ACC 241 - Uses of Accounting Info II - Chapter 2
Which of the following is not an activity in the value chain? A. Design B. Administration C. Customer Service D. Marketing
B. Administration
In the long run, most costs are _____ meaning management is able to influence or change the amount of the cost.
controllable costs
costs that can be influenced or changed by management.
controllable costs
the combination of direct labor and manufacturing overhead costs
conversion costs
anything for which managers want to know the cost
cost object
the cost of manufacturing the goods that were finished during the period
cost of goods manufactured
Which of the six business functions in the value chain does the cost fall under? Costs of a customer support center website
customer service
Which value chain element is associated with: Costs associated with warranties and recalls?
customer service
support provided for customers after the sale
customer service
completed goods that have not yet been sold
finished goods inventory
Fixed or variable costs? Monthly depreciation of equipment used in the customer service department at Klaben Ford Lincoln, a car dealership in Kent, Ohio
fixed
Fixed or variable costs? Monthly insurance costs for the building housing the administrative offices of Panera Bread in St. Louis, Missouri
fixed
Fixed or variable costs? Monthly office lease costs for the Portland office of E&Y, a global audit firm
fixed
Fixed or variable costs? Monthly rent for Onyx Nail Bar, a nail salon in Dallas, Texas
fixed
Fixed or variable costs? . Depreciation of exercise equipment at an LA Fitness club
fixed
Fixed or variable costs? . Property taxes for an Applebees' Neighborhood Grill & Bar
fixed
A product's _____ and _____, not the product's _____ should be used to forecast total costs at different production volumes.
fixed cost; variable cost; average cost
Within the relevant range, _____ do not change in total with changes in production volume.
fixed costs
costs that stay constant in total despite wide changes in volume
fixed costs
all manufacturing costs other than direct materials and direct labor; also called factory overhead and indirect manufacturing cost
manufacturing overhead
A(n) _____ is the cost of making one more unit
marginal cost
the cost of producing one more unit
marginal cost
Which of the six business functions in the value chain does the cost fall under? Cost of a prime-time TV ad featuring Smucker's® Fruit & Honey™ Fruit Spreads
marketing
Which value chain element is associated with: Cost of a 30-second commercial during the SuperBowl™?
marketing
promotion and advertising of products or services
marketing
Forever 21, Target, and Kohl's are all examples of _____.
merchandising companies
a company that resells tangible products previously bought from suppliers
merchandising company
Period costs are often referred to as _____.
operating expenses
earnings generated from the company's primary ongoing operations; the company's earnings before interest and taxes
operating income
Assume a grocery store manager wants to know the cost of running the Produce Department. Thus, the Produce Department is the cost object. Which of the following would be considered direct costs of the Produce Department? 1. Wages of checkout clerks 2. Wages for workers in the Produce Department 3. Depreciation on refrigerated produce display cases 4. Cost of weekly advertisements in local newspaper 5. Cost of bananas, lettuce, and other produce 6. Baggies and twist ties available for shoppers in the Produce Department 7. Monthly lease payment for grocery store retail location 8. Cost of scales hanging in the Produce Department
2, 3, 5, 6, 8
Which of the following is false? A. Sunk costs are generally relevant to decisions. B. Uncontrollable costs are costs over which the company has little or no control in the short run. C. The difference in cost between two alternatives is known as a differential cost. D. Sunk costs are costs that have already been incurred.
A. Sunk costs are generally relevant to decisions.
Which of the following types of companies will always have the Cost of Goods Sold account on their income statements? A. Service and manufacturing companies B. Merchandising and manufacturing companies C. Service and merchandising companies D. Service, merchandising, and manufacturing companies
B. Merchandising and manufacturing companies
Which of the following is true? A. Manufacturing overhead is composed of only variable costs. B. Direct materials are considered to be fixed costs. C. Fixed costs stay constant in total over a wide range of activity levels. D. The average cost per unit can be used for predicting total costs at many different output levels.
C. Fixed costs stay constant in total over a wide range of activity levels.
Which of the following is a calculated amount, rather than a general ledger account? A. Sales revenue B. Finished goods inventory C. Cost of goods sold D. Cost of goods manufactured
D. Cost of goods manufactured
Which of the following is not part of manufacturing overhead? A. Other indirect manufacturing costs, such as plant utilities B. Indirect labor, such as plant forklift operators' wages C. Indirect materials, such as machine lubricants D. Period costs, such as depreciation on office computers
D. Period costs, such as depreciation on office computers
_____ for a company such as Best Buy (consumer electronics) includes all of the costs necessary to purchase products and get them onto the store shelves.
