ACCT 311 Chapter 1

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

Direct

True or false: Removing expenses that DO NOT differ between alternatives could alter a decision

false

How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?

0

We Ship It, Inc. is considering changing its shipping methods, which they believe will attract new customers. The following information relates to the present and proposed methods. present proposed revenues 140,000 190,000 variable costs 60,000 70,000 fixed costs 20,000 25,000 calculate the differential nnet income or loss from the proposal.

35,000 change in revenues -50,000 - 10,000 - 5,000

Contribution Format Income Statement

An income statement that classifies costs by behavior.

Traditional Format Income Statement

Sales (-) Cost of goods Sold = Gross Margin (-) Selling & Admin Expenses selling expenses administrative expenses = Net Operating Income

selling price per unit

Sales / Quantity Sold

Which of the following statements are true?

When mixed costs are represented by a straight-line, the steeper the slope, the higher the variable cost per unit. A mixed cost has a minimun cost of having a service available and ready for use.

indirect manufacturing cost per unit

variable manufacturing overhead per unit + fixed manufacturing overhead per unit

cost of goods sold

beginning inventory + net purchases - ending inventory

costs of goods sold

beginning merchandise inventory + purchases - ending merchandise inventory

Which of the following statements are true?

a. The relevant range of activity is approximated by a straight line b. within the relevant range of activity, fixed costs remain constant in total c. Within the relevant range of activity total variable costs do not change. A,B

Fixed costs that CANNOT easly be changed and often lock a company nito a multi-year decision are _________________ fixed costs.

committed

A type of indirect cost incurred to benefit more than one cost object is a(n) _________ cost.

common

Direct labor and overhead costs incurred to change raw materials into finished products are known as ____________ costs.

conversion

The relative proportion of each type of cost is an organization is known as the company's _____________________ ______________.

cost structure

total sales commission

sales commission per unit X number of units sold

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

sunk

Incremental cost per unit produced

total incremental cost (direct materials + direct labor + variable manufacturing overhead) / number of units produced and sold

total direct costs

total manufacturing cost per unit X number of units sold

Indirect labor costs include:

a. administrative assistant salary b. assembly-line supervisor salary B,D c. assembly-line worker wages d. factory security guard wages

Opportunity costs:

a. are uncommon in decision making b. are benefits that are given up when selecting one alternative over another. B,D c. are part of traditional accounting records d. should be considered in decision making

Common activity bases include:

a. direct labor hours b. machine hours c. units sold d. scrapped units A,B,C, and units produced

Which of the following are most likely fixed costs?

a. electricity to operate factory machines b. administrative salaries c. factory insurance d. factory rent B,C,D

Other names for manufacturing overhead include:

a. factory burden b. prime manufacturing costs c. indirect manufacturing costs d. factory overhead A,C,D

Discretionary fixed costs include:

a. management training programs b. advertizing c. insurance expense c. factory depreciation A,B

An activity base:

a. messures whatever causes costs to vary b. is sometimes called a cost driver c. is a measure of whatever causes fixed costs to occur d. is part of the organization where major operations are planned and carried out. A,B

Prior to being recorded on the income statement, manufacturers' product costs flow through:

a. raw materials b. finished goods c. cost of goods sold d. work in process A,B,D

Administrative costs include:

a. sales commissions and factory supervisors' salaries b. executive compensation and public relations costs c. factory maintenance workers' wages and factory supervisors' salaries d. shipping costs and sales commissions B.

A change in revenues between two alternatives is known as _____________ revenue or incremental revenue.

differential

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

direct

Mterials that become an important component of the finished product whose costs can be easily and conventiently traced to the finished product are ___________ materials

direct

Labor costs that an be easily and conveniently traced to specific products are ___________ costs.

direct labor

total direct manufacturing cost

direct manufacturing cost per unit X number of units sold

a fixed cost remains fixed _______________ within the relevant range of activity.

in total

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

increase or decrease in discrete steps

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

opportunity cost

The materials that go into the final product are called ___________ materials

raw

Cost assumptions are reasonably valid within ___________ ______________ of activity.

relevant range

Which of the following statements are true?

a. the wages of assembly-line workers are period costs b. period costs are expensed in the same period in which they are incurred. c. period costs are included as part if the costs of goods. d. sales commissions are period costs. B,D

Contribution format income statement

Sales Variable Expenses cost of goods sold variable selling expense variable administrative expense = total variable cost Contribution Margin Fixed Expenses fixed selling expenses fixed administrative expenses = total fixed costs Net Operating Income/net operating loss

