A306 Study guide
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