SMARTBOOK 1 - Accounting 102

Product costs ______.

"attach" to units of product as they are purchased for resale or produced are also called inventoriable costs

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

Cost behavior...

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

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

indirect materials

A fixed cost remains fixed ______ within the relevant range of activity.

in total

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

product

Committed fixed costs include ______.

real estate taxes top management salaries

How individual costs react to changes in activity level is referred to as cost_________

behavior

Fixed costs that can be cut-back or eliminated without significant damage to a company's long-term goals are _______ fixed cost and _______ fixed costs can not be easily changed or eliminated.

discretionary & committed

Within the relevant range of activity, ______ costs remain constant in total.

fixed

Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the ______.

income statement

Product costs are also called ________ costs.

inventoriable or manufacturing

As the level of activity moves outside of the relevant range, fixed costs, ______.

increase or decrease in discrete steps

Variable costs ______.

remain constant per unit and vary in total.

Which of the following statements are true? Inventoriable costs are expensed in the period in which they are incurred. Period costs are expensed when incurred. Period costs do not flow through the inventory accounts. All costs in a merchandising company are period costs.

Period costs are expensed when incurred. Period costs do not flow through the inventory accounts. Sales commissions are period costs.

Manufacturing overhead costs include ______.

indirect materials, factory supervisors' salaries, and factory depreciation

Fixed costs that cannot easily be changed and often lock a company into a multi-year decision are called ______ fixed costs.

committed

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

False

True or false: Variable costs remain fixed in total within the relevant range of activity.

False

Within the relevant range of activity ______.

costs and activity can be approximated by a straight line fixed costs remain constant in total

Which of the following are most likely fixed costs?

Factory insurance Administrative salaries Factory rent

The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is recognized is known as the ________ principle.

matching

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

they are incurred

Within the relevant range, a cost that changes in direct proportion to changes in the activity level is a ______ cost.

variable