Chapter 1 accounting notes "costs"
$300 is reported as a expense and $900 is reported as an asset
A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements, _____________.
direct, indirect, common, or overhead
A cost that can be easily and conveniently traced to a specific cost object is a _____________ cost of that cost object, whereas costs that cannot be easily and conveniently traced to that specific cost object are ______________ costs.
mixed
A cost that contains both variable and fixed cost elements is called a(n) ___________ cost
direct material
A laptop computer manufacturer would consider the computer's processor chip to be a(n) ________________ cost.
executive compensation and public relations costs
Administrative costs include __________________.
traditional, contribution
An income statement focusing on product and period costs has been prepared using a _____________ format while a ______________ format income statement makes a distinction between fixed and variable costs.
direct cost
Any item for which cost data is desired is called __________________
$80,000
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 1. $50,000 2. $160,000 3. $80,000 4. $190,000
organizational subunits, customers, anything for which cost data is desired
Cost objects include:
Variable
Cost of goods sold for a merchandising company, direct materials and commissions are all examples of _______________ costs
the difference in cost between two alternatives and is also known as incremental cost.
Differential cost is:
decision making
Differential costs, opportunity costs and sunk costs are all cost classifications used in:
touch
Direct labor is also called ____________ labor
direct
Fantastic Furniture makes custom order couches. The material used to make a couch is a(n) _______ cost of the customer placing the order.
behavior
How individual costs react to changes in activity level is referred to as cost ______________
Direct Labor
In an automobile manufacturing plant, the assembly-line workers are classified as ______________ _______________ cost
direct labor, manufacturing overhead, direct materials
Manufacturing costs include _________________.
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
sales commissions and company president's salary
Non-manufacturing costs include _____________.
product, period
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 all ____________ costs that have been expensed as incurred.
are benefits that are given up when selecting one alternative over another and should be considered in decision making
Opportunity costs are
are also called inventoriable costs and "attach" to units of product as they are purchased for resale or produced
Product costs are
Income Statement
Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the ______________.
Contribution Margin
Sales revenue minus all variable expenses equals
matching
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
Relevant Range
The assumption that cost behavior is strictly linear is reasonably valid within the ______________ _____________ of activity
incremental revenue
The difference in revenues between two alternatives is called ____________.
1. Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior. 2. Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier.
Which of the following are differences between the traditional and contribution format to income statements? 1. The traditional income statement is for internal use, while the contribution format income statement is for external use. 2. Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior. 3. Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier.
1. Factory insurance 2. Factory rent 3. Administrative salaries
Which of the following are most likely fixed costs?
indirect costs
Which of the following is not a COST CLASSIFICATION associated with decision making? 1. Sunk costs 2. Differential costs 3. Indirect costs 4. Opportunity costs
Period costs do not flow through the inventory accounts. Period costs are expensed when incurred.
Which of the following statements are true? 1. All costs in a merchandising company are period costs. 2. Period costs do not flow through the inventory accounts. 3. Period costs are expensed when incurred. 4. Inventoriable costs are expensed in the period in which they are incurred.
fixed costs remain constant in total and costs and activity can be approximated by a straight line
Within the relevant range of activity ________________.
fixed
Within the relevant range of activity, __________ costs remain constant in total.
Variable
Within the relevant range, a cost that changes in direct proportion to changes in the activity level is a __________ cost.
categorizes costs as fixed, mixed and variable and refers to how a cost will change as activity level changes
definition of Cost behavior