Acct2020 Ch 1

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

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 are most likely fixed costs?

1. Administrative salaries 2. Factory insurance 3. Factory rent

A cost that can be easily and conveniently traced to a specific cost object is a(n) BLANK cost of that cost object, whereas costs that cannot be easily and conveniently traced to that specific cost object are BLANK costs

1. direct 2. indirect

In an automobile manufacturing plant, the assembly-line workers are classified as BLANK BLANK costs

1. direct 2. labor

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

1. direct materials 2. direct labor 3. overhead

Within the relevant range of activity ______.

1. fixed costs remain constant in total 2. costs and activity can be approximated by a straight line

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

1. indirect materials 2. manufacturing overhead

Manufacturing costs include ______.

1. manufacturing overhead 2. direct materials 3. direct labor

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

1. opportunity 2. cost

Cost objects include ______.

1. organizational subunits 2. anything for which cost data is desired 3. customers

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

1. product 2. period

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

1. traditional 2. contribution

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

Cost Object

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

True

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

behavior

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

decision making

Selling and administrative costs are ______ costs.

direct or indirect

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

false: Indirect labor costs cannot be conveniently and easily traced to a specific product.

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

fixed

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

indirect

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

indirect

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

manufacturing overhead

Indirect materials and indirect labor are classified as ______.

manufacturing overhead

The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is recognized is known as the BLANK principle

matching

A cost than contains both variable and fixed costs elements is called a(n) BLANK cost

mixed

Inventoriable costs is another term for BLANK costs

product

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

relevant range

Contribution margin is ______.

sales revenue minus variable costs

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

they are incurred

Direct labor is also called BLANK labor

touch

Within the relevant range, a cost that changes in direct proportion to changes in the activity level is a ______ cost.

variable

True Statements

1. Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier. 2. Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior.

True statements

1. Period costs do not flow through the inventory accounts. 2. Period costs are expensed when incurred.

Nonmanufacturing costs include ______.

1. sales commissions 2. company president's salary

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

Indirect costs

The difference in revenues between two alternatives is called ______.

different revenue

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

differential

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

direct

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

direct labor

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

indirect materials

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

raw

Differential costs are also known as BLANK costs

relevant

True statements

1. Sales commissions are period costs. 2. Period costs are expensed in the same period in which they are incurred.

Differential cost is ______.

1. also known as incremental cost 2. the difference in cost between two alternatives

Cost behavior ______.

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

Selling costs include ______.

1. sales salaries 2. advertising 3. sales commissions

Opportunity costs ______.

1. should be considered in decision making 2. are benefits that are given up when selecting one alternative over another

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 BLANK materials

direct

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

direct material