1.2 Smartbook

A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements, Blank______.

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

Product costs Blank______.

attach to units or product as they are produced or purchased for resale are also called inventoriable costs

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

behavior

Fixed costs that cannot easily be changed and often lock a company into a multi-year decision are called ________ fixed costs.

committed

Fixed costs that usually arise from annual spending decisions by management are called or managed fixed costs.

discretionary

Which of the following are most likely fixed costs?

factory insurance administrative salaries factory rent

As the level of activity moves outside of the relevant range, ________ costs increase or decrease in discrete steps rather than an linear fashion

fixed

Costs that remain constant in total and vary per unit are _______ costs.

fixed

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

fixed

Period costs Blank______.

include all costs that are not product costs are expensed in the period incurred

Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the Blank______.

income statement

As the level of activity moves outside of the relevant range, fixed costs, Blank______.

increase or decrease in discrete steps

Fixed costs that can be cut for short periods of time with minimal damage to the long-run goals of the organization are called Blank______ fixed costs.

managed or discretionary

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.

matching

A cost that contains both variable and fixed costs elements is called a(n) _______ cost.

mixed

Inventoriable costs is another term for ________ costs.

product or manufacturing

Cost behavior Blank______.

refers to how a cost will change as activity level changes categorizes costs as fixed, mixed and variable

The assumption that cost behavior is strictly linear is reasonably valid within the ________ ________ of activity.

relevant range

Within the relevant range of activity Blank______.

the assumption that cost behavior is stricly linear is reasonably valid fixed costs remain constant in total and vary per unit

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

they are incurred

Committed fixed costs include Blank______.

tope management salaries real estate taxes

Which type of cost changes in total, in direct proportion to changes in activity level?

variable

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

variable

Within the relevant range, a cost that changes in direct proportion to changes in the activity level is a Blank______ cost.

variable

Variable costs Blank______.

vary in total remain constant per unit