A202 Smartbook chapter 1
A company purchased a 12 month insurance policy on October 1 at a cost of $1,200. On the December 31 annual financial statements:
$300 is reported as a expense and $900 is reported as an asset
Which of the following are most likely fixed costs?
- Factory insurance - Administrative salaries - Factory rent
Cost behavior:
- refers to how a cost will change as activity level changes - categorizes costs as fixed, mixed and variable
Which of the following is not a COST CLASSIFICATION associated with decision making?
Indirect costs
Which type of cost changes in total, in direct proportion to changes in activity level?
Variable
How individual costs react to changes in activity level is referred to as cost _____
behavior
Sales revenue minus variable expenses equals _____ _____
contribution margin
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:
decision making
The difference in costs between two alternatives is called a(n) ______ cost.
differential
Costs that can be easily and conveniently traced to a specific product are called ______ costs.
direct
Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are __________
direct
A laptop computer manufacturer would consider the computer's processor chip to be a(n) ______ cost. Multiple choice question.
direct material
Selling and administrative costs are _______ costs.
direct or indirect
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 _______
direct, indirect
Administrative costs include:
executive compensation and public relations costs
Within the relevant range of activity, ______ costs remain constant in total.
fixed
Minor items such as nails and glue are usually considered to be ______.
indirect materials
Direct materials and direct labor are both ______ costs. Multiple choice question.
manufacturing
Factory materials, such as cleaning supplies, that are not components of finished products are classified as:
manufacturing overhead
A cost that contains both variable and fixed cost elements is a(n) ______ cost.
mixed
Indirect materials include ______.
nails, glue, and thread
There are two broad classifications of costs: manufacturing costs and _______ costs.
nonmanufacturing
inventoriable costs is another term for _____ costs.
product
Cost assumptions are reasonably valid within the _____ _____ of activity.
relevant range
The level of activity within which variable and fixed cost assumptions are valid is known as the _____ _____
relevant range
Contribution margin is:
sales revenue minus variable costs
Costs that have already been incurred and can not be changed by decisions made in the current period or in future periods are called ____ costs
sunk
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
A cost that changes in direct proportion to changes in the activity level is a ______ cost.
variable
Mixed costs are also commonly known as semi- ______ costs.
variable
Which of the following statements are true?
- Period costs are expensed in the same period in which they are incurred. - Sales commissions are period costs.
A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of ______.
- manufacturing overhead - indirect materials
Manufacturing costs can be divided into three categories: direct ________, _________ materials, and manufacturing __________.
- materials - direct - overhead
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
$80,000
Fantastic Furniture makes custom order couches. The material used to make a couch is a(n) _______ cost of the customer placing the order.
direct
Labor costs that can be easily and conveniently traced to specific products are ______ costs. Multiple choice question.
direct labor
The accrual concept that costs incurred to generate revenue are expensed in the same period the revenue is recognized is known as the ________ principle.
matching
Period costs are always expensed on the income statement in the period in which:
they are incurred
True or false: Labor costs that can be specifically traced to a product are indirect labor costs.
False
What type of cost is never relevant and should be disregarded when making decisions?
Sunk
Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as ______.
manufacturing overhead
Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the:
income statement
A manufacturing cost that cannot be easily traced to a specific cost object is a(n) __________
indirect
Differential cost is:
- also known as incremental cost - the difference in cost between two alternatives
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.
Cost objects include ______. Multiple select question.
- customers - anything for which cost data is desired - organizational subunits
In an automobile manufacturing plant, the assembly-line workers are classified as ________ __________
- direct - labor
Indirect labor costs include:
- factory security guard wages - assembly-line supervisor salary