Accounting: Chapter 1 Learnsmart
Indirect labor costs include:
-Factory security guard wages -Assembly-line supervisor salary
Nonmanufacturing costs include:
-company president's salary -sales commissions
The contribution approach to constructing income statements:
-distinguishes between fixed and variable costs -aids in decision making
Other names for manufacturing overhead include:
-factory burden -indirect manufacturing costs -factory overhead
Within the relevant range, fixed costs:
-generally include rent and supervisor salaries -remain constant in total regardless of changes in activity -should not be expressed on a per unit basis when making decisions
Common activity bases include:
-machine hours -direct labor hours -units sold
Prior to being recorded on the income statement, manufacturers' product costs flow through:
-raw materials -work in process -finished goods
A type of indirect cost incurred to benefit more than one cost object is a(n) (?) cost.
common
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 organization is known as the company's (?)(?).
cost structure
Any item foe which cost data is desired is called a(n) (?)(?).
cost, object
Differential costs, opportunity costs, and sunk costs are all cost classifications used in:
decision making
A change in revenues between two alternatives is known as (?) revenue or incremental revenue.
differential
Costs that can be easily and conveniently traced to a specific product are called (?) costs.
direct
Variable costs can vary (?) within the relevant range of activity.
in total
Differential costs are also known as (?) costs.
incremental
Fantastic Furnature makes custom order furnature. The factory manager's salary is a(n) (?) cost od producing a couch.
indirect
Salaries of factory supervisors and factory maintenance personnel are examples of (?) labor costs.
indirect
Minor items such as nails and glue are usually considered to be:
indirect materials
Product costs are also called (?) costs.
inventoriable
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
A potential benefit that is forfeited or lost when one decision is chosen over another is called an (?)(?).
opportunity cost
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 (?)(?).
relevant range
Variable costs (?).
remain constant per unit and vary in total
Contribution margin is:
sales revenue minus variable costs
How individual costs react to changes in activity level is referred to as cost (?).
behavior
Fixed costs that cannot be easily changed and often lock a company into a multi-year decision are (?) fixed costs.
committed
Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are (?) materials.
direct
Labor costs that can be easily and conveniently traced to specific products are (?) costs.
direct labor
Selling and administrative costs are (?) costs.
direct or indirect
Fixed costs that usually arise from annual soending decisions by management are (?) fixed costs.
discretionary
Administrative costs include:
executive compensation and public relations costs
True or false: All of a company's depreciation, property taxes, and insurance premiums are considered manufacturing overhead.
false
True or false: Removing expenses that do not differ between alternatives could alter a decision
false
Completed units that have not yet been sold to customers are found in:
finished goods
Within the relevant range of activity, (?) costs remain constant in total.
fixed
A serious limitation of using a traditional income statement for internal reporting purposes is that is does not distinguish between (?) costs.
fixed and variable
The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is known as the (?) principle.
matching
Manufacturing costs can be divided into three categories: direct (?), (?) labor, and manufacturing (?)
materials, direct, overhead
The components of prime costs are direct (?) costs and direct (?) costs.
materials, labor
True or false: Presenting fixed costs on an average per unit basis makes them look like they are variable costs.
true
Mixed costs are also commonly known as semi-(?) costs.
variable
Costs that have already been incurred and cannot be changed by decisions made in current period or future periods are called (?) costs.
sunk
Step-variable costs:
-can be adjusted quickly as conditions change -may include total salaried employee expense
Differential cost is:
-the difference in cost between two alternatives -also known as incremental cost
Which of the following statements are true?
-A regional sales manager's salary would be a direct cost of the regional office in which the sales manager works -A direct cost can be easily and conveniently traced to a specific cost object
Cost objects include:
-anything for which cost data is desired -organizational subunits -customers
Step-variable costs:
-can be adjusted quickly as conditions change -may include salaried employee expense
Indirect materials and indirect labor are classified as (?).
manufacturing overhead
The revenue obtained from selling one additional unit of product is called (?) revenue.
marginal
Order-getting and order-filling are other names for (?)costs.
selling
In the equation Y=a+bX, Y is the:
total mixed cost
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 -traditional income statements focus on cost classifications. contribution format statements focus on cost behavior.
Period costs are always expressed on the income statement in the period which:
they are incurred
Cost of goods sold for a merchandising company, direct materials, and commissions are all examples of (?) costs.
variable