chapter 1: managerial accounting and cost concepts

executive compensation and public relations costs

administrative costs include

-factory security guard wages -assembly-line supervisor salary

indirect labor costs include

contribution margin

sales revenue minus variable expenses equals

fixed

within the relevant range of activity, _______ costs remain constant in total

variable

within the relevant range, ______ cost remain constant on a per unit basis

differential

a change in revenues between two alternatives is known as ______ revenue or incremental revenue

mixed cost

a cost that contains both variable and fixed cost elements is

-manufacturing overhead -indirect materials

a dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of

direct material

a laptop computer manufacturer would consider the computer's processor chip to be an _______ cost

indirect cost

a manufacturing cost that cannot be easily traced to a specific cost object is

opportunity cost

a potential benefit that is forfeited or lost when one decision is chosen over another is called

common cost

a type of indirect cost incurred to benefit more than one cost object is

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

an activity base:

-real estate taxes -top management salaries

committed fixed costs include:

variable

cost of goods sold for a merchandising company, direct materials and commissions are all example of _____- costs

direct costs

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

manufacturing overhead

factory materials, such as cleaning supplies, that are not components of finished products are classified as

discretionary

fixed costs that usually arise from annual spending decisions by management are _______ fixed costs

direct labor

in an automobile manufacturing plant, the assembly-line workers are classified as

total mixed cost

in the equations Y-a+bX, Y is the

nails, glue, and thread

indirect materials include:

product

inventorial costs is another terms for ______ costs

-direct labor -direct materials -manufacturing overhead

manufacturing costs include:

indirect materials, factory supervisors' salaries, and factory depreciation

manufacturing overhead costs include:

-sales commissions -company presidents salary

non manufacturing costs include:

they are incurred

period costs are always expensed on the income statement in the period in which:

-give managers an idea of where to focus quality control efforts -show managers if quality control costs are poorly distributed -help identify the financial cost of defects

quality cost information reports:

direct or indirect

selling and administrative costs are _____ costs

-advertisting -sales commissions -sales salaries

selling costs include

matching

the accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is know as the _______ principle

differential cost

the difference in cost between two alternatives is called

relevant range

the level of activity within which variable and fixed cost assumptions are valid is known as the

marginal revenue

the revenue obtained from selling one additional unit of product is called

true

true or falsE: a cost may be direct or indirect, depending on the cost object

false

true or false: all of a company's depreciation, property taxes and insurance premiums are considered manufacturing overhead

-factory rent -factory insurance -administrative salaries

what are most likely fixed costs

sunk

what type of cost is never relevant and should be disregarded when making decisions

-measuring and reporting quality costs does not solve quality problems -the impact of customer ill will is generally not found on quality control reports

what is true?