -direct labor -direct materials -manufacturing overhead

administrative

Maintenance and depreciation of test equipment are examples of ______ costs.

appraisal

________is sometimes called inspection costs.

appraisal costs

Costs incurred to identify defective products before they are shipped to customers are called ______ or _______

appraisal, inspection

Nonmanufacturing costs include:

company president's salary and sales commission

How individual costs react to changes in activity level is referred to as:

cost behavior

Any item for which cost data is desired is called a:

cost object

cost objects include

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

Differential costs, opportunity costs and sunk costs are all cost classifications used in:

decision making

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

differential

Manufacturing costs include:

direct materials, direct labor, manufacturing overhead

When a company recalls a defective product, a _______ _______ cost is incurred.

external failure

Within the relevant range of activity, ______ costs remain constant in total.

fixed

Product costs are also called

inventoriable costs

Direct materials and direct labor are both ______ costs.

manufacturing

two broad classifications of costs:

manufacturing costs and non-manufacturing costs

A cost that contains both variable and fixed cost elements is a(n) ______ cost.

mixed

Costs incurred in an attempt to lower the number of products manufactured with defects are ______ costs.

prevention

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

product

Typical prevention costs include:

quality circles and statistical process control

Differential costs are always ________.

relevant in making business decisions

A fixed cost is a cost which

remains constant in total with changes in the level of activity

Selling costs include:

sales commissions, sales salaries, advertising

Costs that have already been incurred and can not be changed by decisions made in the current period or in future periods are called ______ costs

sunk

A cost that changes in direct proportion to changes in the activity level is a ______ cost.

variable

A company purchased a 12 month insurance policy on October 1 at a cost of $1,200. On the December 31 annual financial statements:

$300 is reported as a expense and $900 is reported as an asset

Davidson Company has a product with a selling price per unit of $100, the unit variable cost is $60, and the total monthly fixed costs are $30,000. If the company sells 1,000 units, how much is Davidson's contribution margin per unit?

$40

True or false: The term quality costs refers to the cost of the quality of material used to make a product.

False

The ________ requires that the costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized.

Matching principle

If a firm increases its activity level,

some costs will change, others will remain the same.

What type of cost is never relevant and should be disregarded when making decisions?

sunk cost

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

variable costs

Cyber Devices manufactures PCTV products that enable people to watch television content on their computers. It sells its product to retailers for $50. A tuner component that goes into each of these devices costs $5 to acquire. The total variable cost at an activity level of 1,000 units equal ________.

$5,000

________ is common to both prime cost and conversion cost.

Direct Labor

________ is sometimes called "touch labor."

Direct labor

Materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product are called ________.

Direct materials

________ is an example of an external failure cost.

Product recalls

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

direct

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

matching