ACCT 2521 EXAM 1

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Discretionary fixed costs:

May be reduced for short periods of time with minimal damage to the long run goals of the organization

an activity base

Measures whatever causes costs to vary ; Sometimes called cost driver

Which are true?

Mixed cost has a minimum cost of having a service available and ready for use ; When mixed costs are represented by a straight line, the steeper the slope, the higher variable cost per unit

Variable costs are costs that:

Vary in total directly and proportionately with changes in the activity level & remain the same per unit at every activity level

as a firm begins to operate outside the relevant range, the accuracy of the cost estimates for fixed and variable costs

fixed & variable decreases

The depreciation on equipment in a manufacturer's headquarters can be classified as a(n)

non-manufacturing cost

what is an example of a period cost?

salary for the vice president of finance

Contribution margin is:

sales rev - variable costs

Order getting and order filling are other names for ____ cost

selling

Within relevant range, fixed costs:

shouldn't be expressed on a per unit basis when making decisions ; Remain constant in total regardless of changes in activity ; Generally includes rent and supervisor salaries

Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory?

the amount paid to the individual who stains a chair

The relevant range is:

the range over which total fixed costs in not expected to change

direct labor is also called

touch labor

Income statement focusing on product and period costs has been prepared using _____ format, while a _____ format income statement makes a distinction between fixed and variable costs

traditional & contribution

Which of the following approaches to preparing an income includes a calculation for the gross margin?

traditional approach yes , contribution approach no

Depreciation on equipment a company uses in its selling and administrative activities would be classified as a period cost.

true

Product costs are also known as inventoriable costs.

true

True or false: presenting fixed costs on an avg per unit basis makes them look like they are variable costs

true

Wages paid to production supervisors would be classified as manufacturing overhead.

true

Which costs will change with a decrease in activity within the relevant range?

unit fixed costs and total variable costs

Within the relevant range of activity, variable costs _____

vary in total and remain constant per unit

Direct labor and manufacturing overhead costs are added to

work in process

cost of all work not yet completed is in

work in process

Prior to being recorded on the income statement, manufacturer product costs flow through

work in process , raw materials , finished goods

Tirri corp has provided following info: -direct materials, CPU = 6.85 -direct labor, CPU = 3.9 -variable manufacturing overhead, CPU = 1.25 -fixed manufacturing overhead, CPP = 22,500 -sales commissions, CPU = 1.00 -variable admin exp, CPU = .55 -fixed selling & admin exp, CPP = 7,500 If selling price is 26.2 per unit, the contribution margin per unit sold is closest to

12.65

step variable costs

Can be adjusted quickly as conditions change May include total salaried employee expense

cost behavoir

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

Nonmanufacturing costs include

Company president's salary & Sales commissions

Other names for manufacturing overhead include

Indirect manufacturing costs Factory burden Factory overhead

manufacturing costs include

direct materials, direct labor, manufacturing overhead

Fixed costs that usually arise from annual spending decisions by management are ______ fixed costs

discretionary

Administrative costs include

executive compensation and public relations costs

Indirect labor costs include:

factory security guard wages, assembly-line supervisor salary

Depreciation is always considered a period cost in a manufacturing company.

false

True or False? Variable costs remain fixed in total within the relevant range of activity

false

costs of all work completed but not yet sold is in

finished goods

Company purchases a 12 month insurance policy on october 1 for $1,200. On the dec 31 annual financial statement

$300 reported as an expense $900 reported as an asset

Kneeland corp has provided the following info: -direct materials, CPU = 6.8 -direct labor, CPU = 4.15 -variable manufacturing overhead, CPU = 1.65 -fixed manufacturing overhead, CPP = 121,500 -sales commissions, CPU = 1.00 -variable admin expense, CPU = .50 -fixed selling & admin expense, CPP = 40,500 If 10,000 units are produced the total amount of manufacturing overhead cost is closest

138,000

Balance in work in process inventory account was 22,000 at the beginning of the month and 17,000 at end of month. During the month they incurred direct materials cost of 55,000 and direct labor cost of 28,000. The actual manufacturing overhead cost incurred was 53,000. The manufacturing overhead cost applied to work in process was 51,000. The cost of gods manufactured was?

139,000

QUIZ 1 # 12

223,000

Balance in finished good inventory account at the beginning of the month was 52,000 and 30,000 at the end of the month. The cost of goods manufactured for the month was 212,000. The actual manufacturing overhead cost incurred was 55,000 and the manufacturing overhead applied to work in process was 58,000. The company closes out any under-applied or over-applied manufacturing overhead to cost of goods sold. The adjusted cost of goods sold that would appear on income statement is:

231,000

Data for most recently completed year appears below: -est machine hours: 39,000 -est variable manufacturing overhead: 6.76 / machine hr -est total fixed manufacturing overhead: 794,430 -actual machine hrs for the yr: 42,700 Predetermined overhead rate for the recently completed year?

27.13 / machine hr

QUIZ 1 # 14

293,000

Beginning balance in raw materials account was 20,000 and the ending bal was 36,000. Raw materials purchases during the month totaled 63,000. Manufacturing overhead cost incurred during the month was 111,000 of which 2,000 consisted of raw materials classified as indirect materials. The direct materials cost is?

