BUS 215 Ch 2

Which of the following statements are true? -factory cleaning and maintenance are period costs -sales commissions and shipping costs are product costs -direct labor and indirect labor are product costs -advertising and sales commissions are period costs

-direct labor and indirect labor are product costs -advertising and sales commissions are period costs

Which statements regarding the high-low method are true? -when applying this method, use the data points with the highest and lowest level of cost. -the high-low method should only be used if a scattergraph plot indicates a linear relationship between cost and activity. -it is a better method than least-squares regression. -it only uses two data points.

SHOULD BE ACTIVITY FOR THE FIRST OPTION -the high-low method should only be used if a scattergraph plot indicates a linear relationship between cost and activity. -it only uses two data points.

Which of the following statements are true? □a particular cost is either direct or indirect, regardless of the cost object □a regional sales manager's salary would be a direct cost of the regional office in which the sales manager works □a direct cost can be easily and conveniently traced to a specific cost object □a direct cost is sometimes referred to as a common cost

a regional sales manager's salary would be a direct cost of the regional office in which the sales manager works a direct cost can be easily and conveniently traced to a specific cost object

The more effective a company's ____ activities, the greater the level of ___ failure costs.

appraisal internal

How individual costs change as the level of activity level increases or decreases is referred to as cost _____.

behavior

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 level of activity and their associated costs choose the periods with the highest and lowest level of cost and their associated activities skip that period and move to the next highest or lowest level where costs and activity match

choose the periods with the highest and lowest level of activity and their associated costs

A type of cost incurred to benefit more than one cost object is a(n) _____ cost common opportunity prime sunk

common

The financial statement that organizes costs by their behavior instead of by their function is the: contribution format income statement balance sheet traditional format income statement statement of cash flows

contribution format income

Sales revenue minus variable expenses equals ____ ____.

contribution margin

Any item which cost data is desired is called a(n) ____ ____.

cost object

The difference in costs between two alternatives is called a(n) ________ cost. common opportunity sunk differential

differential

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

differential revenue

Materials that become an important component of the finished product and their cost can be easily and conveniently traced to the finished product are ____ materials

direct

The components of prime costs are: -direct labor -manufacturing labor -direct materials -selling and administrative expenses

direct labor direct materials

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

fixed

A fixed cost remains fixed _____ within the relevant range of activity per unit or in total

in total

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

income statement

Salaries of factory supervisors and factory maintenance personnel are examples of ___ labor costs direct or indirect

indirect

Manufacturing overhead costs include: indirect materials, factory supervisors' salaries, and factory taxes and insurance direct materials, sales commissions, and factory assembly workers' wages direct materials, administrative taxes and insurance, and sales commissions administrative taxes and insurance, sales commissions, and factory assembly workers' wages

indirect materials, factory supervisors' salaries, and factory taxes and insurance

Manufacturing costs can be divided into three categories: direct materials, direct ____, and _____ _____.

labor, manufacturing overhead

Direct materials and direct labor are both: nonmanufacturing costs period costs manufacturing costs selling and administrative costs

manufacturing costs

Costs incurred in an attempt to lower the number of products manufactured with defects are _____ ____.

prevention costs

A report that is constructed to provide an estimate of the financial consequences that a company incurs due to the current level of defects is called a(n) ____ cost report

quality

Preventing, detecting, and dealing with defects causes ___ costs.

quality

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

relevant range

Costs incurred to obtain customers' orders are known as ____ costs.

selling

Which of the following statements are true? Check all that apply -Mixed costs contain both fixed and variable cost elements -management cannot use account analysis when trying to estimate the components of a mixed cost. -the equation for a straight-line can be used to express the relationship between mixed costs and the level of activity -mixed costs are also commonly known as step variable costs

-Mixed costs contain both fixed and variable cost elements -the equation for a straight-line can be used to express the relationship between mixed costs and the level of activity

Quality cost information reports: -help identify the financial cost of defects -show managers if quality control costs are poorly distributed -give managers an idea of where to -focus quality control efforts -always identify lost sales from customer ill will.

-help identify the financial cost of defects -show managers if quality control costs are poorly distributed -give managers an idea of where to -focus quality control efforts

A dress manufacturer would consider the cost of relatively inexpensive items like thread to be a part of: -direct materials -indirect materials -manufacturing overhead -administrative costs

-indirect materials -manufacturing overhead

Which of the following are examples of common activity bases? direct labor hours number of purchase orders machine hours scrapped unis

direct labor hours number of purchase orders machine hours

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 the object are ____ costs

direct, indirect

What method is based on the rise-over-run formula for the slope of a straight line?

high low method

Which of the following statements are true? the wages of assembly-line workers are period costs nonmanufacturing costs are period costs period costs are expensed in the same period in which they are incurred period costs are also called inventoriable costs

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

A potential benefit that is forfeited or lost when one decision is chosen over another is called a _____ _____.

opportunity cost.

Within the relevant range of activity, variable costs: □vary per unit □remain constant in total □remain constant per unit □vary in total

remain constant per unit vary in total

Which of the following statements are true? When plotting a scattergraph, cost is the independent variable scattergraphs are a way to diagnose cost behavior plotting data on a scattergraph is an important diagnostic step scattergraphs should be used after high-low or regression analysis is performed

scattergraphs are a way to diagnose cost behavior plotting data on a scattergraph is an important diagnostic step

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

sunk

Marginal cost is: the cost incurred to produce one more unit of a product the cost that can be traced to a specific product what is given up by selecting one alternative over another another name for the fixed cost per unit.

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: total fixed cost the variable cost per unit the fixed cost per unit total cost total variable cost

the variable cost per unit

Fixed costs remain constant in _____ over the _____ range of activity.

total, relevant

Direct labor is also called

touch

Using the high-low method, the fixed cost is calculated by adding the total cost to the variable cost using either the high or low level of activity after the variable cost is calculated before the variable cost is calculated

using either the high or low level of activity after the variable cost is calculated

Which type of cost changes in total, in direct proportion to changes in activity level? fixed differential opportunity variable

variable

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

variable

Which of the following statements are true? when mixed costs are represented by a straight-line, the steeper the slope, the higher the variable cost per unit. the fixed portion of a mixed cost represents the cost incurred for the actual consumption of a service a mixed cost has a minimum cost of having a service available and ready for use. the equation for a straight-line makes it easy to calculate the total mixed cost for any activity level outside the relevant range.

when mixed costs are represented by a straight-line, the steeper the slope, the higher the variable cost per unit. a mixed cost has a minimum cost of having a service available and ready for use.