ACCT3304 exam 1

cost objects include

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

Which of the following statements is true?

a direct cost is easily & conveniently traced to a specific cost object

activity base

a measure of whatever causes the incurrence of a variable cost

period costs

all costs that are not product costs

costs that are shared by multiple cost objects in a company are known as

common costs

although companies also incur depreciation, utility costs, property taxes & insurance premiums to sustain their nonmanufacturing operations, these costs aren't included as part of

manufacturing overhead

because indirect materials & indirect labor are difficult to trace to specific products, their costs are included in

manufacturing overhead

variable cost

varies, in total, in direct proportion to changes in the level of activity

most manufacturing companies further separate their manufacturing costs into

2 direct cost categories, direct materials & direct labor, and 1 indirect cost category, manufacturing overhead

manufacturing overhead

3rd manufacturing cost category, includes all manufacturing costs except direct materials and direct labor

direct cost

a cost that can be easily and conveniently traced to a specified cost object

indirect cost

a cost that cannot be easily and conveniently traced to a specified cost object

common cost

a cost that is incurred to support a number of cost objects but that cannot be traced to them individually

fixed cost

a cost that remains constant, in total, regardless of changes in the level of activity

raw materials

any materials that go into the final product

cost object

anything for which cost data are desired - including products, customers, plants, office locations, and departments

the finished product of one company

can become the raw materials of another company

finished goods

consist of completed units of product that have not been sold to customers

work in process

consists of units of production that are only partially complete and will require further work before they are ready for sale to customers

manufacturing overhead also includes other indirect costs that can't be traced to finished products, such as

depreciation of manufacturing equipment & utility costs, property taxes & insurance premiums incurred to operate a manufacturing facility

manufacturing overhead usually includes various fixed costs such as

depreciation, insurance, property taxes, rent & supervisory salaries

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

direct

a regional sales manager's salary is a __________ of the regional office in which the sales manager works

direct cost

For manufacturing companies, product costs include:

direct materials, direct labor, & manufacturing overhead

administrative costs can be

direct or indirect

indirect labor

employees that play an essential role in running a manufacturing facility; however, the cost of compensating these people cannot be easily or conveniently traced to specific units of product

To be traced to a cost object such as a particular product, the cost must be caused by the cost object

false

To be traced to a cost object such as a particular product, the cost must be incurred to make the product

false

administrative costs

include all costs associated with the general management of an organization rather than with manufacturing or selling

product costs

include all costs involved in acquiring or making a product

selling costs

include all costs that are incurred to secure customer orders and get the finished product to the customer

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

indirect

a common cost is not a type of

indirect cost

a factory manager's salary is an example of a(n)

indirect cost

a factory's manager's salary is an example of a(n)

indirect cost

a dress manufacturer would consider the cost of relatively inexpensive items like thread to be apart of

indirect materials and manufacturing overhead

Direct Labor

labor costs that can be easily traced to individual units of product

ONLY indirect costs associated with __________ are included in manufacturing overhead

operating the factory

While total variable cost change as the activity level changes, it's important to note that a variable cost is constant if expressed on a _____ basis

per-unit

all selling and administrative expenses are treated as

period costs

Direct Materials

raw materials that become an integral part of the product and that can be conveniently traced directly to it

indirect materials

raw materials whose costs can't be easily/conveniently traced to finished products

cost behavior

refers to how a cost reacts to changes in the level of activity

committed fixed costs

represent organizational investments with a multiyear planning horizon that can't be significantly reduced even for short periods of time without making fundamental changes

nonmanufacturing costs are often divided into 2 categories:

selling costs & administrative costs

a particular cost may be direct or indirect, depending on

the cost object

when a manufacturer sells its finished goods to customers,

the costs are transferred from finished goods to cost of goods sold

cost structure

the relative proportion of each type of cost in an organization

conversion cost

the sum of direct labor cost and manufacturing overhead

Prime Cost

the sum of direct materials cost and direct labor cost

the term conversion cost is used to describe direct labor & manufacturing overhead because

these costs are incurred to convert direct materials into finished products

A cost may be direct or indirect, depending on the cost object.

true