45,000

Bressette corp provided following info: -direct materials, CPU = 6.2 -direct labor, CPU = 3.7 -variable manufacturing overhead, CPU = 1.25 -fixed manufacturing overhead, CPP = 10,000 -sales commissions, CPU = 1.5 -variable admin exp, CPU = .5 -fixed selling & admin exp, CPP = 5,000 The total amount of product costs incurred to make 5,000 is closest to

65,750

QUIZ 1 # 13

68,000

Cost objects include:

Anything for which data is desired , Customers , Organizational sub units

Which is true?

Direct cost can be easily and conveniently traced to a specific cost object ; A regional sales managers salary would be a direct cost of the regional office in which he works at

total conversion costs

Direct labor + variable manufacturing overhead + fixed manufacturing overhead

Common activity bases include:

Direct labor hours ,Units sold ,Machine hours

Total product cost

Direct materials + direct labor + variable manufacturing overhead + fixed manufacturing overhead

Which of the following statements is true when referring to fixed costs?

Discretionary fixed costs can often be reduced to zero for short periods of time without seriously impairing the long-run goals of the company.

which is true?

Period costs do not flow through the inventory accounts ; Period costs are expenses when incurred

To find total variable manufacturing cost:

Product construct materials + direct labor + variable manufacturing overhead

Which is true?

Relevant range of activity is approximated by a straight line ; Within the relevant range of activity, fixed costs remain constant in total

Within the relevant range, fixed costs

Remain constant in total regardless of changes in activity ; Should not be expressed on a per unit basis when making decisions ; Generally include rent and supervisor salaries

non manufacturing costs include

Sales commissions & Company president's salary

selling costs include

Sales commissions , Sales salaries , Advertising

what is an example of a mixed cost?

an employee's compensation, which consists of a flat salary plus a commission

Costs associated with a the company's basic facilities, equipment, and organization are known as:

committed fixed costs

Costs that are shared by multiple cost objects in a company

common

Type of indirect cost incurred to benefit more than one object is a _____ cost

common

what is not an example of a committed fixed cost

contributions to charitable organizations

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

conversion

direct labor is classified as

conversion cost & prime cost

The cost of electricity for running production equipment is classified as:

conversion cost yes, period cost no

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

cost behavior

Relative proportion of each type of cost in an organization is known as the company's

cost structure

Pendergraph corp incurred 60,000 of actual manufacturing overhead costs. During the same period, the manufacturing overhead applied to work in process was 62,000. What is the journal entry to record incurrence of the actual manufacturing overhead costs

debit to manufacturing overhead of 60,000

During july 83,000 of raw materials were requisitioned from the storeroom for use in production. The raw materials included both direct and indirect materials. The indirect materials = 4,000. What is the journal entry to record requisition from storeroom?

debit to work in process of 79,000

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

decision making

A decrease in cost between 2 alternatives should be referred to as a __ cost

decremental

Change in revenues between 2 alternatives is known as _____ revenue or incremental revenue

differential

Difference in costs between 2 alternative is called a _______ cost

differential

In an automobile manufacturing plant, the assembly line workers are classified as _____ cost

direct labor

Which is classified as both a prime cost & a conversion cost?

direct labor

to find total prime cost

direct materials + direct labor

Prime costs are

direct materials and direct labor

A fixed cost remains fixed ____ within the relevant range of activity

in total

as the level of activity increases how will a var cost in total and per unit behave?

increase in total and have no effect per unit

Salaries of factory supervisors and factory maintenance personnel are examples of ____ labor costs

indirect

Not a cost classification associated with decision making?

indirect costs

a factory supervisor wages are classified as

indirect labor & moh

The cost of lubricants used to grease a machine used in the production process of a manufacturing company is an example of a

indirect material cost

The cost of lubricants used to grease a production machine in a manufacturing company is an example of an

indirect material cost

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

indirect materials & manufacturing overhead

an example of a discretionary fixed cost is

management training

In a job order costing system, indirect labor cost is usually recorded as a debit to:

manufacturing overhead

Revenue obtained from selling 1 additional unit of product is called ____ revenue

marginal

Accrual concept that costs incurred to generate revenue are expensed in the same period the revenue is known as the ___ principle

matching

Concept that costs incurred to generate revenue are expenses in the same period the revenue is known as the ______ principle

matching

Product costs appear on the balance sheet

only if goods are partially completed, are unsold at the end of a period, or both

Property taxes on a company's factory building would be classified as a(n):

product cost

The salary paid to the maintenance supervisor in a manufacturing plant is an example of:

product cost & moh

what is not typically classified as a discretionary fixed cost?

property taxes

materials that go into final product

raw materials

the inventory accounts of manufacturing firm include

raw materials, finished goods, work in process

Cost assumptions are reasonably valid within the _____ of activity

relevant range

Level of activity within which variable and fixed cost assumptions are valid is known as:

relevant range

Variable costs

remain constant per unit and vary in total


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