Managerial Accounting Chapter 1 Learnsmart: Managerial Accounting and Cost Concepts

True or False: A cost may be direct or indirect, depending on the cost object.

True

Selling costs include:

advertising sales salaries sales commissions

Product costs:

are also called inventorial costs and "attach" to units of product as they are purchased for resale or produced

Opportunity cost:

are benefits that are given up when selecting one alternative over another and should be considered in decision making

Administrative costs include:

executive compensation and public relations costs

Within the relevant range of activity, ____ costs remain constant in total.

fixed

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

indirect

Product costs are also called ____ costs.

inventoriable

The 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 ____ _____.

relavent range

Differential cost is:

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

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

they are incurred

Committed fixed costs include:

top management salaries and real estate taxes

A cost that changes in direct proportion to changes in the activity level is a _____ cost.

variable

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

variable

Cost objects include:

organizational subunits customers anything for which cost data is desired

True or False: Labor costs that can be specifically traced to a product are indirect labor costs.

False

The components of prime costs are direct ______ costs and direct ______ costs.

materials and labor

Costs that are shared by multiple cost objects in a company are known as ____ costs.

common

Which of the following are different 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 and traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior

Sales revenue minus variable expenses equals ____ _____ .

contribution margin

Cost that can be easily and conveniently traced to a specific product are called ____ costs.

direct

Other names for manufacturing overhead include:

indirect manufacturing costs factory burden factory overhead

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

The revenue from selling one additional unit is called ___ revenue.

marginal

A potential benefit the tis forfeited or lost when one decision is chosen over another is called a(n) ______ .

opportunity cost

Within the relevant range, ____ costs remain constant on a per unit basis.

variable

Units that are partially complete are found in:

work in process

True or False: The finished product to one company can become raw materials for another company.

True

Direct labor and overhead costs incurred to change raw materials into finished products are known as ____ cost.

conversion

A change in revenues between two alternatives is known as ____ revenue or incremental revenue.

differential

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 and indirect

Labor costs that can be easily and conveniently traced to specific products are _____ costs.

direct labor

Prime Costs:

direct labor and direct materials

A laptop computer manufacturer would consider the computers processor chip to be a(n) ____ cost.

direct material

Selling and administrative costs are ____ costs.

direct or indirect

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

indirect materials

Manufacturing overhead costs include _____.

indirect materials, factory supervisors' salaries, and factory depreciation

Discretionary fixed costs include:

management training programs and advertising

Discretionary fixed costs include:

management training programs and advertising

Common activity bases include:

direct labor hours machine hours units sold

Variable costs vary ____ within the relevant range of activity.

in total

Non-manufacturing costs include:

sales commissions and company president's salary

A contribution approach income statement:

separates costs into their fixed and variable components and can assist with management decision making

In the equation Y= a + bX, b denotes the:

slope of the line and variable cost per unit of activity

What type of cost is never relevant and should be disregarded when making decisions?

sunk

Any item for which cost data is desired is called a(n) ____ _____.

cost object