Chapter 1 Managerial Accounting & Cost Concepts

Mixed costs

Factory overhead is typically a

product cost

How should the wages of a sheet metal worker in a fabrication plant be classified?

Manufacturing overhead includes

All manufacturing costs except direct labor and direct materials

the level of activity

In the equation, Y = a + bX, X represents ________.

c. Appraisal costs

Which of the following are sometimes called inspection costs? a. Prevention costs b. Internal failure costs d. External failure costs

Direct labor

________ is sometimes called "touch labor."

some costs will change, other costs will remain the same

if a firm increases its activity level, ________.

$5000 = $5x1000

Cyber Devices manufactures PCTV products that enable people to watch television content on their computers. It sells its product to retailers for $50. A tuner component that goes into each of these devices costs $5 to acquire. The total variable cost at an activity level of 1,000 units equals ________.

A factory supervisors wages are classified as

Indirect labor - yes; fixed manufacturing overhead - yes

sunk costs

Which of the following is always an irrelevant cost?

The following costs were incurred in May: Direct materials $45,300 direct labor $23,800 manufacturing overhead $17,500 selling expenses $16,800 administrative expense $30,200 Prime costs during the month totaled

$69,100

common cost

A ____ is a cost is incurred to support a number of cost of objects but cannot be traced to them individually.

Sunk cost

A cost incurred at the past that is not relevant to any current decision is classified as

remains constant in total with changes in the level of activity

A fixed cost is a cost which ________.

b. quality cost report

A report that details prevention, appraisal, internal failure, and external failure costs is called a ________. a. risk report b. quality cost report c. control report

direct cost

Adventure holiday sales thousands of tour packages each month through its various branches. A branch manager salary would be a ____ of the branch.

$40,000 CM = SR - Var. Exp 100k - (40k +15k +5k) = 100k - 60k

Davidson Company has sales of $100,000, variable cost of goods sold of $40,000, variable selling expenses of $15,000, variable administrative expenses of $5,000, fixed selling expenses of $7,000, and fixed administrative expenses of $9,000. What is Davidson's contribution margin?

relevant in making business decisions

Differential costs are always ________.

$17,500 = 7*2500

In a small manufacturing facility, one welder is needed for every 200 hours of machine-hours or fewer in a month. The welder is paid a monthly salary of $2,500. If the total monthly requirement is 1,300 machine-hours, the total salaried employee expense is ________.

administrative costs

Manufacturing costs include all of the following categories except ________.

Cost of goods sold

Product costs that have become expenses can be found in

Matching principle

The ________ requires that the costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized.

Within the relevant range, variable costs can be expected to:

Vary in total in direct proportion to changes in the activity level.

a. Prevention costs

Which of the following costs support activities whose purpose is to reduce the number of defects? a. Prevention costs b. Internal failure costs c. Appraisal costs d. External failure costs

indirect cost

Adventure holiday sells thousands of tour packages each month through its various branches. A branch manager salary would be a ____ of selling a tour package.

c. the quality of output is the best in the industry

All the following are necessary to obtain ISO 9000 certification EXCEPT ________. a. a quality control system is in use b. the system is backed up with detailed documentation of quality control procedures c. the quality of output is the best in the industry d. the intended level of quality is achieved on a sustained, consistent basis

$25,000 = $15k + 20K - 10k

Audio Corporation purchased $20,000 of DVDs during the current year. The company had DVD inventory of $15,000 at the beginning of the year. An end of the year audit revealed that the company had DVD inventory of $10,000. The amount that would be reported as cost of goods sold in the income statement for the current year is ________.

When referring to fixed costs

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

Manufacturing overhead costs

Items such as indirect materials, indirect labor, maintenance and repairs on production equipment, depreciation, and insurance on manufacturing facilities are included in ________.

direct materials

Materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product are called ________.

Non-manufacturing costs

Property taxes associated with a company's administrative facility are considered ________.

Most likely not to be included as manufacturing overhead in a furniture factory?

The amount paid to the individual who stains a chair

d. Cost of goods sold and selling and administrative expense

The traditional income statement uses which of the following cost categories? a. Variable expenses and fixed expenses. b. Cost of goods sold and fixed expenses. c. Operating expenses and selling and administrative expenses. d. Cost of goods sold and selling and administrative expense

c. Quality of conformance

Which of the following is a measure of whether or not a delivered product meets its design specifications? a. Cost of quality b. Cost of design c. Quality of conformance

Contribution margin is:

Sales less variable production, variable selling, and variable administrative expenses.

a. Product recalls

Which of the following is an example of an external failure cost? a. Product recalls b. Net cost of spoilage c. Disposal of defective products d. Downtime caused by quality problems

a. Net cost of scrap

Which of the following is an example of an internal failure cost? a. Net cost of scrap b. Cost of warranty repairs c. Liability arising from defective products d. Maintenance of test equipment

d. direct labor

Which of the following is common to both prime cost and conversion cost? a. Manufacturing overhead b. Direct materials c. Nonmanufacturing costs d. Direct Labor

c. Helps managers see the lost sales arising from customer ill will

Which of the following is not a benefit of a quality cost report? a. Helps managers see the financial significance of defects b. Helps managers identify the relative importance of quality problems faced by their company c. Helps managers see the lost sales arising from customer ill will d. Helps managers see the distribution of their quality costs

b. It separates costs into fixed and variable categories.

Which of the following is true of the contribution approach? a. It is mainly used for external reporting purposes. b. It separates costs into fixed and variable categories. c. It is not useful for merchandising companies. d. It calculates gross margin by deducting cost of goods sold from sales.

b. An opportunity cost cannot be changed by any decision made now or in the future.

Which of the following statements about opportunity costs is not correct? a. An opportunity cost is the potential benefit that is given up when one alternative is selected over another. b. An opportunity cost cannot be changed by any decision made now or in the future. c. Opportunity costs are not usually found in accounting records. d. Opportunity costs are costs that must be explicitly considered in every decision a manager makes.

d. A company can reduce its total quality cost by focusing less of its efforts on prevention and appraisal.

Which of the following statements is not correct? a. As a company's quality program becomes more refined, prevention activities usually become more effective than appraisal activities. b. Total quality cost drops rapidly as the quality of conformance increases. c. Appraisal can only find defects. d. A company can reduce its total quality cost by focusing less of its efforts on prevention and appraisal.