Acct 2302

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

A(n) is anything for which cost data are desired—including products, customers, plants, office locations, and departments.

Cost Object

The following information is for S&P Enterprises for the month of July: Direct materials $76,000 Direct labor $40,000 Variable manufacturing overhead $25,000 Fixed manufacturing overhead $30,000 Variable selling expense $12,000 Fixed selling expense $15,000 Variable administrative expense $6,000 Fixed administrative expense $18,000 Total product cost for the month of July was

Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead = 171000

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

False

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

mixed

Which type of cost varies, in total, in direct proportion to changes in the level of activity?

Variable

How a cost react to changes in activity level is referred to as cost

behavior

Cost behavior:

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

Sales revenue minus all variable expenses equals

contribution margin

Differential costs, opportunity costs, and incremental costs are all cost classifications used in:

decision making

A change in revenues between two alternatives is known as revenue or incremental revenue.

differential

Manufacturing costs include Blank

manufacturing overhead selling costs direct labor

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

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

opportunity cost

Inventoriable costs is another term for___________ costs.

product or manufacturing

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 assumption that cost behavior is strictly linear is reasonably valid within the of activity.

relevant range

Nonmanufacturing costs include

sales commissions company president's salary

Contribution margin is

sales revenue minus variable costs

Selling costs include

sales salaries sales commissions advertising

Differential cost is

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

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, contribution

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

variable

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

Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior. Contribution format statements make it easier to predict how decisions affect the future.

Opportunity costs

are benefits lost when choosing one option over another should be considered in decision making

Indirect labor costs include:

assembly-line supervisor salary factory security guard wages

Selling and administrative costs are Blank______ costs

direct or indirect

Administrative costs include

executive compensation and public relations costs

Within the relevant range of activity

fixed costs remain constant in total and vary per unit the assumption that cost behavior is strictly linear is reasonably valid

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

income statement

The difference in revenues between two alternatives is called

incremental revenue

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

Given: Sales of $360,000, Gross Margin of $140,000, Contribution Margin of $110,000, and Total Selling & Administrative Exp. of $60,000, net income using the traditional income statement format equals

Reason: Gross Margin of $140,000 - Total Selling & Admin. Exp. of $60,000 = $80,000.

The following information is for S&P Enterprises for the month of July: Direct materials $76,000 Direct labor $40,000 Variable manufacturing overhead $25,000 Fixed manufacturing overhead $30,000 Variable selling expense $12,000 Fixed selling expense $15,000 Variable administrative expense $6,000 Fixed administrative expense $18,000 Total period cost for the month of July was:

The period cost = variable selling expense + fixed selling expense + variable administrative expense + fixed administrative expense = $12,000 + $15,000 + $6,000 + $18,000 = $51,000.

Raw materials whose costs cannot be easily traced to finished products are classified as

indirect materials manufacturing overhead

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

indirect materials

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

they are incurred

Which of the following are most likely fixed costs?

Factory insurance Factory rent Administrative salaries

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

Indirect costs

All manufacturing costs except for direct materials and direct labor belong in the Blank______ cost category.

manufacturing overhead