Accounting 203-Chapter #1

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

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

False-Only indirect costs associated with operating the factory are included in manufacturing overhead.

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

True

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

Variable Cost

What is a direct cost?

a cost that can be traced to a cost object

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

behavior

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

direct labor cost

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

incremental

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

indirect materials

Product costs are also called:

inventoriable costs or manufacturing

Direct materials and direct labor are both ______ costs.

manufacturing

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

manufacturing overhead

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

Cost objects include:

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

Cost behavior:

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

Non-manufacturing costs include:

sales commissions company president's salary

Contribution margin is:

sales revenue minus variable costs

What is an indirect cost?

a cost that relates to the cost object but cannot be traced to it

Any item for which cost data is desired is called a

cost object

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

direct material

Prime costs include:

direct materials and direct labor

Committed fixed costs include:

real estate taxes top management salaries

On a traditional income statement, cost of goods sold reports the _________ costs attached to merchandise sold during the period, while selling and administrative expenses report __________costs that have been expensed as incurred.

1) product 2)period

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

1)Traditional or GAAP 2)Contribution Margin

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

Committed 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

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

decision making

Manufacturing costs include:

direct materials, direct labor, manufacturing overhead

Selling and administrative costs are ______ costs.

direct or indirect

Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are:

direct or raw materials

Indirect labor costs include:

factory security guard wages assembly-line supervisor salary

Period Costs:

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

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

indirect materials and manufacturing overhead

Manufacturing overhead consists of:

indirect materials, factory supervisors' salaries, and factory depreciation