Chapter 2 MA
In making product mix and pricing decisions, managers should focus on: A) total costs B) unit costs C) variable costs D) fixed costs
A) total costs
When 10,000 units are produced, variable costs are $6 per unit. Therefore, when 20,000 units are produced: A) variable costs will total $120,000 B) variable costs will total $60,000 C) variable unit costs will increase to $12 per unit D) variable unit costs will decrease to $3 per unit
A) variable costs will total $120,000
Administrative Cost
All executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling. (accounting, public relations, etc)
Manufacturing Overhead
All manufacturing costs except direct materials and labor (supervisor labor cost, janitor labor cost)
Non-manufacturing costs
Also called period costs, selling costs and administrative costs, expense right away
Amber Manufacturing provided the following information for last month: Sales $20,000 Variable costs 6,000 Fixed costs 9,000 Operating income $5,000 If sales double next month, what is the projected operating income? A) $10,000 B) $25,000 C) $19,000 D) $12,000Amber Manufacturing provided the following information for last month: Sales $20,000 Variable costs 6,000 Fixed costs 9,000 Operating income $5,000 If sales double next month, what is the projected operating income? A) $10,000 B) $25,000 C) $19,000 D) $12,000
C) $19,000
Cost of Goods Sold
Cost of the inventory that was sold during the period
direct costs
Costs that can be specifically identified with a particular project or activity. Assigned to assets
Total Manufacturing Costs =
Direct Materials + Direct Labor + Manufactured Overhead
Direct Materials
Materials that become an integral part of a finished product and whose costs can be conveniently traced to it. (wood for table, microchip for phone)
Indirect cost
a cost that cannot be easily and conveniently traced to a specified cost object, may include both variable and fixed costs
Cost of Goods Sold =
beginning finished goods inventory + Cost of Goods Manufactured (purchases) - ending finished goods inventory
monthly lease payment for a specialized piece of equipment needed to manufacture the football helmet, what type of cost
direct cost
A cost that is classifed as a period cost will be recognized on the income statement as an
expense in the current period
A cost that is classified as a product cost will be recognized on the income statement as an
expense only when the associated units of product are sold
Operating Income =
gross profit - operating expenses
Actual costs
historic costs incurred
Selling Cost
include all costs that are incurred to secure customer orders and get the finished product to the customer (salesperson commisions, sales salaries, deliveries, shipping, advertising)
Manufacturing overhead costs are ___________ factory-related costs that are incurred when producing a product
indirect
Utilities paid for the manufacturing plant, what type of cost
indirect cost
beverages provided daily in plant break room, what type of cost
indirect cost
costs that are initially recorded as assets and expensed when sold are refereed to as
inventoriable costs
Direct Labor
labor costs that can be easily/physically traced to individual units of a product (salary for assembly line workers, carpenters at the home builder)
Gross Profit =
net sales - cost of goods sold
The wages of the receptionist in the administrative offices
period cost, administrative
Advertising cost
period cost, selling
The cost of wages and benefits for the carpenters to create the tables
product cost, direct
The cost of wood used to create tables to sell
product cost, direct
Property taxes on factory building
product cost, indirect
The cost of factory rent and cost of factory utilities
product cost, indirect
Cost of good manufactured
the manufacturing costs associated with the goods that were finished during the period
is sales commisionns variable or fixed?
variable