Accounting 2

costs data includes

-anything for which cost data is desired -organizational subunits/ departments -customers

Manufacturing costs include ______.

-manufacturing overhead -direct materials -direct labor

Administrative costs

all executive organizational, and clerical costs

indirect materials and labor difference

cannot be easily traced

Fixed costs that cannot easily be changed and often lock a company into a multi-year decision are called

committed fixed cost

selling costs

costs necessary to secure the order and deliver the product

Direct Costs

costs that can be easily and conveniently traced to a unit of product or other cost object ex. direct material and direct labor - leather and laces of a football

true or false: All of a company's depreciation, property taxes, and insurance premiums are considered manufacturing overhead

false

depreciation on administrative building is considered a product costs, true or false?

false, nothing to do with admin of cost. it is an example of factory overhead.

Common Costs

indirect costs incurred to support a number of cost objects. These costs cannot be traced to any individual cost object

cost of producing one more unit

marginal cost

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

sunk costs

Cost object

what you're manufacturing (in service industry-hospital, the patient is cost object)

period costs

-are expensed in period incurred -include all costs that are not product costs

on a traditional income statement

-cost of goods sold -gross margin

Manufactuing overhead examples

-depreciation of manufactuing equipment -utility costs -property taxes -insurance premiums incurred to operate a manufacturing facility

Other names for manufacturing overhead include ______.

-factory overhead -factory burden -indirect manufacturing cost

which are most likely fixed costs?

-factory rent -factory insurance -administrative salaries

variable cost

-remain constant per unit -vary in total

opportunity costs

-should be considered in decision making -are benefits lost when choosing one option over another

A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements, ______.

300 reported as an expense, and 900 reported as an asset

cost object

A(n) is anything for which cost data are desired—including products, customers, plants, office locations, and departments.

raw materials

Any material that goes into the final product

Indirect Costs

Costs that cannot be easily and conveniently traced to a unit of a product or other cost object ex. manufacturing overhead - in charge of nurses in hospital

manufacturing costs

Direct materials and direct labor are both ______ costs.

Two types of accounting for goods in manufacturing company

Period costs and product costs

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

True (bc)-raw materials are anything that go into a finished product

direct cost

a cost that can be easily and conveniently traced to a specified cost object

indirect cost

a cost that cannot be easily and conveniently traced to a specified cost object

common cost

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

Discretionary fixed costs include

advertising management training programs

Financial Accounting

concerned with reporting financial information to external parties, such as stockholders, creditors, and regulators

Finished goods

consist of completed units of product that have not yet been sold to customers

Work in process

consists of unit product that are only partially complete and will require further work before they are ready for sale to the customer

sales revenue minus variable expense equals

contribution margin

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

cost behavior

Differential costs, opportunity costs and incremental costs are all cost classifications used in

decision making

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

direct material

Raw materials whose cost can be easily and conveniently traced to the finished product are _____ materials

direct materials

prime costs include

direct materials and direct labor

Fixed costs that usually arise from annual spending decisions by management are called ______ or managed fixed costs

discretionary costs

Administrative costs include ______.

executive compensation and public relations costs

Indirect labor costs include ______.

factory security guard wages, assembly-line supervisor salary

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

fixed cost

As the level of activity moves outside of the relevant range, _____ costs increase or decrease in discrete steps rather than an linear fashion

fixed cost

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

fixed costs

Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the

income statement

As the level of activity moves outside of the relevant range, fixed costs, ____

increase or decrease in discrete steps

The difference in revenues between two alternatives is called

incremental revenue

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

indirect costs

Direct Labor

labor costs that can be easily traced to individual units of product ex. wages paid to automobile assembly workers

The revenue from selling one additional unit is called _____ revenue.

marginal revenue

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

matching principle

discretionary fixed cost

may be altered in the short term by current managerial decisions

The sum of direct materials and direct labor is called _______ cost.

prime cost

Inventoriable costs is another term for

product/manufacturing cost

the term ____ materials refers to any materials used in the final product

raw materials

manufacturing products costs include

raw materials, work in process, and finished goods

Cost Behvaior

refers to how a cost will change as activity level changes, and categorized cost as fixed and mixed variable

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

relevant range

Cost behavior

the way in which a cost reacts to changes in the level of activity

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

they are incurred

committed fixed costs include

top management salaries real estate taxes

Direct labor is also called ______ labor.

touch labor

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

variable cost

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

variable cost

Within the relevant range of activity ______.

-fixed costs remain constant in total and vary per unit -the assumption that cost behavior is strictly linear is reasonably valid

Product costs

-include all costs involved in acquiring or making a product -"attach" to a unit of a product as it is purchased or manufactured, and they remain attached to each unit of a product as long as it remains in inventory awaiting sale

Manufacturing Overhead

-includes all manufacturing costs except direct materials and direct labor. These costs cannot be readily traced to finished products. -includes indirect materials that cannot be easily or conveniently traced to specific units of products -includes indirect labor costs that cannot be easily traced to specific units of product

Which of the following statements are true? Multiple select question. An individual cost is either direct or indirect, regardless of the cost object. A direct cost is sometimes referred to as a common cost. A sales manager's salary is a direct cost of the sales office in which they work. Direct cost can be easily and conveniently traced to specific cost objects.

-sales manager salary -direct cost easily traced to specific cost objects

Purpose of Cost Classification

1. Assigning costs to cost objects 2. Accounting for costs in manufacturing companies 3. Preparing financial statements 4. Predicting cost behavior in response to changes in activity 5. Making decisions

Manufacturing overhead costs include

indirect materials, factory supervisors' salaries, and factory depreciation

Cost on balance sheet

inventory to costs of goods sold

Managerial Accounting

is concerned with providing information to managers within an organization so that they can formulate plans, control operations, and make decisions.

committed fixed cost

long-term, cannot be significantly reduced in the short term- nothing you can do to fix it

Factory burden is a synonym for ______ ______

manufacturing overhead

Indirect materials and indirect labor are classified as ______.

manufacturing overhead

Direct materials

raw materials that become an integral part of the product and that can be conveniently traced directly to it ex. seat in airplane

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