Accounting Chapter 1

Which of the following are most likely fixed costs?

Factory insurance Administrative salaries Factory rent

The components of prime costs are direct ______ costs and direct ________ costs

materials labor

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

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

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

Discretionary fixed costs include ______.

advertising management training programs

Differential cost is ______.

also known as incremental cost the difference in cost between two alternatives

cost objects include

anything for which cost data is desired organizational subunits customers

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

behavior

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

common

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

fixed

product costs are also called

inventoriable or manufacturing costs

Indirect materials include ______.

nails, glue, and thread

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

opportunity cost

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.

Fasle

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

common

Sales revenue minus variable expenses equals_______ _______

contribution margin

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

decision making

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

Manufacturing costs can be divided into three categories: direct _______ , ________ labor and manufacturing __________.

direct materials, direct labor and manufacturing overhead

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

indirect

Direct materials and direct labor are both ______ costs.

manufacturing

Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as ______.

manufacturing overhead

Cost behavior ______.

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

A contribution approach income statement ______.

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

Opportunity costs ______.

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

Direct labor is also called _______ labor.

touch

An income statement focusing on product and period costs has been prepared using a(n) ________ format, while a(n) ______ format income statement makes a distinction between fixed and variable costs.

traditional or GAAP contribution

Within the relevant range, which type of cost changes in total, in direct proportion to changes in activity level?

variable

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 indirect

In an automobile manufacturing plant, the assembly-line workers are classified as _______ ________cost.

direct labor

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

direct material

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

indirect

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

indirect materials

Manufacturing overhead costs include ______.

indirect materials, factory supervisors' salaries, and factory depreciation

A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of ______.

manufacturing overhead indirect materials

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

marginal

The revenue from selling one additional unit is called ______ revenue.

marginal

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

cost object

Beginning merchandise inventory + Purchases - Ending merchandise inventory =

cost of goods sold

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

direct

Manufacturing costs include ______.

direct materials direct labor manufacturing overhead

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 or managed committed

Within the relevant range of activity ______.

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

Indirect materials and indirect labor are classified as ______.

manufacturing overhead

A cost that contains both variable and fixed cost elements is a(n) ______ cost.

mixed

On a traditional income statement, cost of goods sold reports the ______ costs attached to merchandise sold during the period, while selling and administrative expenses report all ______ costs that have been expensed as incurred

product period

The materials that go into the final product are called ______ materials.

raw

Within the relevant range of activity, variable costs ______.

remain constant per unit vary in total

Selling costs include ______.

sales commissions advertising sales salaries

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

they are incurred

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

Which of the following statements are true?

Period costs are expensed in the same period in which they are incurred. Sales commissions are period costs.

Which of the following statements are true?

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

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

True

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

direct labor

Factory burden is a synonym for ______ ______

manufacturing overhead

Cost of goods sold for a merchandising company, direct materials and commissions are all examples of _____ costs.

variable

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

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

Flase

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

increase or decrease in discrete steps

Differential costs are also known as _____ costs

incremental

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

Committed fixed costs include ______.

top management salaries real estate taxes

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

indirect costs