managerial test 1
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 ________. $12,500 $16,250 $17,500 $15,000
$17,500 (13,000)/200 = 6.5 (round up to 7) 2,500 x 7 = 17,500
product costs
* All costs that are involved in acquiring or making a product. In the case of manufactured goods, these costs consist of: direct materials, direct labor, and manufacturing overhead. * attach to units as they are purchased or manufactured and REMAIN attached as the goods go into inventory or waiting sale * assigned to inventory on balance sheet
segment parts
* costs, revenue, and profit data 1. product lines 2. geographic territories 3. departments
example of activity bases/cost drivers
- DL hours - machine hours - units produced - units sold
indirect labor
- cannot be traced to products - traced at great cost and inconvenient * PART of MANUFACTURING OVERHEAD
costs to compare to other alternatives
- differential cost - opportunity cost - sunk cost
job ordering costing system
- direct materials - direct labor - manufacturing overhead costs * DL and DM can be directly traced to JOBS
Examples of variable costs
- direct materials - direct tabor - shipping - supplies - power - sales commission
what is another way to say "non manufacturing costs"
- selling costs - general costs - administrative costs (SG&A)
traditional format layout
1. COGS 2. selling & administrative expenses
managers need perspectives
1. ethics 2. strategic management 3. enterprise risk management 4. corporate social responsibility 5. process management 6. leadership
why are cost assigned to cost objects?
1. pricing 2. profitability 3. controlling spending
2 formats for income statements
1. traditional 2. contribution
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 ________. multiple choice 2 $25,000 $15,000 $10,000 $20,000
25,000
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? 84,000 $45,000 $40,000 $8,000
40,000 * idk the math for this ^ look at last question
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 ________. $50,000 $5 $1,000 $5,000
5,000
indirect costs
Costs that cannot be easily and accurately traced to a cost object EX: Nike factor makes shoes and shirts --> factory manager salary is indirect cost of the variety (like basketball shorts) bc the factory manger salary is incurred as a consequence of running entire factory, not just to make 1 product
Nike factory manager's salary is a _____ for the manufacturing division
DIRECT cost object = entire manufacturing division
indirect labors include the labor costs of:
EX: janitors supervisors materials handlers night security guards * can't trace their costs to specific units of a cost
financial vs. managerial
FINANCIAL: - OUTSIDE organization (owners, creditors, tax authorities, regulators) - past activities - objectivity - precision - GAAP - company wide reports - mandatory for external report MANAGERIAL: - inside organization for (planning, controlling, decision making) - future - emphasizes relevance - timeliness - segmenet reports - NO GAAP - not mandatory
Nike factory manager's salary is a _____ for producing basketball shorts
INDIRECT cost cost object = basketball shorts
traditional format math
Sales = 100,000 COGS = 80,000 gross margin = 20,000 ________________________________ selling = 8,000 administrative = 3,000 total selling and administrative expenses = 11,000 net operating income = 9,000
T/F - a variable cost changes in direct proportion to the changes in the level of activity
TRUE
total mixed cost equation
Y = a + bX Y = The total mixed cost a = The total fixed cost (the vertical intercept of the line). b = The variable cost per unit of activity (the slope of the line) X = The level of activity
Which of the following is not a business management perspective that goes beyond the numbers to enable intelligent planning, controlling, and decision making?
^^^ everything on the last slide is that ESECPL
sunk cost
a cost that has already been committed and cannot be recovered
common cost (type of Indirect cost)
a cost that is incurred to support a number of cost objects but that CANNOT be traced to them individually
differential cost
a difference in cost between two alternatives * always relevant costs
activity base aka COST DRIVER
a measure of whatever causes the incurrence of a variable cost
A mixed cost contains
a variable and fixed element
Cost objects include: a. anything for which cost data is desired b. anything for which revenue data is desired c. customers. d. organizational subunits / departments
a. anything for which cost data is desired c. customers. d. organizational subunits / departments
manufacturing companies (like General Motors)
acquire raw materials to product car
Manufacturing costs include all of the following categories except ________. a. administrative costs b. direct labor c. direct materials d. manufacturing overhead
administrative costs
what are selling costs (NON manufacturing costs) and examples
all costs that are incurred to secure customer orders and get the finished product to the customer EX: advertising, shipping, sales travel, sales commissions, sales salaries, and costs of warehouses
what are administrative costs (NON manufacturing costs) and examples
all costs with general management of an organization rather than the manufacturing or selling EX: executive compensation, general accounting, secretarial work, public relations, similar costs involved in the overall general administration of the organization as a whole
period costs
all the costs that are not product costs. All selling and administrative expenses are treated as period costs. EX: sale commissions, advertising, exec salaries, public relations, and rental costs of administrative offices
cost object
anything for which cost data are desired - products - customers - jobs - organizational sub units
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.
b. An opportunity cost cannot be changed by any decision made now or in the future.
