Managerial Accounting Chapter 1
Administrative costs include
- Executive compensation and public relations costs
In the equation Y=A + BX, B denotes the
- Variable cost per unit of activity - slope of the line
prime costs are
- direct labor - direct materials
Costs that are shared by multiple cost objects in a company are known as
Common costs
A change in revenue between two alternatives is known as ____ revenue or incremental revenue.
Differential
Mateirals that become an important component of the finished product whose cost can be easily and conventiently traced to the finished product are ____ materials
Direct (raw)
In an automobile manufacturing plant. the assembly-line workers are classified as
Direct Labor
Manufacture costs include
Direct Materials, direct labor, manufacturing overhead
Total variable manufactering costs for the month of july was
Direct materials + direct labor + variable manufacturing overhead
Manufacturing costs can be divided into three catagories: Direct ____, _________ labor and manufufacting _________
Direct materials, direct labor, and manufactering overhead
Which of the following are most likely fixed costs?
Factory insurance, factory rent, admin salaries
True or false: removing expenses that do not differ between alternatives could alter a decision
False
A fixed cost remains fixed ____ within the relevant range of activity
In total
Variable costs vary __within the relvent range of activity
In total
Minor items such as nails and glue are usually considered to be
Indirect Materials
Which of the following is not a cost classification associated with decision making?
Indirect costs
Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as
Manufactering overhead
A cost that contains both variable and fixed cost elements is an ________ cost
Mixed cost
A potential benifit that is forfeited or lost when one decision is chosen over another is
Opportunity cost
Costs that have already been incurred and can not be changed by decisions made in the current period or in future periods are called ___ costs
Sunk Costs
Marginal cost is
The cost incurred to produce one more unit of production
Differential cost is
The difference in cost between two alternatives, also known as incremental cost
Period costs are also expensed on the income statement in the period in which
They are incurred
A cost may be direct or indirect depending on the cost object
True
Units that are partially complete are found in
Work in process
Fixed costs that cannot easily by changed and often lock a company into a multi-year decision are ______ fixed costs
commited fixed cost
Sales revenue minus variable expenses equals _____ _______
contribution margin
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 organzaion is known as the comany's
cost structure
Total conversion costs for the month of
direct labor + manufacturing overhead
Total prime cost for the month of september
direct materials + direct labor
Total prime costs for the month
direct materials + direct labor
total product cost for the month
direct materials + direct labor + manu overhead
Prior to being recorded on the income statement, manufavturers' product cost flow through:
direct materials, direct labor, and manu overhead AKA - Raw materials - work in process - finished goods
Fixed costs that can be cut back or elmated without significant damage to a company's long term goals are _____ fixed costs and _______ fixed costs can not e easily changed or eliminted
discretionary, commited
The contribution approach to contructing income statments distinguishes between ______ costs
fixed and variable
Total fixed cost for the month of september was
fixed manufacturing overhead +fixed selling expense + fixed admin expense
As the level of activity moves outside of the relevant range, fixed costs
increase or decrease in discrete steps
Differential costs are also know as
incremental costs
Manufactering overhead costs include _____
indirect materials, factory supervisors salaries, and factory depreciation
The accrual concept that costs incurred to generate a revenue are expensed in the same period revenue is known as the _____ principle
matching
There are two broad classifications of costs: manufacturing costs and ______ costs
non manufacturing
Direct materials, direct labor, and manufacturing overhead are all ______ costs
product
The materials that go into the final product are called ________ materials
raw materials
The level of activity within which variable and fixed cost assumptions are valid is known as
relavant range
Variable costs ______
remain constant per unit and vary in total
Total period cost the month of July was
selling expense + admin expense
In the equation Y=A+BX, Y is the
total mixed cost
The contribution approach to constructing income statements
- aids in decision making - distinguishes between fixed and variable costs
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 - tradional income statmenets focus on cost classifications. Contribution format statements focus on cost behavior
Other names for manufacturing overhead include
- factory burden - indirect manu costs - factory overhead
Common activity bases include
- machine hours - direct labor hours - units sold
cost behavior:
- refers to how a cost will change as activity level changes - catagorizes costs as fixed, mixed and variable
Within the relevant range, fixed costs
- remain constant in total regardless of changes in activity - generally include rent and supervisor salaries - should not be expressed on a par unit bases when making decisions
In the equation Y = A + BX, B denotates
- variable cost per unit of activity - slope of the line
Which of the following statements are true
- when mixed costs are represented by a straight-line, the steeper the slope, the higher the variable cost per unit - mixed cost has a minumum cost of having a service available and ready for use
The following information is for the S&P enterprises for the month of september. Total production cost for the month of september was $
195000
Within the relevent range of activity, variable costs ____
= remain constant per unit = vary in total
Which of the following statements are true?
A direct cost can be easily and conveniently traced to a specific cost object
Which of the following statements is true?
A mixed cost has a min cost of having a service available and ready for use
Which of the following statements is true?
A regional sales manager salary would be a direct cost of the regional office in which the sales manager works.
Within the relavent range, _____ cost remains constant on a per unit basis
Variable
A cost that changes in direct proportion to changes in the activity level is a _______ cost
Variable Cost
Which of the following statements are true
When mixed costs are represented by a straight line, the steeper the slope, the higher the variable cost per unit
Calculate the differential net income or loss from the proposal
a differential cost analysis considers the change in revenues (subtract present and proposed revenue) and subtracts the change in both variable and fixed costs (subtract both present and proposed costs for both variable and fixed costs)