Managerial Accounting Chapter 1

Administrative costs include

- Executive compensation and public relations costs

In the equation Y=A + BX, B denotes the

- Variable cost per unit of activity - slope of the line

prime costs are

- direct labor - direct materials

Costs that are shared by multiple cost objects in a company are known as

Common costs

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

Differential

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

Direct (raw)

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

Direct Labor

Manufacture costs include

Direct Materials, direct labor, manufacturing overhead

Total variable manufactering costs for the month of july was

Direct materials + direct labor + variable manufacturing overhead

Manufacturing costs can be divided into three catagories: Direct ____, _________ labor and manufufacting _________

Direct materials, direct labor, and manufactering overhead

Which of the following are most likely fixed costs?

Factory insurance, factory rent, admin salaries

True or false: removing expenses that do not differ between alternatives could alter a decision

False

A fixed cost remains fixed ____ within the relevant range of activity

In total

Variable costs vary __within the relvent range of activity

In total

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

Indirect Materials

Which of the following is not a cost classification associated with decision making?

Indirect costs

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

Manufactering overhead

A cost that contains both variable and fixed cost elements is an ________ cost

Mixed cost

A potential benifit that is forfeited or lost when one decision is chosen over another is

Opportunity cost

Costs that have already been incurred and can not be changed by decisions made in the current period or in future periods are called ___ costs

Sunk Costs

Marginal cost is

The cost incurred to produce one more unit of production

Differential cost is

The difference in cost between two alternatives, also known as incremental cost

Period costs are also expensed on the income statement in the period in which

They are incurred

A cost may be direct or indirect depending on the cost object

True

Units that are partially complete are found in

Work in process

Fixed costs that cannot easily by changed and often lock a company into a multi-year decision are ______ fixed costs

commited fixed cost

Sales revenue minus variable expenses equals _____ _______

contribution margin

Direct labor and overhead costs incurred to change raw materials into finished products are known as ______ costs

conversion

The relative proportion of each type of cost in an organzaion is known as the comany's

cost structure

Total conversion costs for the month of

direct labor + manufacturing overhead

Total prime cost for the month of september

direct materials + direct labor

Total prime costs for the month

direct materials + direct labor

total product cost for the month

direct materials + direct labor + manu overhead

Prior to being recorded on the income statement, manufavturers' product cost flow through:

direct materials, direct labor, and manu overhead AKA - Raw materials - work in process - finished goods

Fixed costs that can be cut back or elmated without significant damage to a company's long term goals are _____ fixed costs and _______ fixed costs can not e easily changed or eliminted

discretionary, commited

The contribution approach to contructing income statments distinguishes between ______ costs

fixed and variable

Total fixed cost for the month of september was

fixed manufacturing overhead +fixed selling expense + fixed admin expense

As the level of activity moves outside of the relevant range, fixed costs

increase or decrease in discrete steps

Differential costs are also know as

incremental costs

Manufactering overhead costs include _____

indirect materials, factory supervisors salaries, and factory depreciation

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

matching

There are two broad classifications of costs: manufacturing costs and ______ costs

non manufacturing

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

product

The materials that go into the final product are called ________ materials

raw materials

The level of activity within which variable and fixed cost assumptions are valid is known as

relavant range

Variable costs ______

remain constant per unit and vary in total

Total period cost the month of July was

selling expense + admin expense

In the equation Y=A+BX, Y is the

total mixed cost

The contribution approach to constructing income statements

- aids in decision making - distinguishes between fixed and variable costs

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 - tradional income statmenets focus on cost classifications. Contribution format statements focus on cost behavior

Other names for manufacturing overhead include

- factory burden - indirect manu costs - factory overhead

Common activity bases include

- machine hours - direct labor hours - units sold

cost behavior:

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

Within the relevant range, fixed costs

- remain constant in total regardless of changes in activity - generally include rent and supervisor salaries - should not be expressed on a par unit bases when making decisions

In the equation Y = A + BX, B denotates

- variable cost per unit of activity - slope of the line

Which of the following statements are true

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

The following information is for the S&P enterprises for the month of september. Total production cost for the month of september was $

195000

Within the relevent range of activity, variable costs ____

= remain constant per unit = vary in total

Which of the following statements are true?

A direct cost can be easily and conveniently traced to a specific cost object

Which of the following statements is true?

A mixed cost has a min cost of having a service available and ready for use

Which of the following statements is true?

A regional sales manager salary would be a direct cost of the regional office in which the sales manager works.

Within the relavent range, _____ cost remains constant on a per unit basis

Variable

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

Variable Cost

Which of the following statements are true

When mixed costs are represented by a straight line, the steeper the slope, the higher the variable cost per unit

Calculate the differential net income or loss from the proposal

a differential cost analysis considers the change in revenues (subtract present and proposed revenue) and subtracts the change in both variable and fixed costs (subtract both present and proposed costs for both variable and fixed costs)