matching principle
based on accrual concept that costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized
example of sunk cost
buying a .com website for for $25 mil for dog food, it didn't make money, but you already paid $25 mil for the website and you can't go back on buying it
merchandising company
buys finished products from manufactures and sells them to consumers
If a firm increases its activity level, ________. a. costs will remain the same b. all costs will rise c. some costs will change, other costs will remain the same
c. some costs will change, other costs will remain the same
direct costs
can be easily traced to a particular cost object EX: Nike assigns costs to various sales offices, then the sales manager salary in Paris = direct cost of that OFFICE (not the shoe)
manufacturing costs: indirect materials
cannot be physically or directly associated with the finished good EX: glue used in production solder that makes electrical connections in car * PART OF MANUFACTURING OVERHEAD
A ___________ is a cost that is incurred to support a number of cost objects but cannot be traced to them individually.
common cost
fixed cost changes
constant in total, no matter activity EX: - straight line depreciation - insurance rent - salaries
cost are assigned to
cost objects
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 expenses.
d. Cost of goods sold and selling and administrative expenses.
A fixed cost is a cost which ________. a. varies in total with changes in the level of activity b. remains constant per unit with changes in the level of activity c. varies inversely in total with changes in the level of activity d. remains constant in total with changes in the level of activity
d. remains constant in total with changes in the level of activity
raw materials can include _____ or ______
direct and indirect materials
Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) _________ of the branch.
direct cost
manufacturing costs go into these 3 categories
direct materials direct labor (touch labors) manufacturing overhead
manufacturing costs: direct materials
direct materials: raw materials that can be physically and directly associated with the finished product during the manufacturing process EX: car seat can be traced to a car
costs are classified as
direct or indirect
particular cost can be
direct or indirect
selling and administrative costs are direct indirect both
direct or indirect
distinction between fixed and variable costs on the contribution format is
distinguishes fixed and variable costs COGS (variable expenses) contribution margin is amount remaining from the difference of (sales) - (COGS + variable selling + variable administrative) * this amount contributes to the fixed expenses of (fixed selling + fixed administrative) NI = the difference in those 2 numbers
financial or managerial: emphasizes companywide reports
financial
financial or managerial: emphasizes financial consequences of PAST activities
financial
financial or managerial: emphasizes objectivity
financial
financial or managerial: emphasizes objectivity and verifyability
financial
financial or managerial: emphasizes on consequences of past activities
financial
financial or managerial: mandatory for external reports
financial
financial or managerial: must follow GAAP/IFRS
financial
financial vs managerial accounting
financial - financial info to EXTERNAL parties managerial - info to managers to use WITHIN the organization
in relevant range: fixed cost = 500 number of guests = increase from 200 --> 500 average cost per guest = (rental cost / # guests) what happens to the fixed costs if the number of guest increases
fixed cost = same average cost per guest = get smaller rental cost guests avg cost per guest 500 200 $2.00 500 500 $1.00 500 750 $0.67 500 1000 $0.50
differential costs can
fixed or variable
differential revenue
future revenue that differs between any two alternatives
cost bahavior
how a cost reacts to changes int he level of activity
Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) _________ of selling a tour package.
indirect cost
nails and glue are ________ _________
indirect materials
financial or managerial: decisions affecting the future
managerial
financial or managerial: emphasizes decisions affecting the future
managerial
financial or managerial: emphasizes relevance
managerial
financial or managerial: emphasizes segment reports
managerial
financial or managerial: emphasizes timeliness
managerial
financial or managerial: not required by GAAP
managerial
costs are either ____ or _____
manufacturing or nonmanufacturing
Factory materials, such as cleaning supplies, that are not components of finished products are classified as ______. direct materials administrative costs period costs manufacturing overhead
manufacturing overhead
Items such as indirect materials, indirect labor, maintenance and repairs on production equipment, depreciation, and insurance on manufacturing facilities are included in ________.
manufacturing overhead costs
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. a. materiality concept b. consistency concept c. matching principle Correct d. going concern assumption
matching principle
raw materials
materials that are used in the final product (NOT natural resources)
Property taxes associated with a company's administrative facility are considered ________.
non manufacturing costs
managerial accounting pillars/meaning planning controlling decision making
planning - establishing goals and specifying how to achieve them controlling - monitoring and ensuring. the proper execution of plans decision making - selecting the best possible course of action
How should the wages of a sheet metal worker in a fabrication plant be classified? a. Product cost Correct b. Period cost c. Nonmanufacturing cost d. Administrative cost
product cost
costs are either
product or period
non manufacturing costs 2 categories
selling costs administrative costs
Which of the following is always an irrelevant cost? - Differential cost - Sunk cost - Opportunity cost
sunk cost
to be traced to one cost object
the cost must be caused by the cost object
direct labors
touch labor - bc they touch the product while its being made - assembly line workers at General motors - carpenters at home builder - electricians that install equipment
t/f sunk costs are always ignored in decision making
true
opportunity cost
whatever must be given up to obtain some item EX: ford - investing funds in land or high grade security * opportunity cost is the opposite of what you choose
