Managerial Accounting Chapter 1 Learnsmart: Managerial Accounting and Cost Concepts

True or False: Labor costs that can be specifically traced to a product are indirect labor costs.

False

True or False: A cost may be direct or indirect, depending on the cost object.

True

True or False: The finished product to one company can become raw materials for another company.

True

Selling costs include:

advertising sales salaries sales commissions

Product costs:

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

Opportunity cost:

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

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

common

Which of the following are different 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 and traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior

Sales revenue minus variable expenses equals ____ _____ .

contribution margin

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

conversion

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

Cost that can be easily and conveniently traced to a specific product are called ____ costs.

direct

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 and indirect

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

direct labor

Prime Costs:

direct labor and direct materials

Common activity bases include:

direct labor hours machine hours units sold

A laptop computer manufacturer would consider the computers processor chip to be a(n) ____ cost.

direct material

Selling and administrative costs are ____ costs.

direct or indirect

Administrative costs include:

executive compensation and public relations costs

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

fixed

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

indirect

Other names for manufacturing overhead include:

indirect manufacturing costs factory burden factory overhead

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

Product costs are also called ____ costs.

inventoriable

Discretionary fixed costs include:

management training programs and advertising

Discretionary fixed costs include:

management training programs and advertising

Direct materials and direct labor are both ____ costs.

manufacturing

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

manufacturing overhead

The revenue from selling one additional unit is called ___ revenue.

marginal

The components of prime costs are direct ______ costs and direct ______ costs.

materials and labor

A potential benefit the tis forfeited or lost when one decision is chosen over another is called a(n) ______ .

opportunity cost

The materials that go into the final product are called ____ materials.

raw

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

relavent range

Differential cost is:

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

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

they are incurred

Committed fixed costs include:

top management salaries and real estate taxes

Within the relevant range, ____ costs remain constant on a per unit basis.

variable

Units that are partially complete are found in:

work in process

Variable costs vary ____ within the relevant range of activity.

in total

Non-manufacturing costs include:

sales commissions and company president's salary

A contribution approach income statement:

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

In the equation Y= a + bX, b denotes the:

slope of the line and variable cost per unit of activity

What type of cost is never relevant and should be disregarded when making decisions?

sunk

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

variable

Mixed costs are also commonly known as semi-_________ costs.

variable

Cost objects include:

organizational subunits customers anything for which cost data is desired