Inventory (merchandise)
_____ report three types of inventory on the balance sheet.
Manufacturing companies
Which of the following costs are treated as product costs by a merchandising company, such as Walmart? Which costs are treated as period costs? 1. Cost of leasing the retail locations 2. Cost of managers' and sales associates' salaries 3. Cost of merchandise purchased for resale 4. Cost of designing and operating the company's website 5. Cost of shipping merchandise to the store 6. Cost of providing free shipping to customers who buy product online 7. Cost of utilities used in running the retail locations 8. Cost of import duties paid on merchandise purchased from overseas suppliers 9. Depreciation on store shelving and shopping carts
Product costs: 3, 5, 8, Period costs: 1, 2, 4, 6, 7, 9
researching and developing new or improved products or services or the processes for producing them
Research & Development (R&D)
What are the six elements of the value chain?
Research & Development, Design, Production or Purchases, Marketing, Distribution, Customer Service Ricky & Dicky did pee-pee M&Ms during church service.
_____ typically do not have an inventory account.
Service companies
_____ are costs that have already been incurred.
Sunk costs
_____ buy products in bulk from producers, marks them up, and resell to retailers.
Wholesalers
_____ is composed of goods partially through the manufacturing process (not finished yet).
Work in process inventory
For a merchandiser, _____ = [Beginning Inventory] + [Purchases] + [Freight-in] + [Import duties]
[Cost of Goods Available for Sale]
For a merchandiser, [Cost of Goods Sold] = [Beginning Inventory] + _____ + _____ + _____ - [Ending Inventory]
[Purchases], [Freight-in], [Import duties]
For a merchandiser, [Operating Income] = _____ - _____ - _____
[Sales Revenues], [Cost of Goods Sold], [Operating Expenses]
goods that are partway through the manufacturing process but not yet complete
work in process inventory
to assign an indirect cost to a cost object
allocate
to attach a cost to a cost object
assign
The _____ per unit declines as a production facility produces more units.
average cost
the total cost divided by the number of units
average cost
a means of production design in which a company tries to mimic, or copy, the natural biological process in which dead organisms (plants and animals) become the input for another organism or process
biomimicry
Which of the six business functions in the value chain does the cost fall under? Salary of engineers who are designing the new plant's layout
design
Which value chain element is associated with: Cost of making a new product prototype?
design
detailed engineering of products and services and the processes for producing them
design
the difference in cost between two alternative courses of action
differential cost
Costs that differ between alternatives are called _____.
differential costs
Direct cost or an indirect cost? ... assuming that the cost object is the Juniors Department (clothing and accessories for teenage and young women) in the Stow Kohl's department store. Cost of Juniors clothing
direct
Direct cost or an indirect cost? ... assuming that the cost object is the Juniors Department (clothing and accessories for teenage and young women) in the Stow Kohl's department store. Cost of costume jewelry on the mannequins in the Juniors Department
direct
Direct cost or an indirect cost? ... assuming that the cost object is the Juniors Department (clothing and accessories for teenage and young women) in the Stow Kohl's department store. Juniors Department sales clerks
direct
Direct cost or an indirect cost? ... assuming that the cost object is the Juniors Department (clothing and accessories for teenage and young women) in the Stow Kohl's department store. Manager of the Juniors Department
direct
A cost that can be traced to a cost object is known as a(n) _____.
direct cost
a cost that can be traced to a cost object; a cost that is readily identifiable or associated with the cost object
direct cost
the cost of compensating employees who physically convert raw materials into the company's products; labor costs that are directly traceable to the finished product
direct labor
Conversion costs consist of _____ and _____.
direct labor, manufacturing overhead
primary raw materials that become a physical part of a finished product and whose costs are traceable to the finished product
direct materials
Which of the six business functions in the value chain does the cost fall under? Depreciation on delivery vehicles
distribution
Which of the six business functions in the value chain does the cost fall under? Transportation costs to deliver Folgers Coffee® to retailers such as Kroger, Walmart, and Save-A-Lot
distribution
Which value chain element is associated with: Cost of shipping finished goods to overseas customers?
