Managerial Accounting Chapter 1

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

$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 -$50,000 -$190,000 -$80,000

$80,000 (Gross Margin of $140,000 - Total Selling & Admin. Exp. of $60,000)

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

Administrative salaries Factory insurance Factory rent

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

Indirect costs

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

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

Select all that apply. Which of the following statements are true? -Sales commissions are period costs. -Period costs are included as part of the cost of goods. -Period costs are expensed in the same period in which they are incurred. -The wages of assembly-line workers are period costs.

Sales commissions are period costs. Period costs are expensed in the same period in which they are incurred.

Within the relevant range, which type of cost changes in total, in direct proportion to changes in activity level? -Opportunity -Fixed -Differential -Variable

Variable

Within the relevant range, which type of cost changes in total, in direct proportion to changes in activity level? -Variable -Opportunity -Fixed -Differential

Variable

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

behavior

Select all that apply. Cost behavior ______. -categorizes costs as fixed, mixed and variable -is a detailed analysis technique used to determine whether costs are fixed or 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

Sales revenue minus variable expenses equals ___ ___

contribution margin

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

cost object

A change in revenues between two alternatives is known as ___ revenue or incremental revenue.

differential

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

fixed

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

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

manufacturing

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

manufacturing overhead

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

mixed

Select all that apply. Nonmanufacturing costs include ______. -sales commissions -assembly-line worker wages -insurance on plant equipment -company president's salary

sales commissions company president's salary

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

sales revenue minus variable costs

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

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

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

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

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

variable

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. -The traditional income statement is for internal use, while the contribution format income statement is for external use. -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. Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier.

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

advertising sales salaries sales commissions

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

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

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

anything for which cost data is desired customers organizational subunits

Select all that apply. Product costs ______. -are also called inventoriable costs -include all costs involved in making and selling a product "attach" to units of product as they are purchased for resale or produced -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. Opportunity costs ______. -are benefits that are given up when selecting one alternative over another -are uncommon in decision making -are part of traditional accounting records -should be considered in decision making

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

Select all that apply. Nonmanufacturing costs include ______. -assembly-line worker wages -company president's salary -insurance on plant equipment -sales commissions

company president's salary sales commissions

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

decision making

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

direct

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

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. -selling -direct labor -indirect labor -manufacturing overhead

direct labor

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

direct material

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.

direct, indirect

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

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

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

income statement

Differential costs are also known as ___ costs.

incremental

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

incremental revenue

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

manufacturing overhead

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

manufacturing overhead

Factory materials, such as cleaning supplies, that are not components of finished products are classified as ______. -period costs -administrative costs -manufacturing overhead -direct materials

manufacturing overhead

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

manufacturing overhead

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

matching

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.

matching

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

mixed

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

opportunity cost

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

opportunity cost

Direct materials, direct labor, and manufacturing overhead are all ______ costs. -direct -variable -product -conversion -period

product

Direct materials, direct labor, and manufacturing overhead are all ______ costs. -period -conversion -direct -product -variable

product

Inventoriable costs is another term for ___ 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

The assumption that cost behavior is strictly linear is reasonably valid within the of ___ ___activity

relevant range