Chapter 1 Concept Videos

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In a small manufacturing facility, one welder is needed for every 200 hours of machine-hours or fewer in a month. The welder is paid a monthly salary of $2,500. If the total monthly requirement is 1,300 machine-hours, the total salaried employee expense is _________

$17,500 (1,300 / 200 = 6.5 (Round to 7) (7 * $2,500 = $17,500)

Audio Corporation purchased $20,000 of DVDs during the current year. The company had DVD inventory of $15,000 at the beginning of the year. An end of the year audit revealed that the company had DVD inventory of $10,000. The amount that would be reported as cost of goods sold in the income statement for the current year is _________

$25,000 ($20,000 + $15,000 - $10,000) Cost of Goods Sold = Beginning merchandise inventory + Purchases - Ending merchandise inventory

Davidson Company has sales of $100,000, variable cost of goods sold of $40,000, variable selling expenses of $15,000, variable administrative expenses of $5,000, fixed selling expenses of $7,000, and fixed administrative expenses of $9,000. What is Davidson's contribution margin?

$40,000 ($100,000 - $40,000 - $15,000 - $5,000) Revenue - variable expenses

Cyber Devices manufactures PCTV products that enable people to watch television content on their computers. It sells its product to retailers for $50. A tuner component that goes into each of these devices costs $5 to acquire. The total variable cost at an activity level of 1,000 units equals _________blank.

$5,000 ($5 * 1,000 units = $5,000 variable cost)

Manufacturing costs include all of the following categories except _________ Administrative costs Direct labor Direct materials Manufacturing overhead

Administrative costs

Which of the following is not a product cost for external reporting purposes? Direct materials Administrative costs Direct labor Manufacturing overhead

Administrative costs

Which of the following statements about opportunity costs is not correct? An opportunity cost is the potential benefit that is given up when one alternative is selected over another. An opportunity cost cannot be changed by any decision made now or in the future. Opportunity costs are not usually found in accounting records. Opportunity costs are costs that must be explicitly considered in every decision a manager makes.

An opportunity cost cannot be changed by any decision made now or in the future.

Which of the following statements is false? Variable costs change, in total, as the level of activity changes. Variable costs are constant on a per unit basis. Average fixed cost per unit increases as the activity level increases. Total fixed costs do not change within the relevant range.

Average fixed cost per unit increases as the activity level increases.

A ___ is a cost that is incurred to support a number of cost objects but cannot be traced to them individually Common cost Direct cost Indirect cost

Common cost

The traditional income statement uses which of the following cost categories? Variable expenses and fixed expenses Cost of goods sold and fixed expenses Operating expenses and selling and administrative expenses Cost of goods sold and selling and administrative expenses

Cost of goods sold and selling and administrative expenses

Which of the following statements is true? Opportunity costs are always irrelevant in decision-making. Differential costs are always relevant in decision-making. Sunk costs are always relevant in decision-making. Future costs that do not differ between the alternatives are always relevant in decision-making.

Differential costs are always relevant in decision-making.

Conversion costs equal

Direct Labor + Manufacturing Overhead

Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a ___ of the branch. Common cost Direct cost Indirect cost

Direct cost

Which of the following is common to both prime cost and conversion cost? Manufacturing overhead Direct materials Nonmanufacturing costs Direct labor

Direct labor

_____ is sometimes called "touch labor." Direct labor Indirect labor Overhead labor

Direct labor

Materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product are called _________ Raw materials Direct materials Indirect materials

Direct materials

What are the three basic manufacturing cost categories?

Direct materials Direct labor Manufacturing overhead

Which of the following statements is false? A mixed cost includes variable and fixed components. For a mixed cost, the average cost per unit decreases as the activity level increases. In the equation Y = a + bX, the a equals the total fixed cost. In the equation Y = a + bX, the b equals the activity level.

In the equation Y = a + bX, the b equals the activity level.

Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a ___ of selling a tour package Common cost Direct cost Indirect cost

Indirect cost

Which of the following is true of the contribution approach? It is mainly used for external reporting purposes. It separates costs into fixed and variable categories. It is not useful for merchandising companies. It calculates gross margin by deducting cost of goods sold from sales.

It separates costs into fixed and variable categories.

Items such as indirect materials, indirect labor, maintenance and repairs on production equipment, depreciation, and insurance on manufacturing facilities are included in _________

Manufacturing overhead costs

The _________blank requires that the costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized.

Matching principle

Property taxes associated with a company's administrative facility are considered _________

Nonmanufacturing costs

Traditional format income statements:

Organize costs based on product versus period cost classifications.

How should the wages of a sheet metal worker in a fabrication plant be classified?

Product cost

Which of the following statements is true? Product costs can be reported in raw materials, work in process, or finished goods inventories. Selling costs can only be reported in finished goods inventory. Product costs are excluded from the income statement. Selling costs are excluded from the income statement.

Product costs can be reported in raw materials, work in process, or finished goods inventories.

What costs classifications are used for making decisions?

Relevant and irrelevant costs

Differential costs are always _________

Relevant in making business decisions

A fixed cost is a cost which _________

Remains constant in total with changes in the level of activity

Contribution format income statements:

Report variable selling expenses separate from fixed selling expenses.

If a firm increases its activity level, _________

Some costs will change, other costs will remain the same

Which of the following is always an irrelevant cost? Differential cost Sunk cost Opportunity cost

Sunk cost

In the equation, Y = a + bX, X represents _________

The level of activity

Which of the following statements is true? Direct labor is an example of an indirect cost. Each cost is either direct or indirect regardless of the cost object. The same cost can be direct or indirect depending on the cost object. Common costs should be allocated to cost objects in most cases.

The same cost can be direct or indirect depending on the cost object.

Which of the following cost classifications are used to predict cost behavior? Controllable and uncontrollable costs. Value-added and non-value-added costs. Variable and fixed costs. Product and period costs.

Variable and fixed costs.

Which of the following statements is true? Indirect costs can be easily and conveniently traced to cost objects. Direct costs cannot be easily and conveniently traced to cost objects. When the cost object is a product, manufacturing overhead is an indirect cost. Common costs are a type of direct cost.

When the cost object is a product, manufacturing overhead is an indirect cost.


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