Chapter 1 Smart Book Managerial accounting

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

opportunity cost

Differential costs are also known as_________costs

incremental

Based on the following information, compute the cost of goods sold for Spengler Merchandising Corporation. Sales $400,000 Purchases $300,000 Beginning inventory $50,000 Ending inventory $90,000 Selling expenses $70,000 Administrative expenses $30,000 Accounts receivable $110,000

$260,000 Reason: Beginning Inventory ($50,000) + Purchases ($300,000) - Ending Inventory ($90,000) = Cost of Goods Sold

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

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

Based on the following information, calculate net income for Dana's Dress Shop using the traditional format. Sales $360,000 Gross Margin $140,000 Contribution Margin $110,000 Total Selling & Administrative Exp. $60,000

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

Which of the following statements are true?

-A direct cost can be easily and conveniently traced to a specific cost object. -A regional sales manager's salary is a direct cost of the regional office in which the sales manager works.

Which of the following statements are true?

-Period costs are expensed when incurred. -Period costs do not flow through the inventory accounts.

Which of the following are differences between the traditional and contribution format to income statements?

-Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior. -Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier.

Prior to being recorded on the income statement, manufacturers' product costs flow through ______.

-Work in Process -Finished Goods -Raw Materials

Cost objects include ______.

-anything for which cost data is desired -customers *organizational subunits

Opportunity costs ______.

-are benefits that are given up when selecting one alternative over another -should be considered in decision making

Indirect labor costs include ______.

-assembly-line supervisor salary -factory security guard wages

Prime costs include ______.

-direct labor -direct materials

A cost that can be easily and conveniently traced to a specific cost object is a(n)______________cost of that cost object, whereas costs that cannot be easily and conveniently traced to that specific cost object are _____________ costs

-direct or prime - indirect, common or overhead

Other names for manufacturing overhead include ______.

-factory overhead -factory burden -indirect manufacturing costs

Manufacturing costs include ______.

-manufacturing overhead -direct labor -direct materials

The components of prime costs are direct________ and direct _____ costs

-material -labor

Manufacturing costs can be divided into three categories: direct____, _________labor and manufacturing ________________

-materials -direct or touch -overhead or burden

Nonmanufacturing costs include ______.

-sales commissions -company president's salary

Selling costs include ______.

-sales salaries -advertising -sales commissions

A contribution approach income statement ______.

-separates costs into their fixed and variable components -can assist with management decision making

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

False

True or false: Labor costs that can be specifically traced to a product are indirect labor costs.

False

True or false: Removing expenses that do not differ between alternatives could alter a decision.

False

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

Indirect costs

Units that are partially complete are found in ______.

Work in Process

Beginning merchandise inventory + Purchases - Ending merchandise inventory =

cost of goods sold

Differential costs ______.

can be fixed or variable

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

common

Costs that are shared by multiple cost objects in a company are known as ______ costs.

common

Direct labor and overhead costs incurred to change raw materials into finished products are known as_______costs

conversion

Any item for which cost data is desired is called a(n)

cost object

Differential costs, opportunity costs and sunk costs are all cost classifications used in ______.

decision making

The difference in revenues between two alternatives is called ______.

differential revenue

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

direct

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

direct

Fantastic Furniture makes custom order couches. The material used to make a couch is a(n) ______ cost of the customer placing the order.

direct

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

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

direct labor

Selling and administrative costs are ______ costs.

direct or indirect

The contribution approach to constructing income statements distinguishes between ______ costs.

fixed and variable

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

indirect

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

indirect

Manufacturing overhead costs include ______.

indirect materials, factory supervisors' salaries, and factory depreciation

Product costs are also called____________costs

inventoriable or manufacturing

Factory burden is a synonym for_______________

manufacturing overhead

Factory materials, such as cleaning supplies, that are not components of finished products are classified as ______.

manufacturing overhead

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

marginal

The revenue obtained from selling one additional unit of product is called______________revenue

marginal

The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is known as the___________principle

matching

Indirect materials include ______.

nails, glue, and thread

Direct materials, direct labor, and manufacturing overhead are all ______ costs.

product

The materials that go into the final product are called_______materials

raw

Contribution margin is ______.

sales revenue minus variable costs

Costs that have already been incurred and can not be changed by decisions made in the current period or in future periods are called______________costs

sunk

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

they are incurred

Direct labor is also called______ labor

touch

True or false: A cost may be direct or indirect, depending on the cost object.

true

True or false: The finished product of one company can become raw materials for another company.

true