A306 Study guide

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Profit =

(P x Q) - (V x Q) - fixed expenses

At the break even point: NOI = TR=

0 TC

Nonmanufacturing costs include: 1. assembly-line worker wages 2. insurance on plant equipment 3. company president's salary 4. sales commissions

3 and 4

Which of the following are differences between the traditional and contribution format to income statements? A. The traditional income statement is for internal use, while the contribution format income statement is for external use. B. Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier. C. Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior.

B. Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier.

T or F Financial accounting information emphasizes decisions for the future

F

Net income with traditional format =

Gross margin- Total selling and admin

Which of the following is not a COST CLASSIFICATION associated with decision making? Differential costs Opportunity costs Indirect costs Sunk costs

Indirect costs

Rev-Costs=

Net Operating Income

Correct order on the CM format income statement:

Sales VE CM FE NOI

T or F Reports based on management accounting information are created when required

T

Contribution margin is:

all revenues- variable costs

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

behavior

An income statement constructed under the ______ approach allows users to easily judge the impact on profits of changes in selling price, cost or volume.

contribution margin

CMR =

contribution margin/sales

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

cost object

Management accounting is primarily used for

decision making

The difference in costs between two alternatives is called a(n) ______ cost.

differential

Costs that can be easily and conveniently traced to a specific product are called ______ costs

direct

Selling and administrative costs are _______ costs.

direct and indirect

In an automobile manufacturing plant, the assembly-line workers are classified as costs

direct labor

A laptop computer manufacturer would consider the computer's processor chip to be a(n) ______ cost.

direct material

Manufacturing costs can be divided into three categories: direct ______ , ______ labor and manufacturing ________

direct materials, direct labor, manufacturing overhead

Administrative costs include: sales commissions and factory supervisors' salaries factory maintenance workers' wages and factory supervisors' salaries shipping costs and sales commissions executive compensation and public relations costs

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) ______

indirect cost

The contribution margin statement is primarily used for

internal decision making

Indirect materials and indirect labor are classified as ____

manufacturing overhead

The accrual concept that costs incurred to generate revenue are expensed in the same period the revenue is recognized is known as the _____ principle.

matching

Indirect materials include ______

nails, glue, and thread

There are two broad classifications of costs: manufacturing costs and ______ costs.

non manufacturing

There are two broad classifications of costs: manufacturing costs and _______ costs.

non-manufacturing

Cost objects include ______

organizational subunits, customers, anything for which cost data is desired

Inventoriable costs is another term for costs

product

Cost assumptions are reasonably valid within the ______ of activity

relevant range

Selling costs include:

sales salaries, advertising, sales commissions

Mixed costs are also commonly known as semi- ______ costs

semi-variable

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

T or F Creditors would be a user of financial accounting info

t

T or F Management accounting info is used to develop budgets

t

Differential cost is:

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

An income statement focusing on product and period costs has been prepared using a(n)____ format, while a(n)______ format income statement makes a distinction between fixed and variable costs

traditional contribution

Cost of goods sold for a merchandising company, direct materials and commissions are all examples of ______ costs.

variable


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