accgt 202 - chapter 1 smartbook

A company purchased a 12 month insurance policy on October 1 for $1,200. On the December 31 annual financial statements, ___.

$300 is reported as a expense and $900 is reported as an asset

Given: Sales of $360,000, Gross Margin of $140,000, Contribution Margin of $110,000, and Total Selling & Administrative Exp. of $60,000, net income using the traditional income statement format equals ___.

$80,000

Product costs ___.

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

Which of the following are most likely fixed costs?

- Administrative salaries - Factory rent - Factory insurance

Which of the following are differences between the traditional and contribution format to income statements?

- 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.

Differential cost is ___.

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

Opportunity costs ___.

- are benefits lost when choosing one option over another - should be considered in decision making

Period costs ___.

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

Cost objects include ___.

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

Manufacturing costs include ___.

- direct materials - direct labor - manufacturing overhead

Indirect labor costs include ___.

- factory security guard wages - assembly-line supervisor salary

Within the relevant range of activity ___.

- fixed costs remain constant in total and vary per unit - the assumption that cost behavior is strictly linear is reasonably valid

A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of ___.

- manufacturing overhead - indirect materials

Cost behavior ___.

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

Selling costs include ___.

-sales salaries -advertising -sales commissions

Sales revenue minus variable expenses equals ___ ___.

Blank 1: contribution Blank 2: margin

In an automobile manufacturing plant, the assembly-line workers are classified as ___ ___ cost.

Blank 1: direct or touch Blank 2: labor or labour

Manufacturing costs can be divided into three categories: direct ___, ___ labor and manufacturing ___.

Blank 1: materials or material Blank 2: direct or touch Blank 3: overhead or burden

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

Blank 1: opportunity Blank 2: cost

On a traditional income statement, cost of goods sold reports the ___ costs attached to merchandise sold during the period, while selling and administrative expenses report all ___ costs that have been expensed as incurred.

Blank 1: product or manufacturing Blank 2: period

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

Blank 1: relevant Blank 2: range

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

Blank 1: traditional or GAAP Blank 2: contribution or contribution margin

Which of the following is not a COST CLASSIFICATION associated with decision making?

Indirect costs

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

True

Which type of cost changes in total, in direct proportion to changes in activity level?

Variable

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

behavior or behaviour

Any item for which cost data is desired is called a(n) ___ ___.

blank 1: cost blank 2: object

A cost that can be easily and conveniently traced to a specific cost object is a(n) ___ cost of that cost object, whereas costs that cannot be easily and conveniently traced to that specific cost object are ___ costs.

blank 1: direct or prime blank 2: indirect, common, or overhead

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

decision making

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

differential

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

direct

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

direct

A laptop computer manufacturer would consider the computer's processor chip to be a(n) ___ cost.

direct material

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 or raw

Administrative costs include ___.

executive compensation and public relations costs

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

false

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

fixed

The difference in revenues between two alternatives is called ___.

incremental revenue

A manufacturing cost that cannot be easily traced to a specific cost object is a(n) ___ cost.

indirect, common, overhead, or shared

Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as ___.

manufacturing overhead

Indirect materials and indirect labor are classified as ___.

manufacturing overhead

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

A cost that contains both variable and fixed cost elements is a(n) ___ cost.

mixed

A cost that contains both variable and fixed costs elements is called a(n) ___ cost.

mixed, semivariable , semi variable, or semi-variable

Indirect materials include ______.

nails, glue, and thread

Inventoriable costs is another term for ___ costs.

product or manufacturing

The materials that go into the final product are called ___ materials.

raw or direct

Contribution margin is ___.

sales revenue minus variable costs

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

they are incurred

Direct labor is also called ___ labor.

touch

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

variable