CH 1 Acct 201B

A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements, ______. $900 is reported as a expense and $300 is reported as an asset $1,200 is reported as an expense $300 is reported as a expense and $900 is reported as an asset $1,200 is reported as an asset

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

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 $160,000 $80,000 $50,000 $190,000

$80,000 Reason: Gross Margin of $140,000 - Total Selling & Admin. Exp. of $60,000 = $80,000.

The following information is for S&P Enterprises for the month of September: Direct materials $82,000 Direct labor $51,000 Variable manufacturing overhead $32,000 Fixed manufacturing overhead $30,000 Variable selling expense $16,000 Fixed selling expense $15,000 Variable administrative expense $9,000 Fixed administrative expense $18,000 Total fixed cost for the month of September was $ ____________

63,000

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

Blank 1: cost Blank 2: object

Product costs are also called ______________ costs

Blank 1: inventoriable or manufacturing

Direct labor is also called _______ labor.

Blank 1: touch

All of a company's depreciation, property taxes and insurance premiums are considered manufacturing overhead. True False

False

A fixed cost remains fixed ______ within the relevant range of activity. Multiple choice question. in total per unit

in total

The difference in revenues between two alternatives is called ______. marginal revenue incremental revenue incremental cost net profit

incremental revenue

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

indirect

Select all that apply Committed fixed costs include ______. top management salaries real estate taxes research public relations

top management salaries real estate taxes

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 $160,000 $190,000 $50,000

$80,000 Reason: Gross Margin of $140,000 - Total Selling & Admin. Exp. of $60,000 = $80,000.

Select all that apply Which of the following are most likely fixed costs? Administrative salaries Factory rent Factory insurance Electricity to operate factory machines

Administrative salaries Factory rent Factory insurance

The following information is for S&P Enterprises for the month of September: Direct materials $82,000 Direct labor $51,000 Variable manufacturing overhead $32,000 Fixed manufacturing overhead $30,000 Variable selling expense $16,000 Fixed selling expense $15,000 Variable administrative expense $9,000 Fixed administrative expense $18,000 Total fixed cost for the month of September was $

Blank 1: 63,000 or 63000

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

Blank 1: behavior or behaviour

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

Blank 1: committed

Sales revenue minus variable expenses equals _____________ ________________

Blank 1: contribution Blank 2: margin

The assumption that cost behavior is strictly linear is reasonably valid within the _______________________ ___________________ of activity.

Blank 1: relevant Blank 2: range

The assumption that cost behavior is strictly linear is reasonably valid within the ________________________ of activity.

Blank 1: relevant Blank 2: range

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.

Blank 1: traditional or GAAP Blank 2: contribution

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

Blank 1: variable

Select all that apply Which of the following are most likely fixed costs? Factory rent Electricity to operate factory machines Administrative salaries Factory insurance

Factory rent Administrative salaries Factory insurance

Select all that apply Which of the following statements are true? Period costs are expensed when incurred. All costs in a merchandising company are period costs. Period costs do not flow through the inventory accounts. Inventoriable costs are expensed in the period in which they are incurred.

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

Select all that apply Opportunity costs ______. are benefits that are given up when selecting one alternative over another are uncommon in decision making should be considered in decision making are part of traditional accounting records

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

Select all that apply Within the relevant range of activity ______. costs and activity can be approximated by a straight line fixed costs remain constant in total variable costs do not change in total, only per unit

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

Differential costs, opportunity costs and sunk costs are all cost classifications used in ______. account analysis predicting cost behavior decision making financial statements

decision making

Costs that can be easily and conveniently traced to a specific product are called ______ costs. direct indirect common period

direct

Costs that can be easily and conveniently traced to a specific product are called ______ costs. . common period indirect direct

direct

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

direct

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

direct

Costs that can be easily and conveniently traced to a specific product are called ______ costs. direct period indirect common

direct Reason: Indirect costs cannot be easily traced and must be allocated to products. Reason: Common costs are a type of indirect cost.

A laptop computer manufacturer would consider the computer's processor chip to be a(n) ______ cost. direct material direct labor manufacturing overhead indirect material

direct material

Select all that apply Manufacturing costs include ______. direct materials direct labor selling costs manufacturing overhead administrative costs

direct materials direct labor manufacturing overhead

Administrative costs include ______. sales commissions and factory supervisors' salaries factory maintenance workers' wages and factory supervisors' salaries shipping costs and sales commissions executive compensation and public relations costs

executive compensation and public relations costs

Select all that apply Indirect labor costs include ______. administrative assistant salary factory security guard wages assembly-line worker wages assembly-line supervisor salary

factory security guard wages assembly-line supervisor salary

Within the relevant range of activity, ______ costs remain constant in total. neither fixed nor variable variable both fixed and variable fixed

fixed

Variable costs vary ______ within the relevant range of activity. per unit in total

in total

Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the ______. balance sheet statement of cash flows income statement

income statement

The difference in costs between two alternatives is called a(n) ______ cost. incremental opportunity common sunk

incremental

Multiple Choice Question Minor items such as nails and glue are usually considered to be ______. selling costs indirect materials administrative costs direct materials

