ACCT 606 - CH. 1
product costs:
"attach" to units of product as they are purchased for resale or produced; they are also called inventoriable costs
indirect labor costs include:
assembly-line supervisor salary and factory security guard wages
fixed costs that cannot be easily changed and often lock a company into a multi-year decision are:
committed fixed costs
a type of indirect cost incurred to benefit more than one cost object is a(n)
common cost
sales revenue minus variable expenses equals
contribution margin
which of the following are most likely fixed costs?
factory rent, factory insurance, and administrative salaries
the contribution approach to constructing income statements distinguishes between:
fixed and variable costs
how is total fixed cost calculated?
fixed manufacturing overhead + fixed selling expense + fixed administrative expense
a manufacturing cost that cannot be easily traced to a specific cost object is a(n)
indirect cost
minor items such as nails and glue are usually considered to be:
indirect materials
factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as:
manufacturing overhead
an activity base:
measures whatever causes costs to vary and is sometimes called a cost driver
a potential benefit that is forfeited or lost when one decision is chosen over another is called a(n)
opportunity cost
true or false: presenting fixed costs on an average per unit basis makes them look like they are variable costs
true
which of the following statements are true?
a direct cost can be easily and conveniently traced to a specific cost object and a regional sales manager's salary would be a direct cost of the regional office in which the sales manager works
cost objects include:
customers, organizational subunits, and anything for which cost data is desired
the difference in costs between two alternatives is called a(n)
differential cost
the difference in revenues between two alternatives is called:
differential revenue
Fantastic Furniture makes customer order couches. The material used to make a couch is a(n) ___________ cost of the customer placing the order
direct
how is conversion cost calculated?
direct labor + manufacturing overhead
in an automobile manufacturing plant, the assembly-line workers are classified as
direct labor cost
a laptop computer manufacturer would consider the computer's processor chip to be a(n)
direct material cost
how is prime cost calculated?
direct materials + direct labor
manufacturing costs can divided into three categories:
direct materials, direct labor, and manufacturing overhead
fixed costs that usually arise from annual spending decisions by management are
discretionary costs
the materials that go into the final product are called
raw materials
cost behavior:
refers to how a cost will change as activity level changes; also categorizes costs as fixed, mixed, and variable
cost assumptions are reasonably valid within the __________ ___________ of activity
relevant range
variable costs _____________
remain constant per unit and vary in total
nonmanufacturing costs include:
sales commissions and company president's salary
selling costs include:
sales salaries, sales commissions, and advertising
how is period cost calculated?
selling expense + administrative expense
mixed costs are commonly known as:
semi-variable costs
costs that have already been incurred and can not be changed by decisions made in the current period or in future periods are called
sunk costs
differential cost is:
the difference in cost between two alternatives; also known as incremental cost
in the equation Y = a + bX, b denotes the:
variable cost per unit of activity AND slope of the line
cost of goods sold for a merchandising company, direct materials, and commissions are all examples of
variable costs
units that are partially complete are found in:
work in process
