Chapter 1 (1) & 2 (33) & 3 (57)

T/F: All of a company's depreciation, property taxes, and insurance premiums are considered manufacturing overhead.

False, only indirect costs associated with operating the factory are included in manufacturing overhead.

Contribution margin is first used to cover _________________ expenses. Once the break-even point has been reached, contribution margin becomes _____________.

Fixed Profit

A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of ______.

Indirect costs (too cheap and insignificant to treat as direct materials because it is not worth the time to track them) and manufacturing overhead

Blissful Blankets' target profit is $520,000. Each blanket has a contribution margin of $21. Fixed costs are $320,000. The number of blankets that must be sold to achieve the target profit is _________.

Reason: ($520,000 + $320,000) ÷ $21 = 40,000

Raw materials inventory was $27,000 at the beginning of the year and $25,000 at the end of the year. During the year, $100,000 in raw materials were purchased, including $28,000 of indirect materials that were put into manufacturing overhead during the period. Calculate the cost of direct materials used during the period.

Reason: Cost of direct materials = Beginning Inventory + Purchases - Indirect Materials - Ending Inventory ($27,000 + $100,000 - $28,000 - $25,000 = $74,000)

The relative proportions in which a company's products are sold is referred to as ________ ___________

Sales mix

T/F: Raw materials include both direct and indirect materials

True

T/F: The finished product of one company can become raw materials for another company.

True

T/F: The sales mix must be taken into consideration when calculating the break-even point for more than one product due to different selling prices, costs, and contribution margins among the products.

True

A company requisitioned $40,000 in direct materials and $30,000 in indirect materials from the storeroom to be used in production. The journal entry to record this transaction debits __________

Work in process $40,000, debits Manufacturing overhead $30,000 and credits Raw materials $70,000

Cost behavior is considered linear whenever

a straight line approximates the relationship between cost and activity

All manufacturing costs are assigned to units of product and all nonmanufacturing costs are treated as period cost under _________.

absorption or full

The journal entry to record the purchase of materials credits ____________

accounts payable

When a company creates overhead rates based on the actions it performs, it is employing an approach called ________-_________

activity based

A journal entry debiting Salaries expense and crediting Salaries and wages payable could be recording _______

administrative salaries

A measure such as direct labor-hours or machine hours used to assign overhead costs to products and services is called a cost driver or a(n) ________ ________

allocation or activity, base or driver

The journal entry to record selling and administrative salaries debits _______

an expense account and credits Cash or a liability

An essential quality of an overhead allocation base is that it must __________.

be common to all the company's products and services

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

behavior

The type and quantity of each type of direct material needed to complete a unit of product is listed on the __________

bill of materials

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

committed

A factor that causes overhead costs is called a _________

cost driver

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

cost object

Actual manufacturing overhead is _________ to the Manufacturing overhead account.

debited

The adjustment for overapplied overhead ___________ cost of goods sold and ___________ net income **READ

decreases increases

An increase in sales will increase net operating income by a multiple of that increase in sales. The multiple is known as the

degree of operating leverage

When a company uses a departmental approach rather than a plantwide approach to applying overhead, the selling price of the product will always be _________

different

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

direct

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

direct

In an automobile manufacturing plant, the assembly-line workers are classified as ______ _______ cost.

direct labor

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

Estimating the fixed and variable components of a mixed cost using the ______________ approach involves a detailed analysis of what cost behavior should be

engineering

A predetermined overhead rate is calculated by dividing the ______ total manufacturing overhead by the ______ total allocation base.

estimated, estimated

Administrative costs include ____________.

executive compensation and public relations costs

When a job is completed, its costs are transferred into _________

finished goods

Total contribution margin equals ______.

fixed expenses plus net operating income

Variable costs vary ______ within the relevant range of activity.

