Test 1; Chapter 2

a change in revenues between two alternatives is known as ___ revenue or incremental revenue

differential

cost objects include: 1. anything for which cost data is desired 2. anything for which revenue is desired 3. customers 4. organizational subunits

1. anything for which cost data is desired 3. customers 4. organizational subunits

cost objects (check all that apply): 1. can be products, customers or jobs 2. may only be assigned direct costs 3. may be assigned costs to help control spending

1. can be products, customers, or jobs 3. may be assigned costs to help control spending

manufacturing costs include (check all that apply): 1. direct materials 2. administrative costs 3. indirect labor 4. selling costs 5. direct labor

1. direct materials 3. indirect labor 5. direct labor

costs that are shared by multiple cost objects in a company are known as __ costs

common

in an automobile manufacturing plant, the assembly line workers are considered to be _ __ costs.

direct labor

in an automobile manufacturing plant, the assembly line workers are considered to be __ ___ __

direct labor costs

materials that become an important component of the finished product and their costs can be easily and conveniently traced to the finished product are __ __

direct materials

preventing, detecting, and dealing with defects causes __ costs. opportunity marginal sunk quality

quality

the level of activity within which variable and fixed cost assumptions are valid is known as the __ __

relevant range

what is the formula that represents a contribution income statement?

sales- variable expenses = contribution margin - fixed expenses = net income

fixed costs remains constant in __ over the __ range of activity

total, relevant

A __ cost changes in direct proportion to changes in the activity level

variable

__ costs vary in total, in direct proportion to changes in activity level 1. opportunity 2. differential 3. fixed 4. variable

variable

which of the following statements are true? (check all that apply): 1. product costs are also called inventoriable costs 2. inventoriable costs are expensed in the period in which they are incurred 3. period costs are expensed when incurred 4. all costs in a merchandising company are period costs

- product costs are also called inventoriable costs - period costs are expensed when incurred

which of the following statements are true? (check all that apply) - product costs are always expensed in the same period in which the related products are produced - product costs include all costs involved in making and selling a product - product costs attach to units of product as they are purchased for resale or produced - product costs are also called inventoriable costs

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

Within the relevant range in activity, variable costs (check all that apply): 1. remain constant per unit 2. vary in total 3. remain constant in total 4. vary per unit

1. remain constant per unit 2. vary in total

cost __ refers to how individual costs change as the level of activity increases or decreases

behavior

the variable cost per unit using the high low method is calculated as

change in cost divided by change in activity

the variable cost per unit using the high low method is calculated as: -total cost minus fixed cost -change in activity divided by change in cost -y=a+bx -change in cost divided by change in activity

change in cost divided by change in activity

a __ cost is a type of indirect cost incurred to benefit more than one cost object: opportunity common sunk prime

common

Sales revenue minus variable expenses is __ __

contribution margin

sales revenue minus variable expenses is...

contribution margin

managers use __ __ to predict how costs will change as the level of activity changes

cost analysis

cost objects include (check all that apply) anything for which revenue data is desired customers organizational subunits anything for which cost data is desired

customers organizational subunits anything for which cost data is desired

administrative costs include... 1. executive compensation and public relations costs 2. sales commissions and factory supervisors salaries, 3. shipping costs and sales commissions, 4. factory maintenance workers wages and factory supervisors salaries

executive compensation and public relation costs

Which of the following are most likely fixed costs?

factory rent, administrative salaries, factory insurance

__ costs remain constant in total within the relevant range of activity

fixed

A __ __ is a cost that remains constant, in total, regardless of changes in the level of activity.

fixed cost

a fixed cost remains fixed __ within the relevant range of activity - in total -per unit

in total

salaries of factory supervisors and factory maintenance personnel are ___ labor costs

indirect

manufacturing overhead includes (check all that apply) - administrative costs - indirect labor -selling costs - direct materials - direct labor

indirect labor direct labor direct materials

indirect materials and indirect labor are classified as..

manufacturing overhead

the revenue from selling one additional unit is called __ revenue

marginal

direct materials, direct labor, and manufacturing overhead are all __ costs

product

costs that have already been incurred and cannot be changed by decisions made in the current period or in future periods are called ___ ___

sunk costs

costs that have already been incurred and cannot be changed by decisions made in the current period or in future periods are called...

sunk costs

which of the following statements are true? (check all that apply): - direct labor and indirect labor are product costs - advertising and sales commissions are period costs - factory cleaning and maintenance are period costs - sales commissions and shipping costs are product costs

-direct labor and indirect labor are product costs -advertising and sales commissions are period costs

minor items such as nails and glue guns are considered to be 1. indirect materials 2. direct materials 3. administrative costs 4. selling costs

1 indirect materials (while it could be traced, it isn't worth the cost and effort to do it)

which statements regarding the high/low method are true? (check all that apply): 1. it only uses two data points 2. it is a better method than least squares regression 3. when applying this method, use the data points with the highest and lowest level of costs 4. the high low method should be used if a scatter graph indicates a linear relationship between cost and activity

1. it only uses two data points 4. the high/low method should be used if a scatter graph plot indicates a linear relationship between cost and activity

fixed costs (check all that apply): 1. remain constant in total regardless of changes in activity 2. should not be expressed on a per unit basis when making decisions 3. per unit becomes progressively larger as the level of activity increases 4. generally include rent and supervisor salaries

1. remain constant in total regardless of changes in activity 2. should not be expressed on a per unit basis when making decisions (when it is sometimes necessary, when fixed costs are expressed on a per unity basis, it gives the false impression that fixed costs behave like variable costs. Thus it should not be done for decision making purposes. 4. generally include rent and supervisor salaries.