indirect materials

Manufacturing overhead costs include ______. direct materials, administrative taxes and insurance, and sales commissions indirect materials, factory supervisors' salaries, and factory depreciation administrative taxes and insurance, sales commissions, and factory assembly workers' wages direct materials, sales commissions, and factory assembly workers' wages

indirect materials, factory supervisors' salaries, and factory depreciation

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

lank 1: cost Blank 2: object

Direct materials and direct labor are both ______ costs. period manufacturing nonmanufacturing selling and administrative

manufacturing

Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as ______. period costs indirect labor direct materials manufacturing overhead

manufacturing overhead

A cost that contains both variable and fixed cost elements is a(n) ______ cost. sunk mixed semifixed opportunity

mixed

Indirect materials include ______. nails, glue, and thread laptop computer keyboards factory rent and insurance factory manager's salary

nails, glue, and thread

Contribution margin is ______. all revenues minus all costs sales revenue minus cost of goods sold sales revenue minus fixed costs sales revenue minus variable costs

sales revenue minus variable costs

Period costs are always expensed on the income statement in the period in which ______. the cash for the expense changes hands they are incurred the related goods are sold

they are incurred

Within the relevant range, a cost that changes in direct proportion to changes in the activity level is a ______ cost. variable mixed fixed

variable

Sales revenue minus variable expenses equals ______________ _________________

Blank 1: contribution Blank 2: margin

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

Blank 1: direct

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.

Blank 1: direct or prime Blank 2: indirect, common, or overhead

In an automobile manufacturing plant, the assembly-line workers are classified as _____________ __________________cost.

Blank 1: direct or touch Blank 2: labor or labour

Fixed costs that usually arise from annual spending decisions by management are called ___________________ or managed fixed costs.

Blank 1: discretionary

As the level of activity moves outside of the relevant range, ____________________ costs increase or decrease in discrete steps rather than an linear fashion.

Blank 1: fixed

A manufacturing cost that cannot be easily traced to a specific cost object is a(n) __________________ cost.

Blank 1: indirect, common, overhead, or shared

The revenue obtained from selling one additional unit of product is called ______________ revenue.

Blank 1: marginal

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.

Blank 1: matching

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

Blank 1: mixed or semivariable

A potential benefit that is forfeited or lost when one decision is chosen over another is called a(n) ________________________

Blank 1: opportunity Blank 2: cost

The sum of direct materials and direct labor is called _________ cost.

Blank 1: prime

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.

Blank 1: product or manufacturing Blank 2: period

The materials that go into the final product are called _____________materials.

Blank 1: raw or direct

Which of the following is not a COST CLASSIFICATION associated with decision making? Opportunity costs Sunk costs Differential costs Indirect costs

Indirect costs

The following information is for S&P Enterprises for the month of July: Direct materials $76,000 Direct labor $40,000 Variable manufacturing overhead $25,000 Fixed manufacturing overhead $30,000 Variable selling expense $12,000 Fixed selling expense $15,000 Variable administrative expense $6,000 Fixed administrative expense $18,000 Total fixed cost for the month of July was ______. Multiple choice question. $146,000 $88,000 $33,000 $63,000

Reason: $30,000 + $15,000 + $18,000 = $63,000 $63,000

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

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

The finished product of one company can become raw materials for another company. True False

True Reason: Raw materials are anything that go into a finished product. For example, a computer chip is a finished product for the chip manufacturer and a raw material for the computer manufacturer.

Select all that apply Discretionary fixed costs include ______. advertising insurance expense management training programs factory depreciation

advertising management training programs

Select all that apply Product costs ______. are also called inventoriable costs "attach" to units of product as they are purchased for resale or produced include all costs involved in making and selling a product are always expensed in the same period in which the related products are produced

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

Select all that apply Cost behavior ______. is a detailed analysis technique used to determine whether costs are fixed or variable categorizes costs as fixed, mixed and variable refers to how a cost will change as activity level changes is the relative proportion of each type of cost in an organization

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

Select all that apply Cost objects include ______. anything for which revenue data is desired customers anything for which cost data is desired organizational subunits

customers anything for which cost data is desired organizational subunits

Select all that apply Prime costs include ______. direct labor direct materials manufacturing overhead selling and administrative expenses

direct labor direct materials

As the level of activity moves outside of the relevant range, fixed costs, ______. increase or decrease in discrete steps increase or decrease in a linear fashion do not increase or decrease

increase or decrease in discrete steps

Indirect materials and indirect labor are classified as ______. nonspecific materials period costs manufacturing overhead nonspecific labor

manufacturing overhead

The cost of producing one more unit is the ______ cost. opportunity sunk marginal differential

marginal

Select all that apply Cost objects include ______. organizational subunits customers anything for which cost data is desired anything for which revenue data is desired

organizational subunits customers anything for which cost data is desired

Select all that apply Selling costs include ______. sales salaries sales commissions administrative salaries advertising

sales salaries sales commissions advertising

Select all that apply Opportunity costs ______. are part of traditional accounting records are uncommon in decision making should be considered in decision making are benefits that are given up when selecting one alternative over another

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

Select all that apply Differential cost is ______. never relevant to a product decision the difference in cost between two alternatives the same as opportunity cost also known as incremental cost

the difference in cost between two alternatives also known as incremental cost

Period costs are always expensed on the income statement in the period in which ______. the related goods are sold the cash for the expense changes hands they are incurred

they are incurred