Chapter 1 Accounting Review

$300 is reported as a expense and $900 is reported as an asset

A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements...

Mixed Cost

A cost that contains both variable and fixed cost elements is a(n)...

Indirect materials & manufacturing overhead

A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of ______.

In total

A fixed cost remains fixed ______ within the relevant range of activity.

Direct material cost

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

Indirect Cost

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

Common Cost

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

Executive compensation and public relations costs

Administrative costs include...

False

All of a company's depreciation, property taxes, and insurance premiums are considered manufacturing overhead.

Cost Object

Any item for which cost data is desired is called a...

Increase or decrease in discrete steps

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

Sales revenue minus variable costs

Contribution margin is...

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

Cost behavior...

Direct Costs

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

Touch Labor

Direct labor is also called...

Manufacturing costs

Direct materials and direct labor are both...

Management training programs & advertising

Discretionary fixed costs include...

Manufacturing Overhead

Factory burden is a synonym for...

Manufacturing Overhead

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

Discretionary & committed

Fixed costs that can be cut-back or eliminated without significant damage to a company's long-term goals are _________ fixed cost and _________ fixed costs can not be easily changed or eliminated

Committed

Fixed costs that cannot easily be changed and often lock a company into a multi-year decision are called ___________ fixed costs.

Discretionary

Fixed costs that usually arise from annual spending decisions by management are called ________ or managed fixed costs.

80,000 (Reason: Gross Margin of $140,000 - Total Selling & Admin. Exp. of $60,000 = $80,000.)

Given: Sales of $360,000, Gross Margin of $140,000, Contribution Margin of $110,000, and Total Selling & Administrative Exp. of $60,000, net income using the traditional income statement format equals _______.

Cost Behavior

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

Assembly-line supervisor salary & factory security guard wages

Indirect labor costs include...

Nails, glue, and thread

Indirect materials include...

Company president's salary & sales commissions

Nonmanufacturing costs include...

Indirect manufacturing costs, factory overhead, & factory burden

Other names for manufacturing overhead include...

They are incurred

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

Direct materials & direct labor

Prime costs include...

Manufacturing or Inventoriable Costs

Product costs are also called...

Contribution Margin

Sales revenue minus all variable expenses equals...

Direct & indirect

Selling and administrative costs are ___________ costs.

Advertising, sales salaries, & sales commissions

Selling costs include...

Marginal Cost

The cost of producing one more unit is the...

Incremental Cost

The difference in costs between two alternatives is called a(n)...

True

The finished product of one company can become raw materials for another company.

Prime Cost

The sum of direct materials and direct labor is called...

Remain constant per unit & vary in total

Variable costs...

Administrative salaries, factory rent, & factory insurance

Which of the following are most likely fixed costs?

Indirect Costs

Which of the following is not a COST CLASSIFICATION associated with decision making?

Fixed

Within the relevant range of activity, _________ costs remain constant in total.

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

Within the relevant range of activity...

Variable Cost

Within the relevant range, a cost that changes in direct proportion to changes in the activity level is a...