ACCT 310 CHP 2 (Learnsmart)

True or false: For a manufacturer, finished goods inventory is optional.

FALSE

Under variable costing, ______.

all costs except variable manufacturing costs are period costs

Product costs for unsold units are ______.

assigned to inventory under both absorption and variable costing

A company is considering a special order that would not impact marketing, administrative, or total fixed manufacturing costs. Assuming the special order would not affect the regular market for the product, the special order should ______.

be accepted as long as the purchase price per unit is greater than the variable manufacturing cost per unit

On a per unit basis, __________ _______________ costs equals the difference between sales price and the variable cost per unit

contribution margin

The amount available to cover fixed expense and earn a profit is the

contribution margin

the difference between revenue and variable cost is

contribution margin

The way costs respond to changes in activity levels is called

cost behavior

Which of the following is NOT one of the four basic cost behavior categories

direct

When the amount of labor required is not sensitive to the amount produced, then it is probably best to consider labor to be a(n) ______ cost.

fixed

The difference between full cost and full absorption cost is ______.

fixed and variable selling costs are included in full cost but not in full absorption cost

Costs that do not change as volume changes are ___________ costs and costs that change in direct proportion with a change in volume are _____________ costs. (Enter only one word per blank.)

fixed, variable

The difference between revenue and cost of goods sold is ______.

gross margin

on a per unit basis, __________ _____________ equals the sales price minus the full absorption cost per unit. (Enter only one word per blank.)

gross margin

Product costs added to inventory accounts are called

inventoriable costs

Product costs debited to work in process and finished goods are called

inventoriable costs

Full absorption cost ______.

is required by GAAP is the inventoriable cost for external financial statements

Any new costs incurred when adding a product are considered product costs under

managerial costing

Assume total units produced equals total units sold. If the company prepares a gross margin income statement and a contribution margin income statement, ______.

marketing and administrative costs will be the same on both statements operating profit will be the same on both statements

fixed and variable selling costs are included in full cost but not in full absorption cost

may be misleading for making decisions

semi variable costs are also called

mixed costs

Cost of goods manufactured and sold statements are ______.

prepared as part of a company's internal reporting system

Beginning work in process inventory plus total manufacturing costs equals ______.

resources put into production for the year

A doctor's office requires one nurse for each 10 patients scheduled per day. In this case, the nurses' salaries represent a ______ cost.

step

semi fixed costs are also called

step costs

True or false: For a manufacturer, finished goods inventory is optional.

true

If a company is focused on trying to eliminate waste, income statement costs can be divided into ______.

value-added vs. nonvalue-added activities

In a manufacturing environment, labor has traditionally been considered a(n) ______ cost

variable