distribution
delivery of products or services to customers
distribution
the unfortunate practice of overstating a company's commitment to sustainability
greenwashing
Direct cost or an indirect cost? ... assuming that the cost object is the Juniors Department (clothing and accessories for teenage and young women) in the Stow Kohl's department store. Cost of bags used to package customer purchases at the main registers for the store
indirect
Direct cost or an indirect cost? ... assuming that the cost object is the Juniors Department (clothing and accessories for teenage and young women) in the Stow Kohl's department store. Cost of hangers used to display the clothing in store
indirect
Direct cost or an indirect cost? ... assuming that the cost object is the Juniors Department (clothing and accessories for teenage and young women) in the Stow Kohl's department store. Cost of radio advertising for the store
indirect
Direct cost or an indirect cost? ... assuming that the cost object is the Juniors Department (clothing and accessories for teenage and young women) in the Stow Kohl's department store. Cost of the security staff at the Stow store
indirect
Direct cost or an indirect cost? ... assuming that the cost object is the Juniors Department (clothing and accessories for teenage and young women) in the Stow Kohl's department store. Depreciation of the building
indirect
Direct cost or an indirect cost? ... assuming that the cost object is the Juniors Department (clothing and accessories for teenage and young women) in the Stow Kohl's department store. Electricity for the building
indirect
Direct cost or an indirect cost? ... assuming that the cost object is the Juniors Department (clothing and accessories for teenage and young women) in the Stow Kohl's department store. Juniors clothing buyers' salaries (these buyers buy for all the Juniors Departments of Kohl's stores)
indirect
Direct cost or an indirect cost? ... assuming that the cost object is the Juniors Department (clothing and accessories for teenage and young women) in the Stow Kohl's department store. The Stow Kohl's store manager's salary
indirect
a cost that relates to the cost object but cannot be traced specifically to it; a cost that is jointly used or shared by more than one cost object
indirect cost
labor costs that are difficult to trace to specific products
indirect labor
materials whose costs are difficult to trace to specific products
indirect materials
a method of product design in which the company analyzes the environmental impact of a product, from cradle to grave, in an attempt to minimize negative environmental consequences throughout the entire lifespan of the product
life-cycle assessment
Which type of company would have work in process inventory?
manufacturing
Most for-profit organizations can be described as being in one (or more) of three categories: _____, _____, and _____.
manufacturing companies, merchandising companies, service companies
a company that uses labor, plant, and equipment to convert raw materials into new finished products
manufacturing company
all manufacturing overhead costs aside from indirect materials and indirect labor
other indirect manufacturing costs
For a manufacturing company, is it a product cost or period cost? If product, is it direct materials, direct labor, or manufacturing overhead? Costs of shipping finished products to customers
period
For a manufacturing company, is it a product cost or period cost? If product, is it direct materials, direct labor, or manufacturing overhead? Depreciation on salespeoples' automobiles
period
For a manufacturing company, is it a product cost or period cost? If product, is it direct materials, direct labor, or manufacturing overhead? Marketing manager's salary
period
Period or product cost for Bailey Dairy Products Company? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Company president's annual bonus
period
Period or product cost for Bailey Dairy Products Company? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Depreciation on tablets used by sales staff
period
Period or product cost for Bailey Dairy Products Company? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Gasoline used to operate refrigerated trucks delivering finished dairy products to grocery stores
period
Period or product cost for Bailey Dairy Products Company? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Research and development related to elimination of anti-biotic residues in milk
period
Period or product cost for Bailey Dairy Products Company? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Television advertisements for Bailey's products
period
Period or product cost? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Lease payment on administrative headquarters
period
Period or product cost? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Property taxes—30% of building is used for sales, marketing, and administrative offices
period
Period or product cost? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Telecommunications costs for the customer service call center
period
the costs incurred by the company to operate the business that do not get treated as inventory, but rather are expensed immediately in the period in which they are incurred; do not relate to manufacturing or purchasing product; often called operating expenses or selling, general, and administrative expenses
period costs
an inventory system in which Cost of Goods Sold is calculated at the end of the period rather than every time a sale is made
periodic inventory
an inventory system in which both Cost of Goods Sold and Inventory are updated every time a sale is made
perpetual inventory
the combination of direct material and direct labor costs
prime costs
the costs incurred by manufacturers to produce their products or incurred by merchandisers to purchase their products; required by GAAP to be assigned to inventory until the products are sold for external reporting, at which point, they are expensed as Cost of Goods Sold
product costs
