Chapter 1-
Examples of fixed costs
-rent -insurance on buildings
The relative proportion of each type of cost in an organization is known as the company's
Cost structure
A laptop computer manufacturer would consider the computer's processor chip to be a
DM
Manufacturing cost can be divided into 3 categories:
Direct Materials, Direct Labor, and Manufacturing Overhead
A cost that can be easily and conveniently traced to a specific cost object is a
Direct cost
In an automobile manufacturing plant, the assembly-line workers are classified as
Direct labor costs
Other names for MOH?
Factory Burden, Factory Overhead, Indirect Manufacturing Costs
Common activity bases include:
Machine hours, units sold, DL hours
A potential benefit that is forfeited or lost when one decision is chosen over another is called a(n)
Opportunity Cost
Which of the following statements are true?
Period Costs do not flow through the inventory accounts. Period Costs are expensed when incurred.
DM,DL, and MOH are all what type of costs?
Product
The materials that go into the final product are called
Raw Materials
Period costs are always expensed on the income statement in the period in which:
They are incurred
A cost that can not be easily traced to a specific cost object is a
indirect cost
Indirect Materials include
nail, glue, thread
Within the relevant range, variable costs
remain constant per unit, vary in total.
marginal cost is:
the cost incurred to produce one more unit of a product
maintenance and depreciation of test equipment are examples of costs
Appraisals
Manufacturing Overhead
Factory costs such as cleaning supplies, taxes, insurance, and janitor wages.
sales revenue - variable expenses =
contribution margin
Direct Labor is also called
touch labor
Indirect Labor costs include:
Factory security guard wages, and assembly-line supervisor salary.
True or false: labor costs that can be specifically traced to a product are indirect labor costs.
False (DM COSTS)
Within the relevant range of activity, ________ Costs . remain constant in total.
Fixed
As the level of activity moves outside the relevant range, fixed costs:
Increase or decrease in discrete steps
As a level of activity moves outside of the relevant range, fixed costs:
Increase or decrease in discrete steps.
A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of:
Indirect materials & MOH
Committed fixed costs include:
Top management salaries, and real estate taxes.
Which type of cost changes in total, in direct proportion to changes in activity level?
Variable
Within relevant range, what costs remain constant per unit basis?
Variable
Units that are partially complete are found in
Work in Process
How individual costs react to changes in activity level is referred to as cost
behaviors
Which of the following statements is true?
period costs are expensed in the same period in which they are incurred. Sales commissions are period costs.
Two broad classifications of costs:
Manufacturing costs & Non-manufacturing Costs
costs that have already been incurred and cannot change by decisions . made in the current period or in the future periods are called:
SUNK Costs
Non-manufacturing costs include:
Sales commission and company president's salary
T or F: Presenting fixed costs on an average per unit basis makes them look like they are variable costs.
TRUE
Differential Cost is:
The difference in cost between two alternatives. Also known as INCREMENTAL COST
Cost classification in decision making includes:
differential cost, revenue, sunk cost, and opportunity cost.
Manufacturing Overhead costs include
indirect materials, factory supervisors' salaries, and factory depreciation