Ch1 SB

Product costs ______.

"attach" to units of product as they are purchased for resale or produced are also called inventoriable costs

Which of the following are most likely fixed costs?

Administrative salaries Factory rent Factory insurance

Which of the following are differences between the traditional and contribution format to income statements?

Contribution format statements make it easier to predict how decisions affect the future. Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior.

Which of the following statements are true?

Period costs do not flow through the inventory accounts. Period costs are expensed when incurred.

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 minimum cost of having a service available and ready for use.

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

conversion

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

direct

Within the relevant range of activity ______.

fixed costs remain constant in total and vary per unit the assumption that cost behavior is strictly linear is reasonably valid

Manufacturing overhead costs include ______.

indirect materials, factory supervisors' salaries, and factory depreciation

Direct materials and direct labor are both ______ costs.

manufacturing

An activity base ______.

measures whatever causes costs to vary is sometimes called a cost driver

Period costs are always expensed on the income statement in the period in which ______.

they are incurred

Common activity bases include ______.

units sold direct labor hours machine hours

A contribution approach income statement ______.

can assist with management decision making separates costs into their fixed and variable components

Cost behavior ______.

categorizes costs as fixed, mixed and variable refers to how a cost will change as activity level changes

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

common

Costs that are shared by multiple cost objects in a company are known as ______ costs.

common

Indirect materials and indirect labor are classified as ______.

manufacturing overhead

Indirect materials include ______.

nails, glue, and thread

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

conversion

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

direct material

Indirect labor costs include ______.

factory security guard wages assembly-line supervisor salary

Period costs ______.

include all costs that are not product costs are expensed in the period incurred

Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the ______.

income statement

Salaries of factory supervisors and factory maintenance personnel are examples of ______ labor costs.

indirect

Minor items such as nails and glue are usually considered to be ______.

indirect materials

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

variable