CH 1
A fixed cost is a cost which ________.
remains constant in total with changes in the level of activity
Manufacturing costs include all of the following categories except ________. administrative costs direct labor direct materials manufacturing overhead
administrative costs
6. The wages of the company's accountant.
Administrative cost
Direct/Indirect: Cost - Lab tests by outside contractor Cost Object - A particular department
Direct Cost
Direct/Indirect: Cost - Lab tests by outside contractor Cost Object - A particular patient
Direct Cost
Direct/Indirect: Cost - Prescription drugs Cost Object - A particular patient
Direct Cost
Direct/Indirect: Cost - The salary of the head of pediatrics Cost Object - The pediatric department
Direct Cost
Direct/Indirect: Cost - The wages of pediatric nurses Cost Object - The pediatric department
Direct Cost
Direct/Indirect: Cost - Catered food served to patients Cost Object - A particular patient
Direct Cost
Direct/Indirect: Cost - The salary of the head of pediatrics Cost Object - A particular pediatric patient
Indirect Cost
Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) _________ of the branch.
direct cost
Items such as indirect materials, indirect labor, maintenance and repairs on production equipment, depreciation, and insurance on manufacturing facilities are included in ________.
manufacturing overhead costs
How should the wages of a sheet metal worker in a fabrication plant be classified?
product cost
If a firm increases its activity level, ________.
some costs will change, other costs will remain the same
Which of the following is always an irrelevant cost? Differential cost Sunk cost Opportunity cost
sunk cost
Davidson Company has sales of $100,000, variable cost of goods sold of $40,000, variable selling expenses of $15,000, variable administrative expenses of $5,000, fixed selling expenses of $7,000, and fixed administrative expenses of $9,000. What is Davidson's contribution margin?
$40,000
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 equals ________.
$5000
3. The wages of employees who assemble computers from components.
Direct Labor cost
The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. Listed below are some of the costs that are incurred at the company. For each cost, indicate whether it would most likely be classified as direct labor, direct materials, manufacturing overhead, selling, or an administrative cost. (1 - 8) 1. The cost of a hard drive installed in a computer.
Direct Materials Cost
Direct/Indirect: Cost - Heating the hospital Cost Object - The pediatric department
Indirect Cost
Direct/Indirect: Cost - Hospital chaplain's salary Cost Object - A particular patient
Indirect Cost
5. The wages of the assembly shop's supervisor.
Manufacturing Overhead cost
7. Depreciation on equipment used to test assembled computers before release to customers.
Manufacturing Overhead cost
2. The cost of advertising in the Puget Sound Computer User newspaper.
Selling cost
4. Sales commissions paid to the company's salespeople.
Selling cost
A ___________ is a cost that is incurred to support a number of cost objects but cannot be traced to them individually.
common cost
Which of the following is common to both prime cost and conversion cost?
direct labor
________ is sometimes called "touch labor."
direct labor
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
Property taxes associated with a company's administrative facility are considered ________.
nonmanufacturing costs
Differential costs are always ________.
relevant in making business decisions
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 ________.
$17500
In the equation, Y = a + bX, X represents ________.
the level of activity
Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) _________ of selling a tour package.
indirect cost
Direct Cost:
is a cost that can be easily and conveniently traced to a specified cost object. EX: Reebok is assigning costs to its various regional and national sales offices, then the salary of the sales manager in its Tokyo office would be a direct cost of that office.
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
Which of the following statements about opportunity costs is not correct? -An opportunity cost is the potential benefit that is given up when one alternative is selected over another. -An opportunity cost cannot be changed by any decision made now or in the future. -Opportunity costs are not usually found in accounting records. -Opportunity costs are costs that must be explicitly considered in every decision a manager makes.
An opportunity cost cannot be changed by any decision made now or in the future.
The traditional income statement uses which of the following cost categories?
Cost of goods sold and selling and administrative expenses
Which of the following is true of the contribution approach?
It separates costs into fixed and variable categories.
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
Indirect Cost:
is a cost that cannot be easily and conveniently traced to a specified cost object EX: Campbell Soup factory may produce dozens of varieties of canned soups. The factory manager's salary would be an indirect cost of a particular variety such as chicken noodle soup.