Smartbook 1

Which of the following are most likely fixed costs?

Factory rent Administrative salaries Factory insurance

Which of the following statements are true?

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

What type of cost is never relevant and should be disregarded when making decisions?

Sunk

Which of the following statements are true?

The relevant range of activity is approximated by a straight line. Within the relevant range of activity, fixed costs remain constant in total.

Cost objects include:

anything for which cost data is desired organizational subunits customers

Product costs:

are also called inventoriable costs "attach" to units of product as they are purchased for resale or produced

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

behavior

Cost behavior:

categorizes costs as fixed, mixed and variable r efers to how a cost will change as activity level changes

Any item for which cost data is desired is called a ___ ___.

cost object

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 ___ materials.

direct

In an automobile manufacturing plant, the assembly-line workers are classified as ___ ___.

direct labor

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

direct labor

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) ___ cost.

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 include:

nails, glue, thread

Cost assumptions are reasonably valid within the ___ ___ of activity.

relevant range

Direct labor is also called ___ labor.

touch

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

traditional contribution

Which type of cost changes in total, in direct proportion to changes in activity level?

variable

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

indirect materials

Nonmanufacturing costs include:

sales commissions company president's salary

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

Differential cost is:

A difference in cost between two alternatives. Also known as incremental cost

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. Contribution format statements focus on cost behavior.`

The difference in costs between two alternatives is called a(n) ______ cost.

differential

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 that specific cost object are ___ costs.

direct indirect

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

direct material

Administrative costs include:

executive compensation and public relations costs

Indirect labor costs include:

factory security guard wages, assembly-line supervisor salary

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

false

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

indirect materials manufacturing overhead

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

matching

There are two broad classifications of costs: manufacturing costs and ___ costs.

period

Inventoriable costs is another term for ___ costs.

product

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

sunk

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

decision making

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

direct

Indirect materials and indirect labor are classified as ______.

manufacturing overhead

Manufacturing costs include ______.

manufacturing overhead direct labor direct materials

Manufacturing costs can be divided into three categories: direct ___, labor ___and manufacturing ___.

materials direct overhead

A cost that contains both variable and fixed cost elements is a(n) ______ cost.

mixed

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

they are incurred

A cost that changes in direct proportion to changes in the activity level is a ______ cost.

variable

Mixed costs are also commonly known as semi-_________ costs.

variable

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

indirect costs

Contribution margin is:

sales revenue minus variable costs

Cost of goods sold for a merchandising company, direct materials and commissions are all examples of ___ costs.

variable

A company purchased a 12 month insurance policy on October 1 at a cost of $1,200. On the December 31 annual financial statements:

$300 is reported as a expense and $900 is reported as an asset

Direct materials and direct labor are both ______ costs.

manufacturing

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

relevant range

Sales revenue minus variable expenses equals ___ ___.

contribution margin