Contribution margin is: 1. sales revenue minus variable costs 2. sales revenue minus cost of goods sold 3. sales revenue minus fixed costs 4. all revenues minus all costs

1. sales revenue minus variable costs

which of the following statements are true: (check all that apply) 1. within the relevant range of activity, fixed costs remain constant in total 2. the relevant range of activity is approximated by a straight line 3. within the relevant range of activity, total variable costs do not change

1. within the relevant range of activity, fixed costs remain constant in total 2. the relevant range of activity is approximated by a straight line

which of the following statements are true: (check all that apply) 1. a direct cost is sometimes referred to as a common cost 2. a regional sales managers salary would be a direct cost of the regional office in which the sales manager works 3. a particular cost is either direct or indirect, regardless of the cost object 4. a direct cost can be easily and conveniently traced to a specific cost object

2. a regional sales manager salary would be a direct cost object 4. a direct cost can be easily and conveniently traced to a specific cost object

which of the following statements are true? (check all that apply): 1. a particular cost is either direct of indirect, regardless of the cost object 2. a regional sales managers salary would be a direct cost of the regional office in which the sales manager works 3. a direct cost is sometimes referred to as a common cost 4. a direct cost can be easily traced to a specific cost object

2. a regional sales managers salary would be a direct cost of the regional office in which the sales manager works 4. a direct cost can be easily and conveniently traced to a specific cost object

an activity base (check all that apply): 1. is a measure of whatever causes fixed costs to occur 2. is sometimes called a cost driver 3. is part of the organization where major operations are planned and carried out 4. measures whatever causes costs to vary

2. is sometimes called a cost driver 3. measures whatever causes costs to vary

variable costs: 1. remain constant both in total and per unit 2. remain constant per unit and vary in total 3. vary both in total and per unit 4. remain constant in total and vary per unit

2. remain constant per unit and vary in total

which of the following statements are true? (check all that apply): 1. Mixed costs are also commonly known as step variable costs 2. the equation for a straight line can be used to express the relationship between mixed costs and the level of activity 3. mixed costs contain both fixed and variable costs 4. management cannot use account analysis when trying to estimate the components of a mixed cost

2. the equation for straight line can be used to express the relationship between mixed costs and the level of activity 3. mixed costs contain both fixed and variable elements

which of the following are indirect labor costs (check all that apply): 1. administrative assistant salary 2. assembly line worker wages 3. factory security guard wages 4. assembly line supervisor salary

3. factory security guard wages 4. assembly line supervisor salary

a contribution margin income statement (check all that apply): 1. is prepared primarily for external reporting purposes 2. reports gross margin and net income 3. separates costs into their fixed and variable components 4. can assist with management decision making

3. separates costs into their fixed and variable components 4. can assist with management decision making

which of the following statements are true (check all that apply): 1. mixed costs are also commonly known as step variable costs 2. management cannot use account analysis when trying to estimate the components of a mixed cost 3. the equation for a straight line can be used to express the relationship between mixed costs and the level of activity 4. mixed costs contain both fixed and variable elements

3. the equation for a straight line can be used to express the relationship between mixed costs and the level of activity 4. mixed costs contain both fixed and variable elements

Manufacturing overhead costs include: 1. direct materials, sales commissions, and factory assembly workers wages 2. administrative taxes and insurance, sales commissions, and factory assembly workers wages, 3. direct materials, administrative taxes and insurance, and sales commissions 4. indirect materials, factory supervisors salaries, and factory taxes and insurance

4. indirect materials, factory supervisors salaries, and factory taxes and insurance

Manufacturing overhead costs include: 1. indirect materials, factory supervisors salaries, and factory taxes and insurance 2. administrative taxes and insurance, sales commissions and factory assembly workers wages 3. direct materials, sales commissions, and factory assembly workers wages 4. direct materials, administrative taxes and insurance and sales commissions

indirect materials, factory supervisors salaries, and factory taxes and insurance

a dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of (check all that apply): administrative costs indirect materials direct materials manufacturing overhead

indirect materials, manufacturing overhead

An activity base (check all that apply): 1. measures whatever costs to vary 2. is sometimes called a cost driver 3. is a measure of whatever causes fixed costs to occur 4. is part of the organization where major operations are planned and carried out

measures whatever causes costs to vary is sometimes called a cost driver

__ costs are expensed on the income statement when incurred; ___ costs become part of inventory on the balance sheet

period, inventoriable