CHAPTER 1 & 5A

manufacturing costs include all of the following except: a) administrative b) direct labor c) direct materials d) manufacturing overhead

administrative

the potential benefit is given up when one alternative is selected over another

opportunity cost

___ best describe the wages of a sheet metal worker in a fabrication plant a) product costs b) period costs c) nonmanufacturing cost d) administrative costs

product costs

a difference in revenue between any two alternatives

differential revenue

______ is sometimes called "touch labor" a) direct labor b) indirect labor c) overhead labor

direct labor

in a small manufacturing facility, one welder is needed for every 200 hours of machine-hours or fewer in a month. The welder is paid a monthly salary of $2,500. If the total monthly requirement is 1,300 machine-hours, the total salaried employee expense is ________. a) $12,500 b) $16,250 c) $17,500 d) $15,000

$17,500 (1300/200 = 6.5 round to 7) (7x$2,500)

Audio Corporation purchased $20,000 of DVDs during the current year. The company had DVD inventory of $15,000 at the beginning of the year. An end of the year audit revealed that the company had DVD inventory of $10,000. The amount that would be reported as cost of goods sold in the income statement for the current year is ________. a) $25,000 b) $15,000 c) $10,000 d) $20,000

$25,000

Cyber Devices manufactures PCTV products that enable people to watch television content on their computers. It sells its product to retailers for $50. A tuner component that goes into each of these devices costs $5 to acquire. What is the total variable cost at an activity level of 1,000 units? a) $50,000 b) $5 c) $1,000 d) $5,000

$5,000

Which of the following is true of the contribution approach? a) It is mainly used for external reporting purposes. b) It separates costs into fixed and variable categories. c) It is not useful for merchandising companies. d) It calculates gross margin by deducting cost of goods sold from sales.

It separates costs into fixed and variable categories.

the traditional income statement uses which of the following cost categories? a) variable expenses and fixed expenses b) cost of goods sold and fixed expenses c) operating expenses and selling and adminstrative expenses d) cost of goods sold and selling and adminstrative expenses

cost of goods sold and selling and adminstrative expenses

___________ is common to both prime cost and conversion cost a) manufacturing overhead b) direct materials c) nonmanufacturing costs d) direct labor

direct labor

Generally which of the following is the most accurate for managers to use to estimate the fixed and variable components of mixed cost? scattergraph high-Low method least-squares regression

least-squares regression

items such as indirect materials, indirect labor, maintenance and repairs on production equipment, depreciation, and insurance on manufacturing facilities are included in: a) nonmanufacturing costs b) manufacturing overhead costs c) direct costs

manufacturing overhead costs

the ______ requires that costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized a) materiality concept b) consistency concept c) matching principle d) going concern assumption

matching principle

differential costs are always: a) irrelevant in making business decisions b) relevant in making business decision c) a sunk cost

relevant in making business decisions

a fixed cost is a cost which: a) varies in total with changes in the level of activity b) remains constant per unit with changes in the level of activity c) varies inversely in total with changes in the level of activity d) remains constant in total with changes in the level activity

remains constant in total with changes in level of activity

if a firm increases its activity level, a) costs will remain the same b) all costs will rise c) some costs will change, other costs will remain the same

some costs will change, other costs will remain the same

______is always an irrelevant cost a) differential cost b) sunk cost c) opportunity cost

sunk cost

which observation is true of period costs? a) they are expensed in the period in which they are incurred b) they are included as part of the cost of manufactured goods c) they include costs that are incurred to convert materials into the finished product d) they are also known as inventoriable costs

they are expensed in the period in which they are incurred

Davidson Company has a product with a selling price per unit of $100, the unit variable cost is $60, and the total monthly fixed costs are $30,000. If the company sells 1,000 units, how much is Davidson's contribution margin per unit? $40,000 $10,000 $40

$40

Using the high-low method, what is the variable cost? $2 per direct-labor hour. $2.31 per direct-labor hour. $0.30 per direct-labor hour. $3.33 per direct-labor hour.

Variable cost per direct labor hour = Difference in high low cost/Difference in high low activity = (4,000 - 1,900)/(9,000 - 2,000) = 2,100/7,000 = $0.30 per direct labor hour Correct option is (c)

a difference in costs between any two alternatives

differential cost

materials that become and integral part of the finished product and whose costs can be conveniently traced to the finished product are called: a) raw materials b) direct materials c) indirect materials

direct materials

Which of the scattergraph plots above suggests a mixed cost relationship between direct labor-hours and manufacturing overhead?

graph that is increasing

property taxes associated with a company's administrative facility are considered: a) nonmanufacturing costs b) manufacturing overhead costs c) direct costs

nonmanufacturing costs

a cost that has already been incurred and that cannot be changed by any decision made now or in the future

sunk cost

in the equation, Y= a + bX, X represents: a) total mixed cost b) the level of activity c) the total fixed cost d) the variable cost per unit of activity

the level of activity