Managerial ACC ch 1

A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements, ______.

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

Which of the following are differences between the traditional and contribution format to income statements?

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

T/F - All of a company's depreciation, property taxes and insurance premiums are considered manufacturing overhead.

False

T/F - the finished product of one company can become raw materials for another company

True (raw materials are anything that go into a finished product)

Which of the following are most likely fixed costs?

administrative salaries, factory rent, factory insurance

Product costs ____.

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

Period costs _____

are expensed when incurred and do not flow through the inventory accounts

Indirect labor costs include ______.

assembly-line supervisor salary and factory security guard wages

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

behavior

Cost behavior ___.

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

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

committed

Sales revenue minus variable expenses equals ____ ____

contribution margin

any item for which cost data are desired

cost object

Differential costs, opportunity costs and sunk costs are all cost classifications used in ______.

decision making

The difference in revenues between two alternatives is called ______.

differential revenue

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

direct

can be easily and conveniently traced to a specific product

direct costs

In an automobile manufacturing plant, the assembly-line workers are classified as ____ ____ cost.

direct labor

Labor costs that can be easily and conveniently traced to specific products are ______ costs.

direct labor

Selling and administrative costs are ______ costs.

direct or indirect

Administrative costs include ______.

executive compensation and public relations costs

Within the relevant range of activity ______.

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

A fixed cost remains fixed ______ within the relevant range of activity.

in total

CANNOT be easily or conveniently traced to a specific cost object

indirect costs

Which of the following is not a COST CLASSIFICATION associated with decision making?

indirect costs

Minor items such as nails and glue are usually considered to be ______.

indirect materials

Manufacturing overhead costs include ______

indirect materials, factory supervisors' salaries, and factory depreciation

Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as ______.

manufacturing overhead

A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of ______.

manufacturing overhead and indirect materials

manufacturing costs include ____

manufacturing overhead, direct materials, direct labor

The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is known as the ____ principle.

matching

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

mixed

Indirect materials include ______.

nails, glue, and thread (Relatively insignificant materials are treated as indirect because it isn't worth the effort to trace the costs.)

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

opportunity cost

cost objects include ____

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

Direct materials, direct labor, and manufacturing overhead are all ______ costs.

product

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.

product; period

materials that go into the final product

raw materials

Committed fixed costs include ______.

real estate taxes and top management salaries

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

relevant range

Contribution margin is ______.

sales revenue minus variable costs

Period costs are always expensed on the income statement in the period in which ______.

they are incurred

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.

traditional; contribution

A cost that changes in direct proportion to changes in the activity level is a ______ cost.

variable

prime costs include ___

direct labor and direct materials

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

direct material

Within the relevant range of activity, ______ costs remain constant in total.

fixed

Differential cost is ______.

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

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

direct