ACCT 2521 EXAM 1
Discretionary fixed costs:
May be reduced for short periods of time with minimal damage to the long run goals of the organization
an activity base
Measures whatever causes costs to vary ; Sometimes called cost driver
Which are true?
Mixed cost has a minimum cost of having a service available and ready for use ; When mixed costs are represented by a straight line, the steeper the slope, the higher variable cost per unit
Variable costs are costs that:
Vary in total directly and proportionately with changes in the activity level & remain the same per unit at every activity level
as a firm begins to operate outside the relevant range, the accuracy of the cost estimates for fixed and variable costs
fixed & variable decreases
The depreciation on equipment in a manufacturer's headquarters can be classified as a(n)
non-manufacturing cost
what is an example of a period cost?
salary for the vice president of finance
Contribution margin is:
sales rev - variable costs
Order getting and order filling are other names for ____ cost
selling
Within relevant range, fixed costs:
shouldn't be expressed on a per unit basis when making decisions ; Remain constant in total regardless of changes in activity ; Generally includes rent and supervisor salaries
Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory?
the amount paid to the individual who stains a chair
The relevant range is:
the range over which total fixed costs in not expected to change
direct labor is also called
touch labor
Income statement focusing on product and period costs has been prepared using _____ format, while a _____ format income statement makes a distinction between fixed and variable costs
traditional & contribution
Which of the following approaches to preparing an income includes a calculation for the gross margin?
traditional approach yes , contribution approach no
Depreciation on equipment a company uses in its selling and administrative activities would be classified as a period cost.
true
Product costs are also known as inventoriable costs.
true
True or false: presenting fixed costs on an avg per unit basis makes them look like they are variable costs
true
Wages paid to production supervisors would be classified as manufacturing overhead.
true
Which costs will change with a decrease in activity within the relevant range?
unit fixed costs and total variable costs
Within the relevant range of activity, variable costs _____
vary in total and remain constant per unit
Direct labor and manufacturing overhead costs are added to
work in process
cost of all work not yet completed is in
work in process
Prior to being recorded on the income statement, manufacturer product costs flow through
work in process , raw materials , finished goods
Tirri corp has provided following info: -direct materials, CPU = 6.85 -direct labor, CPU = 3.9 -variable manufacturing overhead, CPU = 1.25 -fixed manufacturing overhead, CPP = 22,500 -sales commissions, CPU = 1.00 -variable admin exp, CPU = .55 -fixed selling & admin exp, CPP = 7,500 If selling price is 26.2 per unit, the contribution margin per unit sold is closest to
12.65
step variable costs
Can be adjusted quickly as conditions change May include total salaried employee expense
cost behavoir
Categorizes costs as fixed, mixed and variable ; Refers to how a cost will change as activity level changes
Nonmanufacturing costs include
Company president's salary & Sales commissions
Other names for manufacturing overhead include
Indirect manufacturing costs Factory burden Factory overhead
manufacturing costs include
direct materials, direct labor, manufacturing overhead
Fixed costs that usually arise from annual spending decisions by management are ______ fixed costs
discretionary
Administrative costs include
executive compensation and public relations costs
Indirect labor costs include:
factory security guard wages, assembly-line supervisor salary
Depreciation is always considered a period cost in a manufacturing company.
false
True or False? Variable costs remain fixed in total within the relevant range of activity
false
costs of all work completed but not yet sold is in
finished goods
Company purchases a 12 month insurance policy on october 1 for $1,200. On the dec 31 annual financial statement
$300 reported as an expense $900 reported as an asset
Kneeland corp has provided the following info: -direct materials, CPU = 6.8 -direct labor, CPU = 4.15 -variable manufacturing overhead, CPU = 1.65 -fixed manufacturing overhead, CPP = 121,500 -sales commissions, CPU = 1.00 -variable admin expense, CPU = .50 -fixed selling & admin expense, CPP = 40,500 If 10,000 units are produced the total amount of manufacturing overhead cost is closest
138,000
Balance in work in process inventory account was 22,000 at the beginning of the month and 17,000 at end of month. During the month they incurred direct materials cost of 55,000 and direct labor cost of 28,000. The actual manufacturing overhead cost incurred was 53,000. The manufacturing overhead cost applied to work in process was 51,000. The cost of gods manufactured was?
139,000
QUIZ 1 # 12
223,000
Balance in finished good inventory account at the beginning of the month was 52,000 and 30,000 at the end of the month. The cost of goods manufactured for the month was 212,000. The actual manufacturing overhead cost incurred was 55,000 and the manufacturing overhead applied to work in process was 58,000. The company closes out any under-applied or over-applied manufacturing overhead to cost of goods sold. The adjusted cost of goods sold that would appear on income statement is:
231,000
Data for most recently completed year appears below: -est machine hours: 39,000 -est variable manufacturing overhead: 6.76 / machine hr -est total fixed manufacturing overhead: 794,430 -actual machine hrs for the yr: 42,700 Predetermined overhead rate for the recently completed year?
27.13 / machine hr
QUIZ 1 # 14
293,000
Beginning balance in raw materials account was 20,000 and the ending bal was 36,000. Raw materials purchases during the month totaled 63,000. Manufacturing overhead cost incurred during the month was 111,000 of which 2,000 consisted of raw materials classified as indirect materials. The direct materials cost is?
