Chapter 1 accounting notes "costs"

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

A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements, _____________.

direct, indirect, common, or overhead

A cost that can be easily and conveniently traced to a specific cost object is a _____________ cost of that cost object, whereas costs that cannot be easily and conveniently traced to that specific cost object are ______________ costs.

mixed

A cost that contains both variable and fixed cost elements is called a(n) ___________ cost

direct material

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

executive compensation and public relations costs

Administrative costs include __________________.

traditional, contribution

An income statement focusing on product and period costs has been prepared using a _____________ format while a ______________ format income statement makes a distinction between fixed and variable costs.

direct cost

Any item for which cost data is desired is called __________________

$80,000

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 1. $50,000 2. $160,000 3. $80,000 4. $190,000

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

Cost objects include:

Variable

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

the difference in cost between two alternatives and is also known as incremental cost.

Differential cost is:

decision making

Differential costs, opportunity costs and sunk costs are all cost classifications used in:

touch

Direct labor is also called ____________ labor

direct

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

behavior

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

Direct Labor

In an automobile manufacturing plant, the assembly-line workers are classified as ______________ _______________ cost

direct labor, manufacturing overhead, direct materials

Manufacturing costs include _________________.

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

sales commissions and company president's salary

Non-manufacturing costs include _____________.

product, period

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.

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

Opportunity costs are

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

Product costs are

Income Statement

Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the ______________.

Contribution Margin

Sales revenue minus all variable expenses equals

matching

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

Relevant Range

The assumption that cost behavior is strictly linear is reasonably valid within the ______________ _____________ of activity

incremental revenue

The difference in revenues between two alternatives is called ____________.

1. Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior. 2. Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier.

Which of the following are differences between the traditional and contribution format to income statements? 1. The traditional income statement is for internal use, while the contribution format income statement is for external use. 2. Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior. 3. Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier.

1. Factory insurance 2. Factory rent 3. Administrative salaries

Which of the following are most likely fixed costs?

indirect costs

Which of the following is not a COST CLASSIFICATION associated with decision making? 1. Sunk costs 2. Differential costs 3. Indirect costs 4. Opportunity costs

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

Which of the following statements are true? 1. All costs in a merchandising company are period costs. 2. Period costs do not flow through the inventory accounts. 3. Period costs are expensed when incurred. 4. Inventoriable costs are expensed in the period in which they are incurred.

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

Within the relevant range of activity ________________.

fixed

Within the relevant range of activity, __________ costs remain constant in total.

Variable

Within the relevant range, a cost that changes in direct proportion to changes in the activity level is a __________ cost.

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

definition of Cost behavior