Managerial Accounting chapter 2

Manufacturing costs include - administrative costs -selling costs - manufacturing overhead -direct materials -direct labor

-manufacturing overhead -direct materials -direct labor

Given the following info, calculate total prime cost Direct materials - $58,000 Direct labor - $40,000 Manufacturing overhead- $27,000 Selling expenses- $19,000 Administrative expenses - $50,000

$98,000 (sum of direct materials & labor)

Salaries of factory supervisors and factory maintenance personnel are examples of _____ labor costs - Indirect - administrative - direct

- Indirect

Product costs: - are also called inventoriable cost - "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 - include all costs involved in making and selling a product

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

A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of -manufacturing overhead -indirect materials -direct materials -administrative costs

-manufacturing overhead -indirect materials

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

Direct labor

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

Nonmanufacturing

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

Opportunity cost

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

Variable

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

direct labor

When preparing a scattergraph, the activity X is plotted on the ______ (horizontal or veretical) axis. Activity is the ______( dependent or independent) variable because it causes variations in the cost.

horizontal, independent

A fixed cost remains fixed ______ within the relevant range of activity. Per unit in total

in total

The revenue obtained from selling one additional unit of product is called ___________ revenue.

marginal

True or false: A particular cost may be direct or indirect depending on the cost object.

true

Indirect labor costs include - assembly line supervisor salary - administrative assistant salary - factory security guard wages - assembly-line worker wages

- assembly line supervisor salary - factory security guard wages

The difference in costs between two alternatives is called a(n) __________ cost. - sunk - common - differential - opportunity

- differential

Variable costs vary ______ within the relevant range of activity. - in total - per unit

- in total

Within the relevant range, fixed costs - should not be expressed on a per unit basis when making decisions - remain constant in total regardless of changes in activity - per unit become progressively larger as the level of activity increases - generally include rent and supervisor salaries

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

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

- sunk costs

Differential cost is - the difference in cost between two alternatives - also known as incremental cost - never relevant to a product decision - the same as opportunity cost

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

Which of the following statements is true? - within the relevant range of activity, fixed costs remain constant in total - with the relevant range of activity total variable costs do not change - the relevant range of activity is approximated by a straight line

- the relevant range of activity is approximated by a straight line

When using the high low method, the change in cost divided by the change in units equals - the variable cost per unit - total cost - total fixed cost - the fixed cost per unit - total variable cost

- the variable cost per unit

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

Direct material

When activity level changes, a(n) ___________________ cost changes in direct proportion to the changes.

variable

When using the high-low method, the slope of the line equals the ______ cost per unit of activity.

variable

Cost objects include: - customers - anything for which cost data is desired - organization subunits - anything for which revenue data is desired

- customers - anything for which cost data is desired - organization subunits

Which of the following are most likely fixed costs? - administrative salaries - electricity to operate factory machines - factory rent - factory insurance

- factory rent - factory insurance - administrative salaries

Cost objects: - can be products, customers, or jobs - are assigned only direct costs - may be assigned costs to help control spending

- may be assigned costs to help control spending - can be products, customers, or jobs

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

- product

Contribution margin is - all revenues minus all costs - sales revenue minus fixed costs - sales revenue minus fixed costs - sales revenue minus variable costs

- sales revenue minus variable costs

Cost behavior - categorizes costs as fixed, mixed, and variable - refers to how a cost will change as activity level changes - is a detailed analysis technique used to determine whether costs are fixed or variable - 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

The engineering cost approach - cannot be used when no past experience is available concerning activities and costs - is based on an engineer's evaluation of the production methods - classifies accounts as variable or fixed based on prior knowledge of how the cost behaves - includes an analysis of what cost behavior should be

- is based on an engineer's evaluation of the production methods - includes an analysis of what cost behavior should be

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

- manufacturing overhead