45,000
Bressette corp provided following info: -direct materials, CPU = 6.2 -direct labor, CPU = 3.7 -variable manufacturing overhead, CPU = 1.25 -fixed manufacturing overhead, CPP = 10,000 -sales commissions, CPU = 1.5 -variable admin exp, CPU = .5 -fixed selling & admin exp, CPP = 5,000 The total amount of product costs incurred to make 5,000 is closest to
65,750
QUIZ 1 # 13
68,000
Cost objects include:
Anything for which data is desired , Customers , Organizational sub units
Which is true?
Direct cost can be easily and conveniently traced to a specific cost object ; A regional sales managers salary would be a direct cost of the regional office in which he works at
total conversion costs
Direct labor + variable manufacturing overhead + fixed manufacturing overhead
Common activity bases include:
Direct labor hours ,Units sold ,Machine hours
Total product cost
Direct materials + direct labor + variable manufacturing overhead + fixed manufacturing overhead
Which of the following statements is true when referring to fixed costs?
Discretionary fixed costs can often be reduced to zero for short periods of time without seriously impairing the long-run goals of the company.
which is true?
Period costs do not flow through the inventory accounts ; Period costs are expenses when incurred
To find total variable manufacturing cost:
Product construct materials + direct labor + variable manufacturing overhead
Which is true?
Relevant range of activity is approximated by a straight line ; Within the relevant range of activity, fixed costs remain constant in total
Within the relevant range, fixed costs
Remain constant in total regardless of changes in activity ; Should not be expressed on a per unit basis when making decisions ; Generally include rent and supervisor salaries
non manufacturing costs include
Sales commissions & Company president's salary
selling costs include
Sales commissions , Sales salaries , Advertising
what is an example of a mixed cost?
an employee's compensation, which consists of a flat salary plus a commission
Costs associated with a the company's basic facilities, equipment, and organization are known as:
committed fixed costs
Costs that are shared by multiple cost objects in a company
common
Type of indirect cost incurred to benefit more than one object is a _____ cost
common
what is not an example of a committed fixed cost
contributions to charitable organizations
Direct labor and overhead costs incurred to change raw materials into finished products are known as ___ costs
conversion
direct labor is classified as
conversion cost & prime cost
The cost of electricity for running production equipment is classified as:
conversion cost yes, period cost no
How individual costs react to changes in activity level is referred to as
cost behavior
Relative proportion of each type of cost in an organization is known as the company's
cost structure
Pendergraph corp incurred 60,000 of actual manufacturing overhead costs. During the same period, the manufacturing overhead applied to work in process was 62,000. What is the journal entry to record incurrence of the actual manufacturing overhead costs
debit to manufacturing overhead of 60,000
During july 83,000 of raw materials were requisitioned from the storeroom for use in production. The raw materials included both direct and indirect materials. The indirect materials = 4,000. What is the journal entry to record requisition from storeroom?
debit to work in process of 79,000
Differential costs, opportunity costs and sunk costs are all cost classifications used in
decision making
A decrease in cost between 2 alternatives should be referred to as a __ cost
decremental
Change in revenues between 2 alternatives is known as _____ revenue or incremental revenue
differential
Difference in costs between 2 alternative is called a _______ cost
differential
In an automobile manufacturing plant, the assembly line workers are classified as _____ cost
direct labor
Which is classified as both a prime cost & a conversion cost?
direct labor
to find total prime cost
direct materials + direct labor
Prime costs are
direct materials and direct labor
A fixed cost remains fixed ____ within the relevant range of activity
in total
as the level of activity increases how will a var cost in total and per unit behave?
increase in total and have no effect per unit
Salaries of factory supervisors and factory maintenance personnel are examples of ____ labor costs
indirect
Not a cost classification associated with decision making?
indirect costs
a factory supervisor wages are classified as
indirect labor & moh
The cost of lubricants used to grease a machine used in the production process of a manufacturing company is an example of a
indirect material cost
The cost of lubricants used to grease a production machine in a manufacturing company is an example of an
indirect material cost
A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of:
indirect materials & manufacturing overhead
an example of a discretionary fixed cost is
management training
In a job order costing system, indirect labor cost is usually recorded as a debit to:
manufacturing overhead
Revenue obtained from selling 1 additional unit of product is called ____ revenue
marginal
Accrual concept that costs incurred to generate revenue are expensed in the same period the revenue is known as the ___ principle
matching
Concept that costs incurred to generate revenue are expenses in the same period the revenue is known as the ______ principle
matching
Product costs appear on the balance sheet
only if goods are partially completed, are unsold at the end of a period, or both
Property taxes on a company's factory building would be classified as a(n):
product cost
The salary paid to the maintenance supervisor in a manufacturing plant is an example of:
product cost & moh
what is not typically classified as a discretionary fixed cost?
property taxes
materials that go into final product
raw materials
the inventory accounts of manufacturing firm include
raw materials, finished goods, work in process
Cost assumptions are reasonably valid within the _____ of activity
relevant range
Level of activity within which variable and fixed cost assumptions are valid is known as:
relevant range
Variable costs
remain constant per unit and vary in total