Chapter 1

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

_______is a cost that is incurred to support a number of cost objects but cannot be traced to them individually. (Type of Indirect Cost)

Common Cost

_____ is anything for which cost data are desired—including products, customers, plants, office locations, and departments.

Cost Objects

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

Decision Making

________ is a cost that can be easily and conveniently traced to a specified cost object.

Direct Cost

_______ consists of labor that can be easily traced to individual units of product.

Direct Labor

__________is a cost that cannot be easily and conveniently traced to a specified cost object.

Indirect Cost

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

Manufacturing Overhead

________ refers to all manufacturing costs other than direct labor and direct materials.

Manufacturing Overhead

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

Mixed

Sum of direct materials and direct labor

Prime Cost

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

Relevant Range

Direct labor is also called

Touch Labor

When are period costs recorded?

When they are incurred

format income statement that makes a distinction between fixed and variable costs.

contribution format

Sales revenue minus variable expenses equals

contribution margin

another way to so incremental is

differential

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

fixed

Minor items such as nails and glue are usually considered to be

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

matching principle

Manufacturing costs can be divided into three categories: direct ____ , _______labor and manufacturing ______

materials, direct, and overhead

Inventoriable costs is another term for

product cost

Contribution margin is ______.

sales revenue minus variable costs

An income statement focusing on product and period costs has been prepared using a(n)

traditional format