ACTG211: Chapter 1

A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements, ______. $300 is reported as a expense and $900 is reported as an asset $300 is reported as a expense and $900 is reported as a liability $1,200 is reported as an expense $1,200 is reported as a liability $1,200 is reported as an asset

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

Which of the following are differences between the traditional and contribution format to income statements? The traditional income statement is for internal use, while the contribution format income statement is for external use. 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.

-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.

Which of the following statements are true? The wages of assembly-line workers are period costs. Period costs are included as part of the cost of goods. Sales commissions are period costs. Period costs are expensed in the same period in which they are incurred.

-Sales commissions are period costs. -Period costs are expensed in the same period in which they are incurred.

Within the relevant range of activity ______. fixed costs remain constant in total variable costs do not change in total, only per unit costs and activity can be approximated by a straight line

-fixed costs remain constant in total -costs and activity can be approximated by a straight line

Discretionary fixed costs include ______. management training programs insurance expense advertising factory depreciation

-management training programs -advertising

Committed fixed costs include ______. top management salaries public relations research real estate taxes

-top management salaries -real estate taxes

Which of the following are most likely fixed costs? Administrative salaries Factory insurance Factory rent Electricity to operate factory machines

Administrative salaries Factory insurance Factory rent

The economy would operate much less efficiently without _______________________behavior. Less would be available to consumers, and quality would be lower.

Ethical

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

Indirect costs

Which of the following statements is true? a) There is no significant difference between financial and managerial accounting. b) Managerial accounting data is provided to stockholders and lenders to support decisions about lending and investing in the business. c) Managerial accounting provides financial data for internal use and financial accounting provides data to external users. d) Financial accounting data is based on the business transactions of the business. Managerial accounting is based solely on estimated activity.

Managerial accounting provides financial data for internal use and financial accounting provides data to external users.

A potential benefit that is forfeited or lost when one decision is chosen over another is called a(n) ____________________________.

Opportunity Cost

Which of the following statements are true? Period costs do not flow through the inventory accounts. All costs in a merchandising company are period costs. Inventoriable costs are expensed in the period in which they are incurred. Period costs are expensed when incurred.

Period costs do not flow through the inventory accounts. Period costs are expensed when incurred.

Discretionary fixed costs include ______. advertising factory depreciation insurance expense management training programs

advertising management training programs

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

A type of indirect cost incurred to benefit more than one cost object is a(n) ______ cost. common prime opportunity sunk

common

Costs that are shared by multiple cost objects in a company are known as ______ costs. sunk marginal common opportunity

common

Nonmanufacturing costs include ______. company president's salary assembly-line worker wages insurance on plant equipment sales commissions

company president's salary sales commissions

Sales revenue minus variable expenses equals __________________.

contribution margin

Costs that can be easily and conveniently traced to a specific product are called ______ costs. period direct indirect common

direct

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

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 indirect

A laptop computer manufacturer would consider the computer's processor chip to be a(n) ______ cost. direct material indirect material direct labor manufacturing overhead

direct material

Selling and administrative costs are ______ costs. always indirect direct or indirect always direct

direct or indirect

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

fixed

Within the relevant range of activity, ______ costs remain constant in total. neither fixed nor variable both fixed and variable fixed variable

fixed

Within the relevant range of activity ______. variable costs do not change in total, only per unit fixed costs remain constant in total costs and activity can be approximated by a straight line

fixed costs remain constant in total costs and activity can be approximated by a straight line

A fixed cost remains fixed ______ within the relevant range of activity. per unit in total

in total

As the level of activity moves outside of the relevant range, fixed costs, ______. do not increase or decrease increase or decrease in a linear fashion increase or decrease in discrete steps

increase or decrease in discrete steps

As the level of activity moves outside of the relevant range, fixed costs, ______. increase or decrease in discrete steps increase or decrease in a linear fashion do not increase or decrease

increase or decrease in discrete steps

Differential costs are also known as ___________costs.

incremental

Salaries of factory supervisors and factory maintenance personnel are examples of ______ labor costs. direct administrative indirect

indirect

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

indirect (or common, overhead, shared)

Other names for manufacturing overhead include ______. Multiple select question. indirect manufacturing costs prime manufacturing costs factory burden factory overhead

indirect manufacturing costs factory burden factory overhead

Minor items such as nails and glue are usually considered to be ______. administrative costs selling costs direct materials indirect materials

indirect materials

Manufacturing overhead costs include ______. administrative taxes and insurance, sales commissions, and factory assembly workers' wages indirect materials, factory supervisors' salaries, and factory depreciation direct materials, administrative taxes and insurance, and sales commissions direct materials, sales commissions, and factory assembly workers' wages

indirect materials, factory supervisors' salaries, and factory depreciation

Product costs are also called _______________costs.

inventoriable

Direct materials and direct labor are both ______ costs. selling and administrative nonmanufacturing manufacturing period

manufacturing

Factory burden is a synonym for________________.

manufacturing overhead

Manufacturing costs include ______. manufacturing overhead direct labor administrative costs selling costs direct materials

manufacturing overhead direct labor direct materials

The revenue from selling one additional unit is called ______ revenue. marginal economic opportunity

marginal revenue

A cost that contains both variable and fixed cost elements is a(n) ______ cost. Multiple choice question. semifixed mixed opportunity sunk

mixed

The primary role of managerial accountants is to ______ a) ensure that tax reports are accurate and meet all legal requirements b) help their organization design and maintain financial reporting systems that generate reliable financial disclosures c) partner with co-workers within the organization to improve performance

partner with co-workers within the organization to improve performance

The management activity of ______________ includes specifying how to achieve established goals.

