Managerial
discretionary fixed cost
a cost that can be changed in the short-run without specifically affecting organizational operations
direct cost
a cost that can be economically traced to a specific cost object
indirect cost
a cost that can't be economically traced to a specific cost object
sunk cost
a cost that has already been incurred and cannot be changed no matter what action is taken
variable cost
a cost that varies, in total, in direct proportion to changes in the level of activity. A variable cost is constant on a per unit basis.
under the variable-costing concept, unit product cost would most likely be increased by
a decrease in remaining useful life of factory machinery depreciated on the units-of-production method
internal control is defined as
a process, effected by an entity's board of directors, management and other personnel designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting and compliance
cost driver
a variable such as volume of activity that causes a particular cost to change over a given period of time
what factor related to manufacturing costs causes the difference between operating income computed using absorption costing and operating income computed using variable costing?
absorption costing "inventories" all fixed manufacturing costs
indirect costs are always
allocated
manufacturing overhead is under allocated if the amount
allocated during the period is less than the actual amount incurred
cost object
anything for which a manager wants a separate measurement of cost
a direct cost of one cost object
can be an indirect cost of another cost object
if each motorcycle requires a belt that costs $20 and 2,000 motorcycles are produced for the month, the total cost for belts is
considered to be a direct variable cost
the general term used to identify both the tracing and the allocation of accumulated costs to a cost object is
cost assignment
the determination of a cost as either direct or indirect depends on the
cost object chosen
if manufacturing overhead has been over allocated during the period, and most of the jobs produced have been sold, then
cost of goods sold on the income statement should be decreased
administrative cost
costs associated with the general management of the organization as opposed to manufacturing or selling
product cost
costs incurred in the acquisition or manufacture of a product
selling cost
costs incurred to secure customer orders and get the product or service to the customer
period cost
costs recorded on the income statement as expenses in the period in which they are incurred
variable costs
costs that change in total in direct proportion to changes in volume within the relevant range. Variable costs are constant on a per unit basis within the relevant range.
which element of the value chain would a technical support hotline for customers be considered
customer service
total variable costs will
decrease as production decreases within the relevant range
conversion costs include
direct labor and overhead
conversion cost
direct labor plus manufacturing overhead
prime cost
direct material plus direct labor
prime costs include
direct materials and direct labor
a manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of a indirect cost for the soccer equipment line is the
direct salary paid to the plant manager
how do you calculate predetermined manufacturing overhead rate used to allocate manufacturing overhead costs?
divide the total estimated manufacturing overhead costs by the total estimated amount of the allocation base
cost of goods manufactured equals
ending finished goods inventory plus unadjusted cost of goods sold minus beginning finished goods inventory
if the production volume decreases
fixed costs per unit increase
fixed costs
fixed costs stay constant in total within the relevant range. Fixed costs change on a per unit basis within the relevant range.
finished goods inventory would normally include
goods fully completed but not yet sold
work in process inventory would normally include
goods partially worked on but not yet fully completed
cost behavior refers to
how costs react to a change in the level of activity
cost behavior
how costs react to changes in the level of activity
indirect manufacturing costs may
include both variable and fixed costs
within the relevant range, fixed costs per unit will
increase as production decreases
within relevant range, variable costs
increase in total when activity levels increase
due to a cost-benefit tradeoff, some costs that could be traced to cost objects may be treated as
indirect costs
if Toyota corollas are the cost object, what are each of the costs including property taxes for the manufacturing plant, engines for the cars and janitors wages for the factory classified as direct or indirect
indirect, direct and indirect
committed fixed cost
investments that cannot be significantly reduced even for short periods of time without having a significant impact on organizational operations
costs remain the same amount alternatives are
irrelevant costs
for a manufacturing company, direct labor costs may be included in
only in work in process inventory, finished goods inventory and cost of goods sold
for a manufacturing company, indirect manufacturing costs may be included in
only raw materials inventory, work-in-process inventory, finished goods inventory and cost of goods sold
last month, when 10,000 units of a product were manufactured, the cost per unit was $60. At this level of activity, variable costs are 50% of total unit costs. If 10,500 units are manufactured next month and production activity is still within the relevant rang then
per unit total cost will decease
for a manufacturing company, direct material costs may be included in
raw materials inventory, work in process inventory and finished goods inventory
within the relevant range, a variable cost
remains constant on a per unit basis as the number of units produced increases
depreciation on a factory would be classified as
research and development
when making a decision to buy a new computer you should not consider
sunk costs
activity base
the activity that causes the incurrence of a variable cost
cost tracing is
the assignment of direct costs to the chosen cost object
cost allocation is
the assignment of indirect costs to the chosen cost object
marginal cost
the cost of producing the next unit
inventorial costs are expensed on the income statement when
the products are sold
relevant range
the range of activity over which total fixed costs and variable cost per unit remains constant
relevant range
the range of activity over which total fixed costs and variable costs per unit remain constant
cost structure
the relative proportion of variable, mixed and fixed costs in an organization
total manufacturing costs equal
the sum of direct materials and conversion costs
the use of departmental overhead rates generally result in
the use of a separate cost allocation base for each department in the factory
how do fixed costs per unit behave?
they increase as production decreases
how do variable costs per unit behave?
they remain the same throughout production levels within the relevant range
2 SEC rule 10b-5 provides, among other things, that it shall be unlawful for any person, directly or indirectly
to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances in which they are made, not misleading
the most critical element in internal control is
tone at the top
the ending balance work in process equals
total manufacturing costs to account for minus cost of goods manufactured
if the volume of sales increases for a company that has both fixed and variable costs
total variable costs increase
indirect costs can't be
traced to a particular cost object in an economically feasible way
unit contribution margin
unit sales price minus unit variable costs
classifying a cost as either direct or indirect depends upon
whether the cost can be economically traced to the cost object
what will happen to the contribution margin if fixed costs related to a product increase while variable costs and sales price remain constant?
will not change