Smart Book 2.0- Ch 01 (pre-work)
A company purchased a 12 month insurance policy on October 1 for $1,200. On DECEMBER 31 annual financial statements
$300 is reported as a expense and $900 is reported as an asset
Which of the following statements are true: A. Sales commissions are period costs. B. The wages of assembly-line workers are period costs C. Period costs are expensed in the same period in which they are incurred D. Period costs are included as part of the cost of goods
A & C
Which of the following are most likely fixed costs?
Administrative salaries, factory rent, factory insurance
Discretionary fixed costs include
Advertising, management training programs
How individual costs react to changes in activity level is referred to as cost_______
Behavior
Fixed costs that cannot easily be changed and often lock a company into a multi year decision are called __________fixed costs
Committed
Fantastic Furniture makes custom order couches. The material used to make couch is a(n) _________ cost of the customer placing the order.
Direct
Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are ________ materials
Direct
in an automobile manufacturing plant, the assembly-line workers are classified as ______ _______ cost
Direct Labor
Labor cost that can be easily and conveniently traced to specific products are _________costs
Direct labor
A laptop computer manufacturer would consider the computer's processor chip to be a(n)__________cost
Direct material
Fixed costs that usually arise from annual spending decisions by management are called___________ fixed costs
Discretionary
True or false: All of a company's depreciation, property taxes and insurance premiums are considered manufacturing overhead
False
True or false: Labor costs that can be specifically traced to a product are indirect labor costs
False
As the level of activity moves outside of the relevant range, ________ costs increases or decreases in discrete steps rather than an linear fashion
Fixed
Within the relevant range of activity, _________ costs remain constant in total
Fixed
Variable costs vary__________ within the relevant range of activity
In total
Product costs are also called______ costs
Inventoriable
Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as
Manufacturing overhead
Manufacturing costs can be divided into three categories: Direct___________, ____________ labor and manufacturing _____________.
Materials, direct, overhead
Cost behavior
Refers to how a cost will change as activity level changes categories costs as fixed, mixed and variable
selling costs include______
Sales salaries, advertising, sales commissions
committed fixed costs include
Top management salaries, real estate taxes
Cost of goods sold for merchandising company, direct materials and commissions are all examples of ___________ costs
Variable
Products costs
also called inventoriable costs, "attach" to units of product as they are purchased for resale or produced
Cost objects include...
anything for which cost data is desired, organizational subunits, customers
How individual costs react to change in activity levels is referred to as cost ____________
behavior
Nonmanufacturing costs include:
company president's salary, sales commissions
Any item for which cost data is desired is called a(n)
cost object
Within the relevant range of activity
costs and activity can be approximate by a straight line fixed costs remains constant in total
Cost that can be easily and conveniently traced to a specific product are called ________ cost
direct
Prime costs include....
direct materials and direct labor
selling and administrative costs are _____ costs
direct or indirect
Fixed costs that can be cut-back or eliminated without significant damage to a company's long-term goals are ____________ fixed cost and ________________ fixed costs can not be easily changed or eliminated
discretionary, commited
Indirect labor costs include:
factory security guard wages, assembly-line supervisor salary
Within the relevant range of activity, _________ costs remain constant in total
fixed
Salaries of factory supervisors and factory maintenance personnel are examples of_____ labor costs
indirect
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
Manufacturing costs include......
manufacturing overhead, direct materials, direct labor
A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of______
manufacturing overhead, indirect materials
The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is recognized is known as the _________ principle
matching
The components of prime costs are direct _______ costs and direct ________costs
materials, labor
A cost that contains both variable and fixed cost elements is a(n) __________ cost
mixed
Indirect materials include:
nails, glue, thread
Inventoriable costs is another term for _______ costs
product
The assumption that cost behavior is strictly linear is reasonably valid within the __________, _________ of activity
relevant range
Nonmanufacturing costs include_______
sales commission
Selling costs include:
sales salaries, advertising, sales commissions
True or false: The finished product of one company can become raw materials for another company
true
As the level of activity moves outside of the relevant range, fixed costs, ___________
Increase or decrease in discrete steps
Period costs are always expensed on the income statement in the period in which
Incurred
Salaries of factory supervisors and factory maintenance personnel are examples of _____ labor costs
Indirect
True or false: Labor costs that can be specifically traced to a product are indirect labor costs
false
The materials that go into the final product are called ________materials
raw
Within the relevant range, a cost that changes in direct proportion to changes in the activity level is a _________ cost
variable
