learnsmart chapter 1

in the equation y = a + bx, b denotes the: (choose all that apply) a. variable cost per unit of activity b. fixed cost per unit of activity c. slope of the line d. level of activity

a. variable cost per unit of activity c. slope of the line

which of the following is not a cost classification associated with decision making? a. sunk costs b. indirect costs c. differential costs d. opportunity costs

b. indirect costs

manufacturing costs include: (choose all that apply) a. administrative costs b. manufacturing overhead c. selling costs d. direct materials e. direct labor

b. manufacturing overhead d. direct materials e. direct labor

direct labor and overhead costs incurred to change raw materials into finished products are known as _____ costs a. prime b. opportunity c. conversion d. period

c. conversion

an activity base: (choose all that apply) a. is a measure of whatever causes fixed costs to occur b. is part of the organization where major operations are planned and carried out c. measures whatever causes costs to vary d. is sometimes called a cost driver

c. measures whatever causes costs to vary d. is sometimes called a cost driver

fixed costs that cannot easily be changed and often lock a company into a multi-year decision are _____ fixed costs

committed

indirect materials include: (choose all that apply) a. factory rent and insurance b. factory manager's salary c. laptop computer keyboards d. nails, glue, and thread

d. nails, glue, and thread

variable costs: a. remain constant in total and vary per unit b. vary both in total and per unit c. remain constant both in total and per unit d. remain constant per unit and vary in total

d. remain constant per unit and vary in total

marginal cost is: a. what is given up by selecting one alternative over another b. the cost that can be traced to a specific product c. another name for the fixed cost per unit d. the cost incurred to produce one more unit of a product

d. the cost incurred to produce one more unit of a product

when using the high low method, the change in cost divided by the change in units equals a. the fixed cost per unit b. total cost c. total variable cost d. the variable cost per unit e. total fixed cost

d. the variable cost per unit

a change in revenues between two alternatives is known as _____ revenue or incremental revenue

differential

product costs flow through the inventory accounts until the goods are sold, at which time they become an expense in the cost of goods sold section on the _____ _____

income statement

differential costs are also known as _____ costs

incremental

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

indirect

salaries of factory supervisors and factory maintenance personnel are examples of _____ labor costs.

indirect

product costs are also called _____ costs

inventoriable

there are two broad classifications of costs: _____ costs and non manufacturing costs

manufacturing

manufacturing costs can be divided into three categories: direct _____, _____ labor, and manufacturing _____

materials; direct; overhead

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

opportunity cost

the level of activity within which variable and fixed cost assumptions are valid is known as the _____ _____.

relevant range

within the _____ _____ of activity, cost assumptions are reasonably valid

relevant range

mixed costs are also commonly known as semi-_____ costs

variable

discretionary fixed costs include: (choose all that apply) a. advertising b. insurance expense c. factory depreciation d. management training programs

a. advertising d. management training programs

which of the following statements are true? (choose all that apply) a. advertising and sales commissions are period costs b. direct labor and indirect labor are product costs c. factory cleaning and maintenance are period costs d. sales commissions and shipping costs are product costs

a. advertising and sales commissions are period costs b. direct labor and indirect labor are product costs

a contribution format income statement: (choose all that apply) a. can assist with management decision making b. reports both gross margin and net income c. is prepared primarily for external reporting purposes d. separates costs into their fixed and variable components

a. can assist with management decision making d. separates costs into their fixed and variable components

the difference in costs between two alternatives is called a(n) _____ cost a. differential b. common c. opportunity d. sunk

a. differential

what type of cost is never relevant and should be disregarded when making decisions? a. opportunity b. marginal c. sunk d. incremental

c. sunk

the revenue obtained from selling one additional unit of product is called _____ revenue

marginal

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

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

prime costs are: (choose all that apply) a. direct labor b. direct materials c. selling and administrative expenses d. manufacturing overhead

a. direct labor b. direct material

variable costs vary _____ within the relevant range of activity a. in total b. per unit

a. in total

common activity bases include: (choose all that apply) a. machine hours b. scrapped units c. units sold d. direct labor hours

a. machine hours c. units sold d. direct labor hours

factory materials, such as cleaning supplies, that are not components of finished products are classified as a. manufacturing overhead b. direct materials c. administrative costs d. period costs

a. manufacturing overhead

indirect labor costs include: (choose all that apply) a. administrative assistant salary b. factory security guard wages c. assembly-line worker wages d. assembly-line supervisor salary

b. factory security guard wages d. assembly-line supervisor salary

a fixed cost remains fixed _____ within the relevant range of activity a. per unit b. in total

b. in total

which of the following statements are true? (choose all that apply) a. inventorial costs are expensed in the period in which they are incurred b. period costs are also called inventorial costs c. period costs are expensed when incurred d. all costs in a merchandising company are period costs

b. product costs are also called inventorial costs c. period costs are expensed when incurred

in the equation y = a + bx, b denotes the: (choose all that apply) a. fixed cost per unit of activity b. slope of the line c. variable cost per unit of activity d. level of activity

b. slope of the line c. variable cost per unit of activity

non manufacturing costs include: (choose all that apply) a. assembly-line worker wages b. insurance on plant equipment c. sales commissions d. company president's salary

c. sales commissions d. company president's salary

labor costs that can be easily and conveniently traced to specific products are _____ costs.

