Managerial

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discretionary fixed cost

a cost that can be changed in the short-run without specifically affecting organizational operations

direct cost

a cost that can be economically traced to a specific cost object

indirect cost

a cost that can't be economically traced to a specific cost object

sunk cost

a cost that has already been incurred and cannot be changed no matter what action is taken

variable cost

a cost that varies, in total, in direct proportion to changes in the level of activity. A variable cost is constant on a per unit basis.

under the variable-costing concept, unit product cost would most likely be increased by

a decrease in remaining useful life of factory machinery depreciated on the units-of-production method

internal control is defined as

a process, effected by an entity's board of directors, management and other personnel designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting and compliance

cost driver

a variable such as volume of activity that causes a particular cost to change over a given period of time

what factor related to manufacturing costs causes the difference between operating income computed using absorption costing and operating income computed using variable costing?

absorption costing "inventories" all fixed manufacturing costs

indirect costs are always

allocated

manufacturing overhead is under allocated if the amount

allocated during the period is less than the actual amount incurred

cost object

anything for which a manager wants a separate measurement of cost

a direct cost of one cost object

can be an indirect cost of another cost object

if each motorcycle requires a belt that costs $20 and 2,000 motorcycles are produced for the month, the total cost for belts is

considered to be a direct variable cost

the general term used to identify both the tracing and the allocation of accumulated costs to a cost object is

cost assignment

the determination of a cost as either direct or indirect depends on the

cost object chosen

if manufacturing overhead has been over allocated during the period, and most of the jobs produced have been sold, then

cost of goods sold on the income statement should be decreased

administrative cost

costs associated with the general management of the organization as opposed to manufacturing or selling

product cost

costs incurred in the acquisition or manufacture of a product

selling cost

costs incurred to secure customer orders and get the product or service to the customer

period cost

costs recorded on the income statement as expenses in the period in which they are incurred

variable costs

costs that change in total in direct proportion to changes in volume within the relevant range. Variable costs are constant on a per unit basis within the relevant range.

which element of the value chain would a technical support hotline for customers be considered

customer service

total variable costs will

decrease as production decreases within the relevant range

conversion costs include

direct labor and overhead

conversion cost

direct labor plus manufacturing overhead

prime cost

direct material plus direct labor

prime costs include

direct materials and direct labor

a manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of a indirect cost for the soccer equipment line is the

direct salary paid to the plant manager

how do you calculate predetermined manufacturing overhead rate used to allocate manufacturing overhead costs?

divide the total estimated manufacturing overhead costs by the total estimated amount of the allocation base

cost of goods manufactured equals

ending finished goods inventory plus unadjusted cost of goods sold minus beginning finished goods inventory

if the production volume decreases

fixed costs per unit increase

fixed costs

fixed costs stay constant in total within the relevant range. Fixed costs change on a per unit basis within the relevant range.

finished goods inventory would normally include

goods fully completed but not yet sold

work in process inventory would normally include

goods partially worked on but not yet fully completed

cost behavior refers to

how costs react to a change in the level of activity

cost behavior

how costs react to changes in the level of activity

indirect manufacturing costs may

include both variable and fixed costs

within the relevant range, fixed costs per unit will

increase as production decreases

within relevant range, variable costs

increase in total when activity levels increase

due to a cost-benefit tradeoff, some costs that could be traced to cost objects may be treated as

indirect costs

if Toyota corollas are the cost object, what are each of the costs including property taxes for the manufacturing plant, engines for the cars and janitors wages for the factory classified as direct or indirect

indirect, direct and indirect

committed fixed cost

investments that cannot be significantly reduced even for short periods of time without having a significant impact on organizational operations

costs remain the same amount alternatives are

irrelevant costs

for a manufacturing company, direct labor costs may be included in

only in work in process inventory, finished goods inventory and cost of goods sold

for a manufacturing company, indirect manufacturing costs may be included in

only raw materials inventory, work-in-process inventory, finished goods inventory and cost of goods sold

last month, when 10,000 units of a product were manufactured, the cost per unit was $60. At this level of activity, variable costs are 50% of total unit costs. If 10,500 units are manufactured next month and production activity is still within the relevant rang then

per unit total cost will decease

for a manufacturing company, direct material costs may be included in

raw materials inventory, work in process inventory and finished goods inventory

within the relevant range, a variable cost

remains constant on a per unit basis as the number of units produced increases

depreciation on a factory would be classified as

research and development

when making a decision to buy a new computer you should not consider

sunk costs

activity base

the activity that causes the incurrence of a variable cost

cost tracing is

the assignment of direct costs to the chosen cost object

cost allocation is

the assignment of indirect costs to the chosen cost object

marginal cost

the cost of producing the next unit

inventorial costs are expensed on the income statement when

the products are sold

relevant range

the range of activity over which total fixed costs and variable cost per unit remains constant

relevant range

the range of activity over which total fixed costs and variable costs per unit remain constant

cost structure

the relative proportion of variable, mixed and fixed costs in an organization

total manufacturing costs equal

the sum of direct materials and conversion costs

the use of departmental overhead rates generally result in

the use of a separate cost allocation base for each department in the factory

how do fixed costs per unit behave?

they increase as production decreases

how do variable costs per unit behave?

they remain the same throughout production levels within the relevant range

2 SEC rule 10b-5 provides, among other things, that it shall be unlawful for any person, directly or indirectly

to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances in which they are made, not misleading

the most critical element in internal control is

tone at the top

the ending balance work in process equals

total manufacturing costs to account for minus cost of goods manufactured

if the volume of sales increases for a company that has both fixed and variable costs

total variable costs increase

indirect costs can't be

traced to a particular cost object in an economically feasible way

unit contribution margin

unit sales price minus unit variable costs

classifying a cost as either direct or indirect depends upon

whether the cost can be economically traced to the cost object

what will happen to the contribution margin if fixed costs related to a product increase while variable costs and sales price remain constant?

will not change


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