managerial test 1

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, the total salaried employee expense is ________. $12,500 $16,250 $17,500 $15,000

$17,500 (13,000)/200 = 6.5 (round up to 7) 2,500 x 7 = 17,500

product costs

* All costs that are involved in acquiring or making a product. In the case of manufactured goods, these costs consist of: direct materials, direct labor, and manufacturing overhead. * attach to units as they are purchased or manufactured and REMAIN attached as the goods go into inventory or waiting sale * assigned to inventory on balance sheet

segment parts

* costs, revenue, and profit data 1. product lines 2. geographic territories 3. departments

example of activity bases/cost drivers

- DL hours - machine hours - units produced - units sold

indirect labor

- cannot be traced to products - traced at great cost and inconvenient * PART of MANUFACTURING OVERHEAD

costs to compare to other alternatives

- differential cost - opportunity cost - sunk cost

job ordering costing system

- direct materials - direct labor - manufacturing overhead costs * DL and DM can be directly traced to JOBS

Examples of variable costs

- direct materials - direct tabor - shipping - supplies - power - sales commission

what is another way to say "non manufacturing costs"

- selling costs - general costs - administrative costs (SG&A)

traditional format layout

1. COGS 2. selling & administrative expenses

managers need perspectives

1. ethics 2. strategic management 3. enterprise risk management 4. corporate social responsibility 5. process management 6. leadership

why are cost assigned to cost objects?

1. pricing 2. profitability 3. controlling spending

2 formats for income statements

1. traditional 2. contribution

Audio Corporation purchased $20,000 of DVDs during the current year. The company had DVD inventory of $15,000 at the beginning of the year. An end of the year audit revealed that the company had DVD inventory of $10,000. The amount that would be reported as cost of goods sold in the income statement for the current year is ________. multiple choice 2 $25,000 $15,000 $10,000 $20,000

25,000

Davidson Company has sales of $100,000, variable cost of goods sold of $40,000, variable selling expenses of $15,000, variable administrative expenses of $5,000, fixed selling expenses of $7,000, and fixed administrative expenses of $9,000. What is Davidson's contribution margin? 84,000 $45,000 $40,000 $8,000

40,000 * idk the math for this ^ look at last question

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. The total variable cost at an activity level of 1,000 units equals ________. $50,000 $5 $1,000 $5,000

5,000

indirect costs

Costs that cannot be easily and accurately traced to a cost object EX: Nike factor makes shoes and shirts --> factory manager salary is indirect cost of the variety (like basketball shorts) bc the factory manger salary is incurred as a consequence of running entire factory, not just to make 1 product

Nike factory manager's salary is a _____ for the manufacturing division

DIRECT cost object = entire manufacturing division

indirect labors include the labor costs of:

EX: janitors supervisors materials handlers night security guards * can't trace their costs to specific units of a cost

financial vs. managerial

FINANCIAL: - OUTSIDE organization (owners, creditors, tax authorities, regulators) - past activities - objectivity - precision - GAAP - company wide reports - mandatory for external report MANAGERIAL: - inside organization for (planning, controlling, decision making) - future - emphasizes relevance - timeliness - segmenet reports - NO GAAP - not mandatory

Nike factory manager's salary is a _____ for producing basketball shorts

INDIRECT cost cost object = basketball shorts

traditional format math

Sales = 100,000 COGS = 80,000 gross margin = 20,000 ________________________________ selling = 8,000 administrative = 3,000 total selling and administrative expenses = 11,000 net operating income = 9,000

T/F - a variable cost changes in direct proportion to the changes in the level of activity

TRUE

total mixed cost equation

Y = a + bX Y = The total mixed cost a = The total fixed cost (the vertical intercept of the line). b = The variable cost per unit of activity (the slope of the line) X = The level of activity

Which of the following is not a business management perspective that goes beyond the numbers to enable intelligent planning, controlling, and decision making?

^^^ everything on the last slide is that ESECPL

sunk cost

a cost that has already been committed and cannot be recovered

common cost (type of Indirect cost)

a cost that is incurred to support a number of cost objects but that CANNOT be traced to them individually

differential cost

a difference in cost between two alternatives * always relevant costs

activity base aka COST DRIVER

a measure of whatever causes the incurrence of a variable cost

A mixed cost contains

a variable and fixed element

Cost objects include: a. anything for which cost data is desired b. anything for which revenue data is desired c. customers. d. organizational subunits / departments

a. anything for which cost data is desired c. customers. d. organizational subunits / departments

manufacturing companies (like General Motors)

acquire raw materials to product car

Manufacturing costs include all of the following categories except ________. a. administrative costs b. direct labor c. direct materials d. manufacturing overhead

administrative costs

what are selling costs (NON manufacturing costs) and examples

all costs that are incurred to secure customer orders and get the finished product to the customer EX: advertising, shipping, sales travel, sales commissions, sales salaries, and costs of warehouses

what are administrative costs (NON manufacturing costs) and examples

all costs with general management of an organization rather than the manufacturing or selling EX: executive compensation, general accounting, secretarial work, public relations, similar costs involved in the overall general administration of the organization as a whole

period costs

all the costs that are not product costs. All selling and administrative expenses are treated as period costs. EX: sale commissions, advertising, exec salaries, public relations, and rental costs of administrative offices

cost object

anything for which cost data are desired - products - customers - jobs - organizational sub units

