Managerial ACC ch 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
Which of the following are differences between the traditional and contribution format to income statements?
Compared to traditional statements, contribution format statements provide management with a tool to make decision making easier. Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior.
T/F - All of a company's depreciation, property taxes and insurance premiums are considered manufacturing overhead.
False
T/F - the finished product of one company can become raw materials for another company
True (raw materials are anything that go into a finished product)
Which of the following are most likely fixed costs?
administrative salaries, factory rent, factory insurance
Product costs ____.
are also called inventoriable costs and "attach" to units of product as they are purchased for resale or produced
Period costs _____
are expensed when incurred and do not flow through the inventory accounts
Indirect labor costs include ______.
assembly-line supervisor salary and factory security guard wages
How individual costs react to changes in activity level is referred to as cost _____.
behavior
Cost behavior ___.
categorizes costs as fixed, mixed and variable; refers to how a cost will change as activity level changes
Fixed costs that cannot easily be changed and often lock a company into a multi-year decision are called _____ fixed costs.
committed
Sales revenue minus variable expenses equals ____ ____
contribution margin
any item for which cost data are desired
cost object
Differential costs, opportunity costs and sunk costs are all cost classifications used in ______.
decision making
The difference in revenues between two alternatives is called ______.
differential revenue
Fantastic Furniture makes custom order couches. The material used to make a couch is a(n) ______ cost of the customer placing the order.
direct
can be easily and conveniently traced to a specific product
direct costs
In an automobile manufacturing plant, the assembly-line workers are classified as ____ ____ cost.
direct labor
Labor costs that can be easily and conveniently traced to specific products are ______ costs.
direct labor
Selling and administrative costs are ______ costs.
direct or indirect
Administrative costs include ______.
executive compensation and public relations costs
Within the relevant range of activity ______.
fixed costs remain constant in total; costs and activity can be approximated by a straight line
A fixed cost remains fixed ______ within the relevant range of activity.
in total
CANNOT be easily or conveniently traced to a specific cost object
indirect costs
Which of the following is not a COST CLASSIFICATION associated with decision making?
indirect costs
Minor items such as nails and glue are usually considered to be ______.
indirect materials
Manufacturing overhead costs include ______
indirect materials, factory supervisors' salaries, and factory depreciation
Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as ______.
manufacturing overhead
A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of ______.
manufacturing overhead and indirect materials
manufacturing costs include ____
manufacturing overhead, direct materials, direct labor
The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is known as the ____ principle.
matching
A cost that contains both variable and fixed cost elements is a(n) ______ cost.
mixed
Indirect materials include ______.
nails, glue, and thread (Relatively insignificant materials are treated as indirect because it isn't worth the effort to trace the costs.)
A potential benefit that is forfeited or lost when one decision is chosen over another is called a(n) ____ ____
opportunity cost
cost objects include ____
organizational subunits, customers, anything for which cost data is desired
Direct materials, direct labor, and manufacturing overhead are all ______ costs.
product
On a traditional income statement, cost of goods sold reports the ____ costs attached to merchandise sold during the period, while selling and administrative expenses report all ____ costs that have been expensed as incurred.
product; period
materials that go into the final product
raw materials
Committed fixed costs include ______.
real estate taxes and top management salaries
The assumption that cost behavior is strictly linear is reasonably valid within the ____ ____ of activity.
relevant range
Contribution margin is ______.
sales revenue minus variable costs
Period costs are always expensed on the income statement in the period in which ______.
they are incurred
An income statement focusing on product and period costs has been prepared using a(n) ____ format, while a(n) ____ format income statement makes a distinction between fixed and variable costs.
traditional; contribution
A cost that changes in direct proportion to changes in the activity level is a ______ cost.
variable
prime costs include ___
direct labor and direct materials
A laptop computer manufacturer would consider the computer's processor chip to be a(n) ______ cost.
direct material
Within the relevant range of activity, ______ costs remain constant in total.
fixed
Differential cost is ______.
the difference in cost between two alternatives; also known as incremental cost
Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are ____ materials.
direct
