Chapter 1 Review

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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, what would be the total salaried employee expense?

$17,500 (7*$2,500)

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

Common cost

Adventure Holidays sells thousands of tour packages each month through its branches. A branch manager's salary would be a(n) __ of generating a particular lead.

Indirect cost

This is the sum of direct materials cost and direct labor cost.

Prime cost

This includes direct materials, direct labor, and manufacturing overhead.

Product costs

Which of the following observations is true of period cost?

They are expensed in the period in which they are incurred.

This is the sum of direct labor and manufacturing overhead.

conversion cost

___ is sometimes called "touch labor."

direct labor

___ are those materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product.

direct materials

The traditional format provides managers with an income statement that clearly distinguishes between fixed and variable costs and therefore aids planning, controlling, and decision making.

false

The labor costs of janitors, supervisors, materials handlers, and night security guards at a manufacturing facility are examples of ___ labor.

indirect

Which of the following is true of the contribution approach?

it separates costs into fixed and variable categories

___ consists of items such as indirect materials, indirect labor, maintenance and repairs on production equipment, depreciation, and insurance on manufacturing facilities.

manufacturing overhead

Which of the following 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 ___.

non manufacturing costs

The potential benefit that is given up when one alternative is selected over another

opportunity cost

This includes all selling and administrative expenses.

period costs

a cost that has already been incurred and that cannot be changed by any decision made now or in the future.

sunk cost

Which of the following best describes the wages of a sheet metal worker in a fabrication plant?

product cost

Identify the cost categories in a traditional format income statement

cost of goods sold and selling and administrative expenses

Which of the following is common to both prime cost and conversion cost?

direct labor

The salary of a sales personnel in a company is structured as a monthly base salary of $3,000, plus an additional $100 on each sale made. If the person makes 15 sales in a month, what is the total mixed cost associated with this salesperson?

$4,500

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. What is the total variable cost at an activity level of 1,000 units?

$5,000

Which of the following best describes contribution margin?

Sales revenues minus variable expenses

In the equation, Y=a+bX, what does X represent?

The level of activity

a difference in costs between any two alternatives.

differential cost

a difference in revenues between any two alternatives.

differential revenue

Adventure Holidays sells thousands of tour packages each month through its branches. A branch manager's salary would be a(n) __ of the branch.

direct cost


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