acc 102 - week 1

Product costs ______.

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

opportunity costs

This is the potential benefit given up by choosing one alternative over another.

Units that are partially complete are found in ______.

Work in Process

Sunk costs

are costs that have already been incurred.

Touch labor is another name for _____ labor.

direct

Inventoriable costs is another term _____ for costs.

product or manufacturing

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

they are incurred

Because managers need cost data organized by cost behavior to aid in planning, controlling, and decision making, the ______ format income statement is not very useful for internal reporting purposes.

traditional

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

true

Managers use cost classifications for reasons beyond basic decision making.

true

The finished product of one company can become raw materials for another company.

true

A cost that cannot be influenced by the manager being evaluated is a(n) ______ cost.

uncontrollable

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

variable

Which of the following are differences between the traditional and contribution format to income statements? - The traditional income statement is for internal use, while the contribution format income statement is for external use. - Contribution format statements make it easier to predict how decisions affect the future. - Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior.

- Contribution format statements make it easier to predict how decisions affect the future. - Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior.

Which of the following statements are true? - An individual cost is either direct or indirect, regardless of the cost object. - Direct cost can be easily and conveniently traced to specific cost objects. - A sales manager's salary is a direct cost of the sales office in which they work. - A direct cost is sometimes referred to as a common cost. - A factory manager's salary is a direct cost of the manufacturing department.

- Direct cost can be easily and conveniently traced to specific cost objects. - A sales manager's salary is a direct cost of the sales office in which they work. - A factory manager's salary is a direct cost of the manufacturing department.

Which of the following are most likely fixed costs? - Factory rent - Electricity to operate factory machines - Factory insurance - Administrative salaries

- Factory rent - Factory insurance - Administrative salaries

Differential cost is ______.

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

Cost behavior:

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

prime costs include _____.

- direct materials - direct labor

Other names for manufacturing overhead include ______.

- factory burden - factory overhead - indirect manufacturing costs

Indirect labor costs include:

- factory security guard wages - assembly-line supervisor salary

Period costs: - flow through the inventory accounts - include all costs that are not product costs - are expensed in the period incurred - are included as part of the cost of goods _____.

- include all costs that are not product costs - are expensed in the period incurred

Fixed costs that can be cut for short periods of time with minimal damage to the long-run goals of the organization are called Blank______ fixed costs.

- managed - discretionary

Discretionary fixed costs include ______. - management training programs - advertising - factory depreciation - insurance expense

- management training programs - advertising

Manufacturing costs include ______.

- manufacturing overhead - direct labor - direct materials

Cost objects include ______.

- organizational subunits / departments - customers - anything for which cost data is desired

Selling costs include ______. - administrative salaries - sales commissions - advertising - sales salaries

- sales commissions - advertising - sales salaries

Nonmanufacturing costs include Blank______. - insurance on plant equipment - assembly-line worker wages - sales commissions - company president's salary

- sales commissions - company president's salary

Variable costs ______.

- vary in total - remain constant per unit

All of a company's depreciation, property taxes, and insurance premiums are considered manufacturing overhead.

False (only indirect costs associated with operating a factory are included in manufacturing overhead & doesn't include non manufacturing costs)

Differential costs ______.

can be fixed or variable

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

common

Costs that are incurred to support a number of cost objects but cannot be traced to them individually are known as ______ costs.

common

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

conversion

A(n) _____ _____ is anything for which cost data are desired—including products, customers, plants, office locations, and departments

cost object

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

decision making

Manufacturing costs include ______ costs.

direct and indirect

Labor costs 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

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

Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the ______.

income statement

The difference in costs between two alternatives is called a(n) ______ cost.

incremental cost

The difference in revenues between two alternatives is called ______.

incremental revenue

A factory produces a variety of tools. The factory manager's salary is a(n) ______ cost of a particular type of tool.

indirect

Salaries of factory supervisors and factory maintenance personnel are examples of ______ labor costs.

indirect

Manufacturing overhead costs include ______.

indirect materials, factory supervisors' salaries, and factory depreciation

Indirect materials and indirect labor are classified as:

manufacturing overhead

Managers use various names for indirect manufacturing costs. Common terms include _____ _____.

manufacturing overhead or factory burden

The assumption that cost behavior is strictly linear is reasonably valid within the _____ _____ of activity.

relevant range

Contribution margin is ______.

sales revenue minus variable costs