Accounting: Chapter 1 Learnsmart

Indirect labor costs include:

-Factory security guard wages -Assembly-line supervisor salary

Nonmanufacturing costs include:

-company president's salary -sales commissions

The contribution approach to constructing income statements:

-distinguishes between fixed and variable costs -aids in decision making

Other names for manufacturing overhead include:

-factory burden -indirect manufacturing costs -factory overhead

Within the relevant range, fixed costs:

-generally include rent and supervisor salaries -remain constant in total regardless of changes in activity -should not be expressed on a per unit basis when making decisions

Common activity bases include:

-machine hours -direct labor hours -units sold

Prior to being recorded on the income statement, manufacturers' product costs flow through:

-raw materials -work in process -finished goods

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

common

Direct labor and overhead costs incurred to change raw materials into finished products are known as (?) costs.

conversion

The relative proportion of each type of cost in an organization is known as the company's (?)(?).

cost structure

Any item foe which cost data is desired is called a(n) (?)(?).

cost, object

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

decision making

A change in revenues between two alternatives is known as (?) revenue or incremental revenue.

differential

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

direct

Variable costs can vary (?) within the relevant range of activity.

in total

Differential costs are also known as (?) costs.

incremental

Fantastic Furnature makes custom order furnature. The factory manager's salary is a(n) (?) cost od producing a couch.

indirect

Salaries of factory supervisors and factory maintenance personnel are examples of (?) labor costs.

indirect

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

indirect materials

Product costs are also called (?) costs.

inventoriable

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

A potential benefit that is forfeited or lost when one decision is chosen over another is called an (?)(?).

opportunity cost

Materials that go into the final product are called (?) materials.

raw

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

relevant range

Variable costs (?).

remain constant per unit and vary in total

Contribution margin is:

sales revenue minus variable costs

How individual costs react to changes in activity level is referred to as cost (?).

behavior

Fixed costs that cannot be easily changed and often lock a company into a multi-year decision are (?) fixed costs.

committed

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

Labor costs that can be easily and conveniently traced to specific products are (?) costs.

direct labor

Selling and administrative costs are (?) costs.

direct or indirect

Fixed costs that usually arise from annual soending decisions by management are (?) fixed costs.

discretionary

Administrative costs include:

executive compensation and public relations costs

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

false

True or false: Removing expenses that do not differ between alternatives could alter a decision

false

Completed units that have not yet been sold to customers are found in:

finished goods

Within the relevant range of activity, (?) costs remain constant in total.

fixed

A serious limitation of using a traditional income statement for internal reporting purposes is that is does not distinguish between (?) costs.

fixed and variable

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

matching

Manufacturing costs can be divided into three categories: direct (?), (?) labor, and manufacturing (?)

materials, direct, overhead

The components of prime costs are direct (?) costs and direct (?) costs.

materials, labor

True or false: Presenting fixed costs on an average per unit basis makes them look like they are variable costs.

true

Mixed costs are also commonly known as semi-(?) costs.

variable

Costs that have already been incurred and cannot be changed by decisions made in current period or future periods are called (?) costs.

sunk

Step-variable costs:

-can be adjusted quickly as conditions change -may include total salaried employee expense

Differential cost is:

-the difference in cost between two alternatives -also known as incremental cost

Which of the following statements are true?

-A regional sales manager's salary would be a direct cost of the regional office in which the sales manager works -A direct cost can be easily and conveniently traced to a specific cost object

Cost objects include:

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

Step-variable costs:

-can be adjusted quickly as conditions change -may include salaried employee expense

Indirect materials and indirect labor are classified as (?).

manufacturing overhead

The revenue obtained from selling one additional unit of product is called (?) revenue.

marginal

Order-getting and order-filling are other names for (?)costs.

selling

In the equation Y=a+bX, Y is the:

total mixed 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.

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

they are incurred

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

variable