Chapter 2 MA

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In making product mix and pricing decisions, managers should focus on: A) total costs B) unit costs C) variable costs D) fixed costs

A) total costs

When 10,000 units are produced, variable costs are $6 per unit. Therefore, when 20,000 units are produced: A) variable costs will total $120,000 B) variable costs will total $60,000 C) variable unit costs will increase to $12 per unit D) variable unit costs will decrease to $3 per unit

A) variable costs will total $120,000

Administrative Cost

All executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling. (accounting, public relations, etc)

Manufacturing Overhead

All manufacturing costs except direct materials and labor (supervisor labor cost, janitor labor cost)

Non-manufacturing costs

Also called period costs, selling costs and administrative costs, expense right away

Amber Manufacturing provided the following information for last month: Sales $20,000 Variable costs 6,000 Fixed costs 9,000 Operating income $5,000 If sales double next month, what is the projected operating income? A) $10,000 B) $25,000 C) $19,000 D) $12,000Amber Manufacturing provided the following information for last month: Sales $20,000 Variable costs 6,000 Fixed costs 9,000 Operating income $5,000 If sales double next month, what is the projected operating income? A) $10,000 B) $25,000 C) $19,000 D) $12,000

C) $19,000

Cost of Goods Sold

Cost of the inventory that was sold during the period

direct costs

Costs that can be specifically identified with a particular project or activity. Assigned to assets

Total Manufacturing Costs =

Direct Materials + Direct Labor + Manufactured Overhead

Direct Materials

Materials that become an integral part of a finished product and whose costs can be conveniently traced to it. (wood for table, microchip for phone)

Indirect cost

a cost that cannot be easily and conveniently traced to a specified cost object, may include both variable and fixed costs

Cost of Goods Sold =

beginning finished goods inventory + Cost of Goods Manufactured (purchases) - ending finished goods inventory

monthly lease payment for a specialized piece of equipment needed to manufacture the football helmet, what type of cost

direct cost

A cost that is classifed as a period cost will be recognized on the income statement as an

expense in the current period

A cost that is classified as a product cost will be recognized on the income statement as an

expense only when the associated units of product are sold

Operating Income =

gross profit - operating expenses

Actual costs

historic costs incurred

Selling Cost

include all costs that are incurred to secure customer orders and get the finished product to the customer (salesperson commisions, sales salaries, deliveries, shipping, advertising)

Manufacturing overhead costs are ___________ factory-related costs that are incurred when producing a product

indirect

Utilities paid for the manufacturing plant, what type of cost

indirect cost

beverages provided daily in plant break room, what type of cost

indirect cost

costs that are initially recorded as assets and expensed when sold are refereed to as

inventoriable costs

Direct Labor

labor costs that can be easily/physically traced to individual units of a product (salary for assembly line workers, carpenters at the home builder)

Gross Profit =

net sales - cost of goods sold

The wages of the receptionist in the administrative offices

period cost, administrative

Advertising cost

period cost, selling

The cost of wages and benefits for the carpenters to create the tables

product cost, direct

The cost of wood used to create tables to sell

product cost, direct

Property taxes on factory building

product cost, indirect

The cost of factory rent and cost of factory utilities

product cost, indirect

Cost of good manufactured

the manufacturing costs associated with the goods that were finished during the period

is sales commisionns variable or fixed?

variable


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