Cost Accounting ch 2

Which of the following statements are true?

-Gross margin reflects the ability of a wholesaler to price products. -Retailers have an entire category of amounts that do not appear on service company income statements. -Information technology represents the major cost for some service organizations. -Labor is the most important single cost for many service organizations. -For managerial purposes, managers often assign nonmanufacturing costs to products. -Distinguishing between manufacturing and nonmanufacturing costs can be difficult. -Nonmanufacturing costs are expensed as incurred for financial accounting purposes. -Cost of goods manufactured and sold statements can be effective communication devices. -Managerial reports are tailored to the individual company's needs. The cost of goods manufactured and sold statement focuses on both current costs and inventories.

Given the following, calculate cost of materials put into production. Inventories: Direct materials b$300 e$250 Work in process b$400 e$200 Finished goods b$500 e$350 Direct material purchases $4,200 Direct labor $3.000 Manufacturing overhead $5,000

4,250

A company started the year with $185,000 of goods finished and ready for sale. During the year, a total of $700,000 of goods were started in production. Of the goods started, $550,000 were finished during the year. If total cost of goods sold for the year equals $625,000, the company's ending finished goods inventory equals $.

Blank 1: 110,000

A company had the following inventories during the year: Inventories: Beginning Ending Direct materials $200 $150 Work in process $300 $250 Finished goods $400 $350 If total direct materials purchased was $2,850, the direct materials put into production for the year equals $

Blank 1: 2,900

On a per unit basis, the equals the difference between sales price and the variable cost per unit.

Blank 1: contribution Blank 2: margin

The amount available to cover fixed expense and earn a profit is the _ _.

Blank 1: contribution Blank 2: margin

The way costs respond to changes in activity levels is called .

Blank 1: cost Blank 2: behavior

Costs that can be unambiguously related to cost objects are costs whereas costs that cannot be unambiguously related to cost objects are costs.

Blank 1: direct Blank 2: indirect

Product costs that can be identified with units at a relatively low cost are manufacturing costs and all other product costs are manufacturing costs.

Blank 1: direct Blank 2: indirect

The two types of product costs are manufacturing costs and manufacturing costs.

Blank 1: direct Blank 2: indirect

When preparing financial statements, are deducted from revenues associated with an accounting period.

Blank 1: expenses

Costs that do not change as volume changes are costs and costs that change in direct proportion with a change in volume are costs.

Blank 1: fixed Blank 2: variable

Any new costs incurred when adding a product are considered product costs under costing.

Blank 1: managerial

Costs required to obtain customer orders are costs and costs required to manage the organization are costs.

Blank 1: marketing, selling, or sales Blank 2: administrative or administration

Nonmanufacturing costs are also called costs and manufacturing costs are also called costs.

Blank 1: period Blank 2: product

The sum of direct materials and direct labor equals costs and the sum of direct labor and manufacturing overhead equals costs.

Blank 1: prime Blank 2: conversion

Costs assigned to units of production and expensed when the units are sold are costs, whereas costs are expensed as incurred.

Blank 1: product or manufacturing Blank 2: period or nonmanufacturing

Customers are provided with an intangible product by companies.

Blank 1: service

If a company is focused on trying to eliminate waste and reduce costs, financial statements can be developed that classify costs into - and - activities.

Blank 1: value Blank 2: added or adding Blank 3: nonvalue Blank 4: added or adding

Direct materials and sales commissions are most likely costs, whereas many manufacturing overhead costs such as rent and supervisor salaries are costs.

Blank 1: variable Blank 2: fixed

Products that have been started but not yet completed are called .

Blank 1: work Blank 2: in Blank 3: process or progress

Which of the following is NOT one of the four basic cost behavior categories?

Direct

True or false: Cost of goods sold includes the actual cost of goods that were sold and the costs required to sell them.

False

True or false: The excess of operating revenues over the operating costs incurred to generate those revenues is net income.

False

True or false: The focus of cost accounting is on expenses.

False

True or false: Whether a cost is direct or indirect depends on the cost object.

True

To calculate cost of goods sold during the year, take total cost of goods manufactured and:

add beginning finished goods and subtract ending finished goods inventory

To calculate cost of goods manufactured during the year, take total manufacturing costs and ______.

add beginning work in process and subtract ending work in process inventory

Under variable costing, ______.

all costs except variable manufacturing costs are period costs

The process of assigning costs is called cost ______.

allocation

Product costs for unsold units are ______.

assigned to inventory under both absorption and variable costing

The difference between revenue and variable cost is _____.

contribution margin

The difference between full cost and full absorption cost is Blank______.

fixed and variable selling costs are included in full cost but not in full absorption cost

Common approaches for determining product costs discussed in the text do not include ______ costing.

full

The full cost of a product equals all ______.

manufacturing and selling costs (both fixed and variable)

A cost ______.

may be recorded as an asset is a sacrifice of resources

Assume total units produced equals total units sold. If the company prepares a gross margin income statement and a contribution margin income statement, ______.

operating profit will be the same on both statements marketing and administrative costs will be the same on both statements

To calculate net income, operating profit is adjusted for ______.

other required regulatory adjustments extraordinary items interest expense

Cost of goods manufactured and sold statements are ______.

prepared as part of a company's internal reporting system

Companies with low overhead costs focus on managing Blank______ costs, whereas companies with high overhead costs focus on managing Blank______ costs.

prime, conversion

Beginning work in process inventory plus total manufacturing costs equals ______.

resources put into production during the year

A sacrifice of resources is a(n) .

to cost

True or false: For a manufacturer, finished goods inventory is optional.

true

If a company is focused on trying to eliminate waste, income statement costs can be divided into ______.

value-added vs. nonvalue-added activities

Goods that have been started in production but are not yet completed are called ______.

work in process