Chapter 1 - Managerial Accounting and Cost Concepts

Which type of cost changes in total, in direct proportion to changes in activity level?

Variable

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

direct

Within the relevant range of activity, _______ cost remains constant in total.

fixed

A potential benefit that is forfeited or lost when one decision is chosen over another is called a(n) _______ _______.

opportunity cost

Cost assumptions are reasonable valid within the _______ _______ of activity.

relevant range

Direct labor is also called _______ labor.

touch

In the equation Y = a + bX, b denotes the: (select all that apply) a) slope of the line b) level of activity c) variable cost per unit of activity d) fixed cost per unit of activity

a) slope of the line c) variable cost per unit of activity

Cost behavior: (Select all that apply) a) refers to how a cost will change as activity level changes b) is a detailed analysis technique used to determine whether costs are fixed or variable c) categorizes costs as fixed, mixed and variable d) is the relative proportion of each type of cost in an organization

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

Differential cost is: (Select all that apply) a) the difference in cost between two alternatives b) also known as incremental cost c) the same as opportunity cost d) never relevant to a product decision

a) the difference in cost between two alternatives b) also known as incremental cost

Which of the following are most likely fixed costs? (Select all that apply) a) Electricity to operate factory machines b) Administrative salaries c) Factory rent d) Factory insurance

b) Administrative salaries c) Factory Rent d) Factory Insurance

Which of the following statements are true? (Select all that apply) a) Period costs are included as part of the cost of goods. b) Period costs are expensed in the same period in which they are incurred. c) The wages of assembly-line workers are period costs. d) Sales commissions are period costs.

b) Period costs are expensed in the same period in which they are incurred. d) Sales commissions are period costs.

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

indirect

The revenue obtained from selling one additional unit of product is called _______ revenue.

marginal

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

Sunk

Which of the following statements are true? (Select all that apply) a) All costs in a merchandising company are period costs. b) Inventoriable costs are expensed in the period in which they are incurred. c) Period costs do not flow through the inventory accounts. d) Period costs are expensed when incurred.

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

Indirect labor costs include: (Select all that apply) a) administrative assistant salary b) assembly-line worker wages c) factory security guard wages d) assembly-line supervisor salary

c) factory security guard wages d) assembly-line supervisor salary

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

indirect materials

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

manufacturing overhead

Indirect materials and indirect labor are classified as:

manufacturing overhead

Manufacturing costs can be divided into three categories: direct _______, _____ labor and manufacturing _____.

materials direct overhead

Fantastic Furniture makes custom order furniture. The factory manager's salary is a(n) _______ cost of producing a couch.

direct

Labor costs that can be easily and conveniently traced to specific products are _______ costs.

direct labor

Contribution margin is:

sales revenue minus variable costs

Indirect labor costs include: (Select all that apply) a) administrative assistant salary b) factory security guard wages c) assembly-line worker wages d) assembly-line supervisory salary

b) factory security guard wages d) assembly-line supervisory salary

Nonmanufacturing costs include: (Select all that apply) a) assembly-line worker wages b) sales commissions c) company president's salary d) insurance plan on plant equipment

b) sales commissions c) company president's salary

The contribution approach to constructing income statements distinguishes between _________ and _________ costs.

fixed and variable

Variable costs:

remain constant per unit and vary in total.

A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of: (Select all that apply) a) indirect materials b) direct materials c) administrative costs d) manufacturing overhead

a) indirect materials d) manufacturing overhead

Within the relevant range, fixed costs: (Select all that apply) a) should not be expressed on a per unit basis when making decisions b) per unit become progressively larger as the level of activity increases c) remain constant in total regardless of changes in activity d) generally include rent and supervisor salaries

a) should not be expressed on a per unit basis when making decisions c) remain constant in total regardless of changes in activity d) generally include rent and supervisor salaries

Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are _______ materials.

direct

Sales revenue minus variable expenses equals _______ ______.

contribution margin

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

indirect

Inventoriable costs is another term for _______ costs.

product

Within the relevant range, _______ costs remain constant on a per unit basis.

variable

Product costs: (Select all that apply) a) Include all costs involved in making and selling a product. b) "attach" to units of product as they are purchased for resale or produced. c) are also called inventorialble costs d) are always expensed in the same period in which the related products are produced

b) "attach" to units of product as they are purchases for resale or produced c) are also called inventoriable costs

Which of the following statements are true? (Select all that apply) a) The fixed portion of a mixed cost represents the cost incurred for the actual consumption of a service. b) A mixed cost has a minimum cost of having a service available and ready for use. c) When mixed costs are represented by a straight-line, the steeper the slope, the higher the variable cost per unit. d) The equation for a straight-line makes it easy to calculate the total mixed cost for any activity level outside the relevant range.

b) A mixed cost has a minimum cost of having a service available and ready for use. c) When mixed costs are represented by a straight-line, the steeper the slope, the higher the variable cost per unit.