planning

On a traditional income statement, cost of goods sold reports the ______________________costs attached to merchandise sold during the period, while selling and administrative expenses report all ______________________costs that have been expensed as incurred.

product period

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

relevant range

Contribution margin is ______. sales revenue minus variable costs sales revenue minus cost of goods sold all revenues minus all costs sales revenue minus fixed costs

sales revenue minus variable costs

Opportunity costs ______. are uncommon in decision making should be considered in decision making are benefits that are given up when selecting one alternative over another are part of traditional accounting records

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

Marginal cost is ______. another name for the fixed cost per unit the cost that can be traced to a specific product what is given up by selecting one alternative over another the cost incurred to produce one more unit of a product

the cost incurred to produce one more unit of a product

True or false: The finished product of one company can become raw materials for another company.

true -Raw materials are anything that go into a finished product

Managerial accounting skills are ______. Multiple choice question. useful in a variety of careers and industries only needed by certified management accountants most important to certified public accountants

useful in a variety of careers and industries

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

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 ______ cost. variable mixed fixed

variable

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

cost object

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

cost object

Differential costs, opportunity costs and sunk costs are all cost classifications used in ______. financial statements decision making predicting cost behavior account analysis

decision making

Based on the following information, calculate net income for Dana's Dress Shop using the traditional format. Sales $360,000 Gross Margin $140,000 Contribution Margin $110,000 Total Selling & Administrative Exp. $60,000 $190,000 $50,000 $160,000 $80,000

$80,000 Reason: Gross Margin of $140,000 - Total Selling & Admin. Exp. of $60,000 = $80,000.

Managerial accounting helps managers perform three vital activities: ____________ and decision making.

Controlling and planning

True or false: Variable costs remain fixed in total within the relevant range of activity.

False

True or false: Managerial accounting skills are needed in for profit, not-for-profit and governmental entities.

True

True or false: All of a company's depreciation, property taxes and insurance premiums are considered manufacturing overhead.

True (Reason: Only indirect costs associated with operating the factory are included in manufacturing overhead.)

Cost objects include ______. anything for which cost data is desired anything for which revenue data is desired organizational subunits customers

anything for which cost data are desired— (products, customers, plants, office locations, organizational subunits, and departments.)

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

differential

Fantastic Furniture makes custom order couches. The material used to make a couch is a(n) ______ cost of the customer placing the order. common indirect overhead direct

direct

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

direct labor

Fixed costs that can be cut-back or eliminated without significant damage to a company's long-term goals are _______________ fixed cost and _____________________fixed costs can not be easily changed or eliminated.

discretionary committed

Fixed costs that usually arise from annual spending decisions by management are called _____________fixed costs.

discretionary (managed)

Planning involves ______. a) ensuring that operations are on track b) motivating employees to perform routine activities c) performing reviews of the internal control system d) establishing goals and specifying how to achieve them

establishing goals and specifying how to achieve them

Controlling involves ______. a) determining where to focus marketing efforts for the next year b) gathering feedback to ensure plans are being properly executed or modified as needed c) establishing goals for the company d) preparing annual budgets

gathering feedback to ensure plans are being properly executed or modified as needed

Variable costs vary ______ within the relevant range of activity. in total per unit

in total

Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the ______. income statement statement of cash flows balance sheet

income statement

Factory materials, such as cleaning supplies, that are not components of finished products are classified as ______. period costs manufacturing overhead direct materials administrative costs

manufacturing overhead

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

The components of prime costs are direct _____________costs and direct _______________costs.

material labor

Manufacturing costs can be divided into three categories: direct ____________, ______________labor and manufacturing _________________ .

materials direct overhead

Indirect materials include ______. nails, glue, and thread laptop computer keyboards factory manager's salary factory rent and insurance

nails, glue, and thread

Three activities vital to the role of managerial accounting are ______.

planning, controlling and decision making

Direct materials, direct labor, and manufacturing overhead are all ______ costs. product period variable conversion direct

product

The materials that go into the final product are called __________________materials.

raw materials

Cost behavior ______. refers to how a cost will change as activity level changes categorizes costs as fixed, mixed and variable is the relative proportion of each type of cost in an organization is a detailed analysis technique used to determine whether costs are fixed or variable

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

Variable costs ______. remain constant in total and vary per unit. remain constant both in total and per unit. vary both in total and per unit. remain constant per unit and vary in total.

remain constant per unit and vary in total.

Period costs are always expensed on the income statement in the period in which ______. they are incurred the related goods are sold the cash for the expense changes hands

they are incurred

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

Manufacturing overhead costs include ______.

indirect materials, factory supervisors' salaries, and factory depreciation (Reason: Only indirect costs associated with operating the factory are included in manufacturing overhead.)

Labor costs that can be easily and conveniently traced to specific products are ______ costs. direct labor manufacturing overhead indirect labor selling

direct labor

Prime costs include ______. selling and administrative expenses direct labor direct materials manufacturing overhead

direct labor direct materials

Lower quality goods and services, less from which to choose and higher prices are all possible effects of abandoning ______. ethical behavior the lean thinking model decentralization

ethical behavior

Managerial accounting ______.

is not mandatory emphasizes relevance emphasizes the future reports to managers inside the organization

Indirect labor costs include ______. assembly-line worker wages administrative assistant salary assembly-line supervisor salary factory security guard wages

assembly-line supervisor salary factory security guard wages (Reason: Indirect labor includes manufacturing costs only. Administrative salaries are non-manufacturing costs.)

Gathering feedback needed to ensure that expectations are being met is part of _________________.

Controlling

Which of the following statements is true? Most accounting majors spend their careers working public accounting. Managerial accounting knowledge is only required in public accounting. Management accountants need strong financial accounting skills.

Management accountants need strong financial accounting skills.