Which of the following statements about opportunity costs is not correct? a. An opportunity cost is the potential benefit that is given up when one alternative is selected over another. b. An opportunity cost cannot be changed by any decision made now or in the future. c. Opportunity costs are not usually found in accounting records. d. Opportunity costs are costs that must be explicitly considered in every decision a manager makes.

b. An opportunity cost cannot be changed by any decision made now or in the future.

matching principle

based on accrual concept that costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized

example of sunk cost

buying a .com website for for $25 mil for dog food, it didn't make money, but you already paid $25 mil for the website and you can't go back on buying it

merchandising company

buys finished products from manufactures and sells them to consumers

If a firm increases its activity level, ________. a. costs will remain the same b. all costs will rise c. some costs will change, other costs will remain the same

c. some costs will change, other costs will remain the same

direct costs

can be easily traced to a particular cost object EX: Nike assigns costs to various sales offices, then the sales manager salary in Paris = direct cost of that OFFICE (not the shoe)

manufacturing costs: indirect materials

cannot be physically or directly associated with the finished good EX: glue used in production solder that makes electrical connections in car * PART OF MANUFACTURING OVERHEAD

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

common cost

fixed cost changes

constant in total, no matter activity EX: - straight line depreciation - insurance rent - salaries

cost are assigned to

cost objects

The traditional income statement uses which of the following cost categories? a. Variable expenses and fixed expenses. b. Cost of goods sold and fixed expenses. c. Operating expenses and selling and administrative expenses. d. Cost of goods sold and selling and administrative expenses.

d. Cost of goods sold and selling and administrative expenses.

A fixed cost is a cost which ________. a. varies in total with changes in the level of activity b. remains constant per unit with changes in the level of activity c. varies inversely in total with changes in the level of activity d. remains constant in total with changes in the level of activity

d. remains constant in total with changes in the level of activity

raw materials can include _____ or ______

direct and indirect materials

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

direct cost

manufacturing costs go into these 3 categories

direct materials direct labor (touch labors) manufacturing overhead

manufacturing costs: direct materials

direct materials: raw materials that can be physically and directly associated with the finished product during the manufacturing process EX: car seat can be traced to a car

costs are classified as

direct or indirect

particular cost can be

direct or indirect

selling and administrative costs are direct indirect both

direct or indirect

distinction between fixed and variable costs on the contribution format is

distinguishes fixed and variable costs COGS (variable expenses) contribution margin is amount remaining from the difference of (sales) - (COGS + variable selling + variable administrative) * this amount contributes to the fixed expenses of (fixed selling + fixed administrative) NI = the difference in those 2 numbers

financial or managerial: emphasizes companywide reports

financial

financial or managerial: emphasizes financial consequences of PAST activities

financial

financial or managerial: emphasizes objectivity

financial

financial or managerial: emphasizes objectivity and verifyability

financial

financial or managerial: emphasizes on consequences of past activities

financial

financial or managerial: mandatory for external reports

financial

financial or managerial: must follow GAAP/IFRS

financial

financial vs managerial accounting

financial - financial info to EXTERNAL parties managerial - info to managers to use WITHIN the organization

in relevant range: fixed cost = 500 number of guests = increase from 200 --> 500 average cost per guest = (rental cost / # guests) what happens to the fixed costs if the number of guest increases

fixed cost = same average cost per guest = get smaller rental cost guests avg cost per guest 500 200 $2.00 500 500 $1.00 500 750 $0.67 500 1000 $0.50

differential costs can

fixed or variable

differential revenue

future revenue that differs between any two alternatives

cost bahavior

how a cost reacts to changes int he level of activity

Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) _________ of selling a tour package.

indirect cost

nails and glue are ________ _________

indirect materials

financial or managerial: decisions affecting the future

managerial

financial or managerial: emphasizes decisions affecting the future

managerial

financial or managerial: emphasizes relevance

managerial

financial or managerial: emphasizes segment reports

managerial

financial or managerial: emphasizes timeliness

managerial

financial or managerial: not required by GAAP

managerial

costs are either ____ or _____

manufacturing or nonmanufacturing

Factory materials, such as cleaning supplies, that are not components of finished products are classified as ______. direct materials administrative costs period costs manufacturing overhead

manufacturing overhead

Items such as indirect materials, indirect labor, maintenance and repairs on production equipment, depreciation, and insurance on manufacturing facilities are included in ________.

manufacturing overhead costs

The ________ requires that the costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized. a. materiality concept b. consistency concept c. matching principle Correct d. going concern assumption

matching principle

raw materials

materials that are used in the final product (NOT natural resources)

Property taxes associated with a company's administrative facility are considered ________.

non manufacturing costs

managerial accounting pillars/meaning planning controlling decision making

planning - establishing goals and specifying how to achieve them controlling - monitoring and ensuring. the proper execution of plans decision making - selecting the best possible course of action

How should the wages of a sheet metal worker in a fabrication plant be classified? a. Product cost Correct b. Period cost c. Nonmanufacturing cost d. Administrative cost

product cost

costs are either

product or period

non manufacturing costs 2 categories

selling costs administrative costs

Which of the following is always an irrelevant cost? - Differential cost - Sunk cost - Opportunity cost

sunk cost

to be traced to one cost object

the cost must be caused by the cost object

direct labors

touch labor - bc they touch the product while its being made - assembly line workers at General motors - carpenters at home builder - electricians that install equipment

t/f sunk costs are always ignored in decision making

true

opportunity cost

whatever must be given up to obtain some item EX: ford - investing funds in land or high grade security * opportunity cost is the opposite of what you choose