Chapter 2; Cost Accounting Concepts

Product costs for unsold units are ______.

assigned to inventory under both absorption and variable costing

When preparing financial statements,__________ are deducted from revenues associated with an accounting period.

expenses

To calculate net income, operating profit is adjusted for ______.

extraordinary items interest expense other required regulatory adjustments

True or false: Cost of goods sold includes the actual cost of goods that were sold and the costs required to sell them.

false

Any new costs incurred when adding a product are considered product costs under ________ costing.

managerial

The full cost of a product equals all ______.

manufacturing and selling costs (both fixed and variable)

Nonmanufacturing costs are also called _________ costs and manufacturing costs are also called _________ costs.

period, product

If a company is focused on trying to eliminate waste, income statement costs can be divided into ______.

value-added vs. nonvalue-added activities

Which of the following statements are true??

For managerial purposes, managers often assign nonmanufacturing costs to products. Nonmanufacturing costs are expensed as incurred for financial accounting purposes. Distinguishing between manufacturing and nonmanufacturing costs can be difficult.

Which of the following statements are true??

Gross margin reflects the ability of a wholesaler to price products. Retailers have an entire category of amounts that do not appear on service company income statements.

Which of the following statements are true?

Labor is the most important single cost for many service organizations. Information technology represents the major cost for some service organizations.

Which of the following statements are true???

The cost of goods manufactured and sold statement focuses on both current costs and inventories. Managerial reports are tailored to the individual company's needs. Cost of goods manufactured and sold statements can be effective communication devices.

To calculate cost of goods sold during the year, take total cost of goods manufactured and:

add beginning finished goods and subtract ending finished goods inventory

To calculate cost of goods manufactured during the year, take total manufacturing costs and ______.

add beginning work in process and subtract ending work in process inventory.

Under variable costing, ______.

all costs except variable manufacturing costs are period costs

The process of assigning costs is called cost ______.

allocation

The process of assigning indirect costs is called cost ________.

allocation

On a per unit basis, the _______ _______ equals the difference between sales price and the variable cost per unit.

contribution margin

The amount available to cover fixed expense and earn a profit is the _____ - ______.

contribution margin

The difference between revenue and variable cost is _____.

contribution margin

A sacrifice of resources is a(n) ________.

cost

The way costs respond to changes in activity levels is called __________ __________.

cost behavior

Which of the following is NOT one of the four basic cost behavior categories?

direct

The two types of product costs are _______ and _______.

direct and indirect

Costs that can be unambiguously related to cost objects are _____ costs whereas costs that cannot be unambiguously related to cost objects are ______ costs.

direct, indirect

Product costs that can be identified with units at a relatively low cost are _______ manufacturing costs and all other product costs are _______ manufacturing costs.

direct, indirect

True or false: The excess of operating revenues over the operating costs incurred to generate those revenues is net income

false

True or false: The focus of cost accounting is on expenses

false

The difference between full cost and full absorption cost is ______.

fixed and variable selling costs are included in full cost but not in full absorption cost

Costs that do not change as volume changes are ______ costs and costs that change in direct proportion with a change in volume are ______ costs.

fixed, variable

Common approaches for determining product costs discussed in the text do not include ______ costing.

full

A cost ______.

is a sacrifice of resources may be recorded as an asset

Full absorption cost ______.

is the inventoriable cost for external financial statements is required by GAAP

Assume total units produced equals total units sold. If the company prepares a gross margin income statement and a contribution margin income statement, ______.

marketing and administrative costs will be the same on both statements operating profit will be the same on both statements

Costs required to obtain customer orders are _______ costs and costs required to manage the organization are __________ costs.

marketing, administrative

Costs required to obtain customer orders are _______ costs and costs required to manage the organization are ________ costs.

marketing, administrative

Cost of goods manufactured and sold statements are ______.

prepared as part of a company's internal reporting system

Companies with low overhead costs focus on managing ______ costs, whereas companies with high overhead costs focus on managing ______ costs.

prime, conversion

The sum of direct materials and direct labor equals ______ costs and the sum of direct labor and manufacturing overhead equals ______ costs.

prime, conversion

Costs assigned to units of production and expensed when the units are sold are _________ costs, whereas ________ costs are expensed as incurred.

product and period

Beginning work in process inventory plus total manufacturing costs equals ______.

resources put into production during the year

Customers are provided with an intangible product by ________ companies.

service

Customers are provided with an intangible product by _________ companies.

service

True or false: For a manufacturer, finished goods inventory is optional.

true

True or false: Whether a cost is direct or indirect depends on the cost object.

true

If a company is focused on trying to eliminate waste and reduce costs, financial statements can be developed that classify costs into ___________-_______ and ________-________ activities.

value-added, nonvalue-added

Direct materials and sales commissions are most likely _________ costs, whereas many manufacturing overhead costs such as rent and supervisor salaries are ________ costs.

variable, fixed

Goods that have been started in production but are not yet completed are called ______.

work in process

Products that have been started but not yet completed are called ________ ________ ________.

work in process