Chapter 1

Direct labor is also called ______ labor.

touch

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 (GAAP); contribution

Multiple choice question. A cost that changes in direct proportion to changes in the activity level is a ______ cost. variable mixed fixed

variable

Multiple choice question. A company purchased a 12 month insurance policy on October 1 at a cost of $1,200. On the December 31 annual financial statements: $1,200 is reported as an asset $1,200 is reported as an expense $1,200 is reported as a liability $300 is reported as a expense and $900 is reported as an asset $300 is reported as a expense and $900 is reported as a liability

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

Multiple choice question. 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 $50,000 $160,000 $190,000

$80,000 Reason: Gross Margin of $140,000 - Total Selling & Admin. Exp. of $60,000 = $80,000.

Select all that apply Which of the following are most likely fixed costs? Administrative salaries Factory rent Factory insurance Electricity to operate factory machines

Administrative salaries Factory rent Factory insurance

Select all that apply Which of the following are differences between the traditional and contribution format to income statements? The traditional income statement is for internal use, while the contribution format income statement is for external use. 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.

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.

Multiple choice question. Which of the following is not a COST CLASSIFICATION associated with decision making? Differential costs Opportunity costs Sunk costs Indirect costs

Indirect costs

Select all that apply Which of the following statements are true? Sales commissions are period costs. Period costs are included as part of the cost of goods. The wages of assembly-line workers are period costs. Period costs are expensed in the same period in which they are incurred.

Sales commissions are period costs. Period costs are expensed in the same period in which they are incurred.

Select all that apply Which of the following statements are true? Within the relevant range of activity, fixed costs remain constant in total. The relevant range of activity is approximated by a straight line. Within the relevant range of activity total variable costs do not change.

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

Select all that apply Cost objects include ______. anything for which cost data is desired anything for which revenue data is desired customers organizational subunits

anything for which cost data is desired customers organizational subunits

Multiple choice question. Indirect labor costs include: administrative assistant salary assembly-line supervisor salary assembly-line worker wages factory security guard wages

assembly-line supervisor salary factory security guard wages Reason: + Indirect labor includes manufacturing costs only. Administrative salaries are non-manufacturing costs. + The wages of assembly-line workers can be traced to a specific product or service and are considered direct labor costs.

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

behavior

Select all that apply Nonmanufacturing costs include: company president's salary assembly-line worker wages sales commissions insurance on plant equipment

company president's salary sales commissions

Any item for which cost data is desired is called a(n) _______ ________.

cost object

Multiple choice question. Differential costs, opportunity costs and sunk costs are all cost classifications used in: predicting cost behavior decision making financial statements account analysis

decision making

Multiple choice question. The difference in costs between two alternatives is called a(n) ______ cost. opportunity sunk common differential

differential

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

Multiple choice question. Costs that can be easily and conveniently traced to a specific product are called ______ costs. indirect period direct common

direct

Multiple choice question. Fantastic Furniture makes custom order couches. The material used to make a couch is a(n) _______ cost of the customer placing the order. indirect direct overhead common

direct

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 (prime) indirect (common, overhead)

Multiple choice question. Labor costs that can be easily and conveniently traced to specific products are ______ costs. direct labor selling indirect labor manufacturing overhead

direct labor

Multiple choice question. A laptop computer manufacturer would consider the computer's processor chip to be a(n) ______ cost. indirect material direct material direct labor manufacturing overhead

direct material

Manufacturing costs can be divided into three categories

direct material direct labor manufacturing overhead

Multiple choice question. Selling and administrative costs are _______ costs. always direct direct or indirect always indirect

direct or indirect

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

direct; labor

Multiple choice question. Administrative costs include: executive compensation and public relations costs factory maintenance workers' wages and factory supervisors' salaries sales commissions and factory supervisors' salaries shipping costs and sales commissions

executive compensation and public relations costs REASONS: + factory maintenance workers' wages and factory supervisors' salaries Reason: These are manufacturing overhead costs. +sales commissions and factory supervisors' salaries Reason: These are a selling and a manufacturing overhead cost. +shipping costs and sales commissions Reason: These are selling costs.

Multiple choice question. Within the relevant range of activity, ______ costs remain constant in total. neither fixed nor variable variable both fixed and variable fixed

fixed

A manufacturing cost that cannot be easily traced to a specific cost object is a(n) ________ cost.

indirect

Multiple choice question. Minor items such as nails and glue are usually considered to be ______. selling costs direct materials administrative costs indirect materials

indirect

Multiple choice question. Salaries of factory supervisors and factory maintenance personnel are examples of ______ labor costs. direct indirect administrative

indirect

Multiple choice question. Salaries of factory supervisors and factory maintenance personnel are examples of ______ labor costs. indirect direct administrative

indirect

Product costs are also called _________ cost.

inventoriable or manufacturing

Multiple choice question. Direct materials and direct labor are both ______ costs. nonmanufacturing manufacturing period selling and administrative

manufacturing

Multiple choice question. Indirect materials and indirect labor are classified as ______. manufacturing overhead nonspecific materials nonspecific labor period costs

manufacturing overhead

Multiple choice question. Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as ______. direct materials period costs indirect labor manufacturing overhead

manufacturing overhead (Reason: Janitor wages are indirect labor, but the other costs listed are not. Period costs are nonmanufacturing costs. Cleaning supplies, taxes, insurance and janitor wages are indirect costs.)

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

matching

Multiple choice question. A cost that contains both variable and fixed cost elements is a(n) ______ cost. mixed semifixed sunk opportunity

mixed

Multiple choice question. Indirect materials include ______. factory rent and insurance nails, glue, and thread factory manager's salary laptop computer keyboards

nails, glue, and thread

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

nonmanufacturing (period, support, SGA)

Multiple choice question. Direct materials, direct labor, and manufacturing overhead are all ______ costs. product period variable conversion direct

product

Select all that apply Cost behavior: refers to how a cost will change as activity level changes is the relative proportion of each type of cost in an organization is a detailed analysis technique used to determine whether costs are fixed or variable categorizes costs as fixed, mixed and variable

refers to how a cost will change as activity level changes categorizes costs as fixed, mixed and variable (L01-4)

Cost assumptions are reasonably valid within the ________ _______ of activity.

relevant range

Multiple choice question. Contribution margin is: sales revenue minus cost of goods sold sales revenue minus variable costs sales revenue minus fixed costs all revenues minus all costs

sales revenue minus variable costs

Multiple choice question. What type of cost is never relevant and should be disregarded when making decisions? Marginal Opportunity Incremental Sunk

sunk

Select all that apply Differential cost is: the same as opportunity cost the difference in cost between two alternatives never relevant to a product decision also known as incremental cost

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

Multiple choice question. Period costs are always expensed on the income statement in the period in which: the cash for the expense changes hands the related goods are sold they are incurred

they are incurred

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

variable

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

variable