Cost Accounting Book

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

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

True

Manufacturing costs include all of the following categories except _________________

administrative costs

which of the following statements about opportunity costs is not correct?

an opportunity cost cannot be changed by any decision made now or in the future

cost objects include

anything for which cost data is desired, organizational subunits, customers

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

behavior

The direct materials required to manufacture each unit of product are listed on a ________.

bill of materials

A normal cost system applies overhead to jobs ________.

by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job

A type of indirect cost incurred to benefit more than one cost object is a(n) ______ cost.

common

Costs that are shared by multiple cost objects in a company are known as ______ costs.

common

A ____________ is a cost that is incurred to support a number of cost objects but cannot be traced to them individually

common cost

The traditional income statement uses which of the following cost categories?

cost of goods and selling and administrative expenses

Product costs that have become expenses can be found in:

cost of goods sold

The relative proportion of variable, fixed, and mixed costs in a company is known as the company's:

cost structure

The adjustment for overapplied overhead ________.

decreases cost of goods sold and increases net operating income.

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

direct

____________________ is sometimes called "touch labor"

direct labor

Materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product are called __________________

direct materials

Selling and administrative costs are ______ costs.

direct or indirect

Which of the following are most likely fixed costs?

factory rent, administrative salaries, factory insurance

If a job is not completed at year end, then no manufacturing overhead cost would be applied to that job when a predetermined overhead rate is used. (T/F)

false

Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) _________ of selling a tour package.

indirect cost

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

indirect materials

which of the following is true of the contribution approach?

it separates costs into fixed and variable categories

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

manufacturing overhead

Factory materials, such as cleaning supplies, that are not components of finished products are classified as ______.

manufacturing overhead

Indirect materials and indirect labor are classified as ______.

manufacturing overhead

The ________________ requires that the costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized.

matching principle

Manufacturing costs can be divided into three categories: direct ___________ , __________ labor and manufacturing _____________

materials, direct, overhead

Companies can improve job cost accuracy by using ________.

multiple predetermined overhead rates

Property taxes associated with a company's administrative facility are considered _________________

non manufacturing costs

Inventoriable costs is another term for

product costs

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

raw

Differential costs are always

relevant in making business decisions

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

relevant range

A fixed cost is a cost which

remains constant in total with changes in the level of activity

In the cost formula (Y = a + bX) that is used to estimate the total manufacturing overhead cost for a given period, the letter "a" refers to the estimated ________.

total fixed manufacturing overhead cost

Actual overhead costs are not assigned to jobs in a job costing system. (T/F)

true

The fact that one department may be labor intensive while another department is machine intensive explains in part why multiple predetermined overhead rates are often used in larger companies. (T/F)

true

What is the term used when a company applies less overhead to production than it actually incurs?

underapplied

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

-compared to traditional statements, contribution format statements provide management with a tool to make decision making easier -traditional income statements focus on cost classifications. contributions format statements focus on cost behavior

Within the relevant range of activity

-costs and activity can be approximated by a straight line -fixed costs remain constant in total

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 or GAAP -contribution

Which of the following statements are true? a. Inventoriable costs are expensed in the period in which they are incurred. b. All costs in a merchandising company are period costs. c. Period costs do not flow through the inventory accounts. d. Period costs are expensed when incurred.

C and D

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.

Fantastic Furniture makes custom order couches. The material used to make a couch is a(n) ______ cost of the customer placing the order.

direct

Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) ______________ of the branch

direct cost

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

direct labor

which of the following is common to both prime cost and conversion cost?

direct labor

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

direct material

In a job-order cost system, indirect labor is assigned to a job using information from the employee time ticket. (T/F)

false

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

false

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

fixed

Items such as indirect materials, indirect labor, maintenance and repairs on production equipment, depreciation, and insurance on manufacturing facilities are included in ________.

manufacturing overhead costs

If a firm increases its activity level, _______________

same costs will change, other costs will remain the same

When all of a company's job cost sheets are viewed collectively they form what is known as a ________.

subsidiary ledger

which of the following is always an irrelevant cost?

sunk cost

in the equation, Y= a +bX, X represents

the level of activity

How should the wages of a sheet metal worker in a fabrication plan be classified?

product cost