Period or product cost for Bailey Dairy Products Company? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Wages and salaries paid to machine operators at dairy processing plant
product, DL
Period or product cost? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Wages and benefits paid to assembly line workers in the manufacturing plant
product, DL
Period or product cost for Bailey Dairy Products Company? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Cost of milk purchased from local dairy farmers
product, DM
Period or product cost for Bailey Dairy Products Company? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Plastic gallon containers in which milk is packaged
product, DM
Period or product cost? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Standard packaging materials used to package individual units of product for sale (for example, cereal boxes in which cereal is packaged)
product, DM
Period or product cost for Bailey Dairy Products Company? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Depreciation on refrigerated trucks used to collect raw milk from local dairy farmers
product, MOH
Period or product cost for Bailey Dairy Products Company? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Lubricants used in running bottling machines
product, MOH
Period or product cost for Bailey Dairy Products Company? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Property insurance on dairy processing plant
product, MOH
Period or product cost? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Depreciation on the automated production line equipment
product, MOH
Period or product cost? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Property taxes—70% of the building is used for manufacturing
product, MOH
Period or product cost? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Repairs and maintenance on factory equipment
product, MOH
Period or product cost? If product cost, is it direct material (DM), direct labor (DL), or manufacturing overhead (MOH)? Salaries paid to quality control inspectors in the plant
product, MOH
For a manufacturing company, is it a product cost or period cost? If product, is it direct materials, direct labor, or manufacturing overhead? Assembly-line workers' wages
product; direct labor
For a manufacturing company, is it a product cost or period cost? If product, is it direct materials, direct labor, or manufacturing overhead? Cost of major components of the finished product
product; direct materials
For a manufacturing company, is it a product cost or period cost? If product, is it direct materials, direct labor, or manufacturing overhead? Depreciation on plant equipment
product; manufacturing overhead
For a manufacturing company, is it a product cost or period cost? If product, is it direct materials, direct labor, or manufacturing overhead? Insurance on plant building
product; manufacturing overhead
For a manufacturing company, is it a product cost or period cost? If product, is it direct materials, direct labor, or manufacturing overhead? Plant forklift operator's salary
product; manufacturing overhead
Which of the six business functions in the value chain does the cost fall under? Depreciation on Orrville, Ohio plant
production
Which of the six business functions in the value chain does the cost fall under? Plant manager's salary
production
Which of the six business functions in the value chain does the cost fall under? Purchase of strawberries used in Smucker's® Strawberry Preserves
production
Which value chain element is associated with: Cost of assembly labor used in the plant?
production
resources used to produce a product or service or to purchase finished merchandise intended for resale
production or purchases
Johnson & Johnson, a personal care products manufacturer, converts _____ into finished products.
raw materials inventory
all raw materials (direct materials and indirect materials) not yet used in manufacturing
raw materials inventory
Which of the six business functions in the value chain does the cost fall under? Depreciation on food research lab
research and development
Which value chain element is associated with: Costs a pharmaceutical company incurs to develop new drugs?
research and development
merchandising company that sells to consumers
retailer
A law office, an advertising agency, and a hospital are all examples of _____.
service companies
a company that sells intangible services rather than tangible products
service company
a cost that has already been incurred
sunk cost
the cost of all resources used throughout the value chain
total cost
to assign a direct cost to a cost object
trace
evaluating a company's performance not only by its ability to generate economic profits, but also by its impact on people and the planet
triple bottom line
costs that cannot be changed or influenced in the short run by management
uncontrollable costs
the activities that add value to a firm's products and services; includes R&D, design, production or purchases, marketing, distribution, and customer service
value chain
Fixed or variable costs? Cost of French fries used at a McDonald's restaurant
variable
Fixed or variable costs? Cost of fuel used by Old Dominion Freight Line, a national trucking company
variable
Fixed or variable costs? Cost of oranges sold at a Kroger's grocery store
variable
Fixed or variable costs? Cost of rubber used to manufacturer L.L. Bean boots
variable
Fixed or variable costs? Hourly wages paid to cashiers at The Home Depot
variable
Fixed or variable costs? Monthly cost of coffee at a Dunkin' Donuts store
variable
Fixed or variable costs? Monthly sugar costs for The Hershey Company
variable
Fixed or variable costs? Sales commissions at Tampa Honda in Florida
variable
Fixed or variable costs? Shipping costs at Amazon.com
variable
Gasoline is one of many _____ in the operation of a motor vehicle.
variable costs
costs that change in total in direct proportion to changes in volume
variable costs
merchandising companies that buy in bulk from manufacturers, mark up the prices, and then sell those products to retailers
wholesaler