Chapter 1 Concept Overview Videos

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

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 ________.

$5,000

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 ________.

17,500

Which of the following statements about opportunity costs is not correct?

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.

________ is sometimes called "touch labor."

Direct labor

Which of the following is true of the contribution approach?

It separates costs into fixed and variable categories.

How should the wages of a sheet metal worker in a fabrication plant be classified?

Product cost

Which of the following is always an irrelevant cost?

Sunk cost

A ___________ is a cost that is incurred to support a number of cost objects but cannot be traced to them individually.

a common cost

Adventure Holiday sells thousands of tour packages each month thought its various branches. A branch manager's salary would be a(n) _________ of the branch.

a direct cost

Manufacturing costs include all of the following categories except ________.

administrative costs

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.

an indirect cost

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

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

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

A fixed cost is a cost which ________.

remains constant in total with changes in the level of activity

If a firm increases its activity level, ________.

some costs will change, others will remain the same.

In the equation, Y = a + bX, X represents ________.

the level of activity