direct labor

a laptop computer manufacturer would consider the computer's processor chip to be a(n) _____ cost.

direct material

high-low or least squares regression analysis should only be done if a(n) _____ plot depicts linear cost behavior

scatter

an income statement focusing on product and period costs has been prepared using a _____ traditional format, while a(n) _____ format income statement makes a distinction between fixed and variable costs

traditional; contribution

mixed costs are also commonly known as semi-_____ costs.

variable

when using the high-low method, the slope of the line equals the _____ cost per unit of activity

variable

within the relevant range, _____ costs remain constant on a per unit basis

variable

which type of cost changes in total, in direct proportion to changes in activity level?

variable cost

the engineering cost approach: (choose all that apply) a. is based on an engineer's evaluation of the production methods b. includes an analysis of what cost behavior should be c. cannot be used when no past experience is available concerning activities and costs d. classifies accounts as variable or fixed based on prior knowledge of how the cost behaves

a. is based on an engineer's evaluation of the production methods b. includes an analysis of what cost behavior should be

contribution margin is: a. sales revenue - variable costs b. sales revenue - cost of goods sold c. sales revenue - fixed costs d. all revenues - all costs

a. sales revenue - variable costs

the rise-over-run formula for the slope of a straight line is the basis of: a. the high-low method b. a scattergraph c. least-squares regression

a. the high-low method

sales revenue minus variable expenses equals _____ _____

contribution margin

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

cost object

within the relevant range, fixed costs: (choose all that apply) a. remain constant in total regardless of changes in activity b. generally include rent and supervisor salaries c. per unit become progressively larger as the level of activity increases d. should not be expressed on a per unit basis when making decisions

a. remain constant in total regardless of changes in activity b. generally include rent and supervisor salaries d. should not be expressed on a per unit basis when making decisions

contribution margin is: a. sales revenue minus variable costs b. sales revenue minus fixed costs c. all revenues minus all costs d. sales revenue minus cost of goods sold

a. sales revenue minus variable costs

in the equation y = a + bx, y is the: a. total mixed cost b. level of activity c. total fixed cost d. variable cost per unit of activity

a. total mixed cost

using the high-low method, the fixed cost is calculated: (choose all that apply) a. using either the high or low level of activity b. by adding the total cost to the variable cost c. after the variable cost per unit d. before the variable cost is calculated

a. using either the high or low level of activity c. after the variable cost per unit is calculated

which of the following statements are true? (choose all that apply) a. the equation for a straight-line makes it easy to calculate the total mixed cost for any activity level outside the relevant range b. a mixed cost has a minimum cost of having a service available and ready for use c. the fixed portion of a mixed cost represents the cost incurred for the actual consumption of a service d. when mixed costs are represented by a straight-line, the steeper the slope, the higher the variable cost per unit

b. a mixed cost has a minimum cost of having a service available and ready for use d. when mixed costs are represented by a straight-line, the steeper the slope, the higher the variable cost per unit

step-variable costs: (choose all that apply) a. are generally treated as fixed costs b. can be adjusted quickly as conditions change c. may include total salaried employee expense

b. can be adjusted quickly as conditions change c. may include total salaried employee expense

when using the high-low method, if the high or low levels of cost do not match the high or low levels of activity: a. skip that period and move to the next highest or lowest level where costs and activity match b. choose the periods with the highest and lowest level of activity and their associated costs c. choose the periods with the highest and lowest level of costa and their associated activities

b. choose the periods with the highest and lowest level of activity and their associated costs

cost objects include: (choose all that apply) a. anything for which revenue data is desired b. customers c. organizational subunits d. anything for which cost data is desired

b. customers c. organizations subunits d. anything for which cost data is desired

which statements regarding the high-low method are true? (choose all that apply) a. when applying this method, use the data points with the highest and lowest level of cost b. the high-low method should only be used if a scattergraph plot indicates a linear relationship between cost and a activity c. it only uses two data points d. it is superior to least-squares regression

b. the high-low method should only be used if a scattergraph plot indicates a linear relationship between cost and activity c. it only uses two data points

the high-low method: (choose all that apply) a. is difficult to apply and requires a statistical software package b. uses only two data points c. generally provides an accurate estimate of true cost behavior during normal periods d. is based on periods where the activity tends to be unusual

b. uses only two data points d. is based on periods where the activity tends to be unusual

which of the following statements are true? (choose all that apply) a. an individual cost is either direct or indirect, regardless of the cost object b. a direct cost is sometimes referred to as a common cost c. a regional sales manager's salary would be a direct cost of the regional office in which the sales manager works d. a direct cost can be easily and conveniently traced to a specific cost object

c. a regional sales manager's salary would be a direct cost of the regional office in which the sales manager works d. a direct cost can be easily and conveniently traced to a specific cost object

period costs are always expensed on the income statement in the period in which: a. the cash for the expense changes hands b. the related goods are sold c. they are incurred

c. they are incurred

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

common