Accounting Final Chapter 1

Discretionary Fixed Costs Include:

1. Advertising 2. Management Training Programs

Using the high-low method, fixed cost is calculated by:

1. After variable cost per unit is calculated 2. Using either the high or low level of activity

Product Costs:

1. Also called "inventoriable" costs 2. "attach" to units of product as they are purchased for resale or produced

Differential Costs is:

1. Also know as incremental costs 2. The difference in costs between two alternatives

Cost Behavior:

1. Categorizes costs as fixed, mixed or variable 2. refers to how a cost will change as activity level changes

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

1. Common Cost

Sales Revenue minus variable expenses equals ______________

1. Contribution Margin

Direct labor and overhead costs incurred to change raw materials into finished products are known as ________________ costs.

1. Conversion

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

1. Direct

Materials that became an important component of the finished product whose cost can be easily and conveniently traced to the finished product are ___________________ materials.

1. Direct

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

1. Direct 2. Indirect

Prime costs are:

1. Direct Labor 2. Direct Materials

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

1. Direct Material Cost

Manufacturing costs can be divided into three categories: direct ____________________ labor and manufacturing ___________________

1. Direct Materials 2. Direct Labor 3. Manufacturing Overhead

Indirect Labor Costs Include: _________________ and ___________________

1. Factory Security Guard Wages 2. Assembly - line supervisor salary

As activity changes _______________ costs remain constant in total.

1. Fixed

A fixed cost remains fixed ____________ within the relevant range of activity

1. In Total

Manufacturing Overhead Costs Include: ________________, _________________, and __________________________

1. Indirect Materials 2. Factory Supervisors' Salaries 3. Factory Depreciation

Which statements behind the high-low method are true?

1. It only uses two data points 2. The high-low method should only be used if a scatter graph plot indicates a linear relationship between cost and activity

The revenue obtained from selling one additional unit of product is called:

1. Marginal Revenue

Step Variabel Costs:

1. May include total salaried employee expense 2. Can be adjusted quickly as conditions change

Committed Fixed Costs Include:

1. Real Estate Taxes 2. Top Management Salaries

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

1. Relevant Range

Within the relevant range of activity, variable costs:

1. Remain constant per unity 2. Vary in total

Within the relevant range of activity, variable costs: _________________________

1. Remains Constant Per Unit

Selling Costs include: __________________, _________________________, and ____________________

1. Sales Salaries 2. Sales Commissions 3. Advertising

Costs incurred to obtain customer's orders are known as ___________________ costs

1. Selling Costs

An activity base:

1. Sometimes called a cost driver 2. measures whatever causes costs to vary

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

1. Sunk

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

1. Traditional 2. Contribution

The high-low method:

1. Uses two data points 2. Is based on periods where the activity tends to be unusual

Mixed Costs are also commonly known as semi- _________________ costs.

1. Variable

When using the high low method, the slope of the line equals the _______________________ cost per unit of activity.

1. Variable

Which type of costs changes in total, in direct proportion to changes in activity level?

1. Variable

Within the relevant range, ____________________ costs remain constant on a per unit basis

1. 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.

1. direct 2.indirect

The engineering cost approach:

1. includes an analysis of what cost behavior should be 2. Is based on an enngineer's evaluation of the production methods

How to compute COGS:

Beginning Inventory + Purchases - Ending Inventory = COGS

The relative portion of each type of cost in an organization is known as the company's __________________________

Cost Structure

The difference in revenues between two alternatives is called:

Differential Revenue

Indirect materials can be easily and inexpensively traced to a specific product:

False

Labor costs that can be specifically traced to a product are indirect labor costs.

False

Variable costs remain fixed in total within the relevant range of activity.

False

In a least-sqaures regression line, the vertical intercept (a) of the line represents the total _________________________ cost

Fixed Cost

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

Indirect Costs

Direct materials and direct labor are both ______________ costs.

Manufacturing Costs

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

Opportunity Cost

The materials that go into the final product are called ____________________ materials

Raw Materials

In the equation Y = a +bx, Y is the:

Total Mixed Cost

Advertising and sales commissions are period costs

True

Direct Labor and Indirect Labor are product costs

True

Period costs are expensed in the same period in which they are incurred

True

Sales commissions are period costs

True

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

True

Cost behavior is considered linear whenever

a straight line approximates the relationship between cost and activity

When using the high-low method, if the high or low levels of cost do not match the high or low levels of activity:

choose the periods with the highest and lowest levels of activity and their associated cost

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

cost object

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

direct labor

Product costs flow through the inventory accounts until the goods are sold, at which time they became an expense in the cost of goods sold section on the _______________________

income statement

Product costs are also called:

inventoriable costs

A method that uses al the available data points to divide a mixed cost into its fixed and variable components is called:

least-squares regression

Marginal Cost Is:

the cost incurred to produce one more unit of a product

When using the high-low method, the change in cost divided by the change in units equals:

the variable cost per unit