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

Selling and administrative costs first appear on the ______

income statement

The adjustment for underapplied overhead ___________ cost of goods sold and ___________ net income **READ

increases decreases

Which of the following is not a COST CLASSIFICATION associated with decision making?

indirect costs

Manufacturing overhead costs include ___________.

indirect materials, factory supervisors' salaries, and factory depreciation

A journal entry that debits Work in process and Manufacturing overhead and credits Raw materials records the __________

issuance of materials

The document that records the materials, labor, and manufacturing overhead costs charged to a job is the _____________.

job cost sheet

A method that uses all the available data points to divide a mixed cost into its fixed and variable components is called

least-squares regression

Manufacturing overhead consists of all ____________

manufacturing costs other than direct labor and direct materials

Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as ______.

manufacturing overhead

Companies that use job-order costing make ______

many different products

The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is recognized is known as the _________ __________

matching principle

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

materials, direct or touch, overhead or burden

An allocation base is a(n) ________.

measure of activity used to assign overhead costs to products and services

When compared to a departmental approach, using activity-based costing results in _______ overhead rates.

more

multiple predetermined overhead rates

multiply each departments rates and hours and add them together instead of using the entire company hours and avg rate across departments

When labor costs are incurred, ________ labor costs are added directly to the Work in Process account.

only direct

A measure of how sensitive net operating income is to a given percentage change in sales dollars is known as __________

operating leverage

The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find _________.

overhead applied to the job

The formula for applying overhead to a specific job is: ___________ amount of allocation base incurred by job.

predetermined overhead rate ×

Direct materials, direct labor, and manufacturing overhead are all ___________ ___________

product costs

Inventoriable costs is another term for _______________ costs.

product or manufacturing costs

Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are ______ materials

raw

The materials that go into the final product are ________ materials

raw

A multiple predetermined overhead rate system is more accurate than a plantwide overhead rate system because it ______________

reflects differences in how overhead costs are incurred within departments

A journal entry that debits Manufacturing overhead and credits Accounts payable could be made to record ___________

rent expense on factory equipment factory utilities expense

The term used for the relative proportion in which a company's products are sold is

sales mix

Net operating income is calculated by subtracting ______ from ______.

selling and administrative expenses gross margin

When all of a company's job cost sheets are viewed collectively, they form what is known as a(n)

subsidiary ledger

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

they are incurred

Committed fixed costs include ______.

top management salaries real estate taxes

To prepare a CVP graph, lines must be drawn representing total revenue, ____________, _________________

total expense, and total fixed expense

When only a portion of the units involved in a job are sold, the _________

unit product cost is used to calculate the amount transferred from finished goods to cost of goods sold

The term "cost structure" refers to the relative proportion of ____________ and _______________ costs in an organization.

variable fixed

The break-even point is the level of sales at which the profit equals ______

zero

Typical cost drivers include ______.

- computer time - flight-hours - machine-hours

Widely used allocation bases in manufacturing include _______________

- direct labor hours - machine hours - direct labor cost - units of product

Categories of manufacturing costs include

- direct materials - direct labor - manufacturing overhead

The appeal of using predetermined departmental overhead rates is they presumably provide ___________

- enhanced information for decision making - a more accurate accounting of costs

Indirect labor costs include _____________.

- factory security guard wages - assembly-line supervisor salary

Period costs ______.

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

Manufacturing overhead:

- is an indirect cost. - consists of many different types of costs. - contains fixed costs.

Selling costs include __________.

- sales salaries - sales commissions - advertising

T/F: Account analysis involves a detailed analysis of what cost behavior should be, based on an industrial engineer's evaluation.

False

Within the relevant range of activity ______.

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

Cost objects include:

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

What side of the Manufacturing overhead account is actual manufacturing overhead entered on?

Always the debit side

Cost structure refers to

Cost structure refers to the relative portion of fixed and variable costs in an organization.

Which of the following are most likely fixed costs? Multiple select question.

- Factory insurance - Factory rent - Administrative salaries

Which of the following statements are true about scatter graphs?

- Scattergraphs are a way to diagnose cost behavior. - Plotting data on a scattergraph is an important diagnostic step

Work in Process consists of ______.

- actual direct materials cost - actual direct labor cost - applied manufacturing overhead

Product costs ______.

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

Cost behavior ______.

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