Managerial Accounting Questions Chapter 1

Manufacturing Costs can be divided into three categories

-Direct Materials -Direct Labor -Manufacturing Overhead

What are the two things cost behaviors do?

-Refers to how a cost will change as activity changes -Categorizes costs as fixed, mixed, and variable

Within the relevant range of activity

-costs and activity can approximated by a straight line -Fixed costs remain constant in total

cost objects include

-customers organizational subunits anything for which cost data is desired

cost behavior

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

committed fixed costs include

Real estate taxes Top management salaries

The contribution margin equation

Sales - Variable Costs

Marginal cost

The cost incurred to produce one more unit of a product

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

Total Mixed Cost

True or false: The finished product of one company can become raw materials for another company

True

Common costs pertain to costs that:

are not directly traceable to a cost object

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

behavior

Differential costs

can be fixed or variable

Sales Revenue -Variable expenses

contribution margin

Differential costs, opportunity costs and sunk costs are all cost classifications used in ______.

decision making

A change in revenue between two alternatives is known as

differential revenue

Fixed costs that usually arise from annual decisions by management are called [blank ]fixed costs

discretionary or managed

As the level of activity moves outside of the relevant range, blank costs increase or decrease in discrete steps rather than an linear fashion

fixed

An income statement focusing on product and period costs has been prepared using a GAAP format, while a contribution format income statement makes a distinction between blank cost

fixed and variable costs

Because the variable cost per unit equals the slope of the straight line, the steeper the slope, the ______ the variable cost per unit.

higher

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

in total

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

increase or decrease in discrete steps

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

marginal

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

matching principle

A cost than contains both variable and fixed costs elements is called a(n) Blank 1 cost

mixed cost

Nonmanufacturing costs include

sales commission and company president's salary

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

sunk

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

sunk

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

they are incurred

Direct Labor is also called

touch labor

Within the relevant range, (Blank) costs remain constant on a per unit basis

variable

The contribution approach to constructing income statements distinguishes between ______ costs.

variable and fixed costs

what are inventoriable costs

Are product costs that attach to the product and are expense when the product is sold

Fixed costs that cannot easily be changed and often lock a company into a multi-yeaar decision are called

Committed

Beginning merchandise inventory+purchases-Ending Merchandise inventory

Cost of goods sold

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

Direct

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

False

Costs that can be easily and conveniently traced to a specific product are called

Direct Cost

Fixed costs that can be cut-back or eliminated without significant damage to a company's long-term goals are Blank 1 fixed cost and Blank 2 fixed costs can not be easily changed or eliminated

Discretionary Committed

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

False

A manufacturing cost that cannot be easily traced to a specific cost object is a

Indirect Cost

Prime Costs Equation

Prime Cost= Direct Materials + Direct Labor

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

Product