Managerial Accounting Exam 1

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

sunk costs

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

variable costs

an income statement focusing on product and period costs has been prepared using a ______ format, while a(n) _________ format income statement makes a distinction between fixed and variable costs

traditional, contribution

committed fixed costs include

top management salaries real estate taxes

In the equation Y = a + bX, Y is the

Total Mixed Cost

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

in total

Product costs are also called

Inventoriable Costs

Any item for which cost data is desired is called

cost object

Selling costs include: A.) Advertising B.) Sales Salaries C.) Sales commissions D.) Administrative Salaries

A.) Advertising B.) Sales Salaries C.) Sales commissions

Nonmanufacturing costs include: A.) Company president's salary B.) Sales commissions C.) Assembly-line worker wages D.) Insurance on plant equipment

A.) Company president's salary B.) Sales commissions

Which of the following are you true? A.) Period Costs do not flow through the inventory accounts B.) All costs in merchandising company are period costs C.) Inventoriable Costs are expensed in the period in which they are incurred D.) Period costs are expensed when incurred.

A.) Period Costs do not flow through the inventory accounts C.) Inventoriable Costs are expensed in the period in which they are incurred D.) Period costs are expensed when incurred.

Selling Costs include: A.) Sales Commissions B.) Advertising C.) Sales Salaries D.) Administrative Salaries

A.) Sales Commissions B.) Advertising C.) Sales Salaries

Which of the following statements are true?

A.) When mixed costs are represented by a straight-line, the steeper the slope, the higher the variable cost per unit B.) A mixed cost has a minimum cost of having a service available and ready for use

common activity bases include: A.) machine hours B.) scrapped units C.) direct labor hours D.) units sold

A.) machine hours C.) direct labor hours

Within the relevant range of activity, variable costs: A.) vary in total B.) remain constant per unit C.) remain constant in total D.) vary per unit

A.) vary in total B.) remain constant per unit

Prior to being recorded on the income statement, manufacturers' product costs flow through

Finished Goods Work in Process Raw Materials

Non-manufacturing costs include: A.) assembly-worker wages B.) company president's salary C.) insurance on plant equipment D.) sales commissions

B.) company president's salary D.) sales commissions

An activity base A.) is a measure of whatever causes fixed costs to occur B.) is sometimes called a cost driver C.) is part of the organization where major operations and planned and carried out D.) measures whatever causes costs to vary

B.) is sometimes called a cost driver D.) measures whatever causes costs to vary

Discretionary fixed costs include A.) insurance expense B.) management training programs C.) factory depreciation D.) advertising

B.) management training programs D.) advertising

In the equation y = a + bX, b denotes the A.) fixed cost per unit of activity B.) slope of the line C.) variable cost per unit of activity D.) level of activity

B.) slope of the line C.) variable cost per unit of activity

Differential cost is: A.) the same as opportunity cost B.) the difference in cost between two alternatives C.) never relevant to a product decision D.) also known as incremental cost

B.) the difference in cost between two alternatives D.) also known as incremental cost

Manufacturing costs include A.) administrative costs B.) selling costs C.) manufacturing overhead D.) direct labor E.) direct materials

C.) manufacturing overhead D.) direct labor E.) direct materials

Indirect materials include: A.) factory manager's salary B.) laptop computer keyboards C.) nails, glue, and thread D.) factory rent and insurance

C.) nails, glue, and thread

Materials that can become an important component of the finished product whose costs can easily and conveniently be traced to the finished product

Direct materials

Prime costs are

Direct materials Direct Labor Manufacturing Overhead

Administrative costs include: A.) Factory maintenance workers' wages and factory supervisors' salaries B.) Executive compensation and public relations costs C.) Shipping Costs and Sales commissions D.) Sales commissions and factory supervisors' salaries

Executive compensation and public relations costs

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

False

Sales of factory supervisors and factory maintenance personnel are examples of _____ labor costs

Indirect

A manufacturing cost than cannot be easily traced to a specific cost object

Indirect Cost

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

Indirect Materials

Factory materials, such as cleaning supplies, that are not components of finished products are classified as

Manufacturing Overhead

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

Sunk Cost

Direct Labor is also called

Touch Labor

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

True

the relative proportion of each type of cost in an organization is known as the company's

base structure

step-variable costs

can be adjusted as conditions change may include total salaried employee expense

a type of indirect cost incurred to benefit more than one cost object is a(n)

common cost

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.

Sales revenue minus variable expenses equals

contribution margin

How individual costs react to changes in activity levels is referred to as

cost behavior

the difference in costs between two alternatives is called a(n) _____ cost

differential

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

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

Selling and administrative costs are ______ costs

direct or indirect

Fixed costs that usually arise from annual spending decisions by management are

discretionary fixed costs

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

fixed

The contribution approach to constructing income statements distinguishes between

fixes and variable costs

within the relevant range, fixed costs

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

variable costs vary _____ within the relevant range of activity

in total

differential costs are also known as

incremental costs

Other names for manufacturing overhead include

indirect manufacturing costs factory overhead factory burden

Manufacturing overhead costs include

indirect materials, factory supervisors' salaries, and factory depreciation

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

labor, materials

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

marginal costs

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

marginal revenue

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

matching principle

manufacturing costs can be divided into three categories: direct _____, ______ labor and manufacturing ______.

materials, direct, overhead

a cost that contains both variable and fixed cost elements is a(n) ________ cost

mixed

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

opportunity cost

Cost object include

organizational subunits, anything for which cost data is desired

The materials that go into the final product are called

raw materials

cost assumptions are reasonably valid within the _________ of activity

relevant range

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

they are incurred