A manufacturing cost that CANNOT be easily traced to a specific cost object is a(n) _________ cost.

indirect

total indirect manufacturing cost

indirect manufacturing cost per unit X number of units sold

Product costs are also called _____________costs.

inventoriable

Variable Costs ___________.

is constant if expressed on a per unit basis and vary in total

Contribution Format Income Statement would be more useful to

managers in estimating how net operating income will change in responses to changes in unit sales

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

manufacturing overhead

The revenue obtained from selling one additional unit of product is called _____________ revenue.

marginal

A cost that contains both fixed and variable elements is referred to as a(n) __________________ cost.

mixed

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

variable

Mixed costs are also commonly known as semi-__________ costs

variable

Within the relevant range, ____________ costs remain constant on a per unit basis.

variable

The following information is for S&P Enterprises for the mouth of july: direct material $76,000 direct labor $40,000 Variable manufacturing overhead $25,000 fixed manufacturing overhead $30,000 variable selling expense $12,000 fixed selling expense $15,000 variable administrative expense $6,000 fixed administrative expense $18,000 total prime cost for the month of july was:

116,000 prime cost = direct materials + direct labor 76,000+40,000 = 116,000

The following information is for S&P Enterprises for the mouth of july: direct material $76,000 direct labor $40,000 Variable manufacturing overhead $25,000 fixed manufacturing overhead $30,000 variable selling expense $12,000 fixed selling expense $15,000 variable administrative expense $6,000 fixed administrative expense $18,000 total variable manufacturing cost for the month of july was:

141,000 variable manufacturing cost = direct materials + direct labor + variable manufacuting overhead 76,000+40,000+25,000

The following information is for S&P Enterprises for the mouth of september: direct material $82,000 direct labor $51,000 Variable manufacturing overhead $32,000 fixed manufacturing overhead $30,000 variable selling expense $16,000 fixed selling expense $15,000 variable administrative expense $9,000 fixed administrative expense $18,000 Total product cost for the month of september was $_________.

195,000 total product cost = direct materials + direct labor + manfacturing overhead 82,000+51,000+32,000+30,000 = 195,000

The following information is for S&P Enterprises for the mouth of july: direct material $76,000 direct labor $40,000 Variable manufacturing overhead $25,000 fixed manufacturing overhead $30,000 variable selling expense $12,000 fixed selling expense $15,000 variable administrative expense $6,000 fixed administrative expense $18,000 Total period cost for the month of july was:

51,000 period costs = selling expense + administrative expense 12,000+15,000+6,000+18,000 = 51,000

The following information is for S&P Enterprises for the month of July: direct materials 76,000 direct labor 40,000 variable manufacturing overhead 25,000 fixed manufacturing overhead 30,000 variable selling expense 12,000 fixed selling expense 15,000 variable administrative expense 6,000 fixed administrative expense 18,000 Total variable manufacturing cost for the month of July was:

= direct materials + direct labor + variable manufacturing overhead 76,000 + 40,000 + 25,000 = 141,000

True or false: Presenting fixed costs on an average per unit basis makes them look like they are variable costs.

True

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

behavior

variable cost per unit

costs of goods sold, direct materials, direct labor, variable manufacturing overhead (indirect materials, supplies, and power) variable selling and administrative expenses

The following information is for S&P Enterprises for the month of July: direct materials 76,000 direct labor 40,000 variable manufacturing overhead 25,000 fixed manufacturing overhead 30,000 variable selling expense 12,000 fixed selling expense 15,000 variable administrative expense 6,000 fixed administrative expense 18,000 Total conversion cost for the month of July was:

direct labor + manufacturing overhead= 40,000 + 25,000 + 30,000 = 95,000

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

direct material

total incremental cost

direct materials + direct labor + variable manufacturing overhead

total direct manufacturing cost per unit

direct materials per unit + direct labor cost per unit

total manufacturing cost per unit

direct materials per unit + direct labor per unit + variable manufacturing overhead per unit + fixed manufacturing overhead per unit

Selling and administrative costs are ______ costs.

direct or indirect

Fixed costs that usually arise from annual spending decisions by management are __________ fixed costs.

discretionary

True or false: All of a company's depreciation, property taxes and insurance premiums are considered manufacturing overhead

false

total indirect selling expense

fixed administrative expense X number of units sold its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives' compensation

total direct selling expense

fixed portion of sales representatives' compensation sales commissions per unit X number of units sold

indirect materials include:

glue, nails, and thread