Smart Book 2.0- Ch 01 (pre-work)

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A company purchased a 12 month insurance policy on October 1 for $1,200. On DECEMBER 31 annual financial statements

$300 is reported as a expense and $900 is reported as an asset

Which of the following statements are true: A. Sales commissions are period costs. B. The wages of assembly-line workers are period costs C. Period costs are expensed in the same period in which they are incurred D. Period costs are included as part of the cost of goods

A & C

Which of the following are most likely fixed costs?

Administrative salaries, factory rent, factory insurance

Discretionary fixed costs include

Advertising, management training programs

How individual costs react to changes in activity level is referred to as cost_______

Behavior

Fixed costs that cannot easily be changed and often lock a company into a multi year decision are called __________fixed costs

Committed

Fantastic Furniture makes custom order couches. The material used to make couch is a(n) _________ cost of the customer placing the order.

Direct

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

in an automobile manufacturing plant, the assembly-line workers are classified as ______ _______ cost

Direct Labor

Labor cost that can be easily and conveniently traced to specific products are _________costs

Direct labor

A laptop computer manufacturer would consider the computer's processor chip to be a(n)__________cost

Direct material

Fixed costs that usually arise from annual spending decisions by management are called___________ fixed costs

Discretionary

True or false: All of a company's depreciation, property taxes and insurance premiums are considered manufacturing overhead

False

True or false: Labor costs that can be specifically traced to a product are indirect labor costs

False

As the level of activity moves outside of the relevant range, ________ costs increases or decreases in discrete steps rather than an linear fashion

Fixed

Within the relevant range of activity, _________ costs remain constant in total

Fixed

Variable costs vary__________ within the relevant range of activity

In total

Product costs are also called______ costs

Inventoriable

Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as

Manufacturing overhead

Manufacturing costs can be divided into three categories: Direct___________, ____________ labor and manufacturing _____________.

Materials, direct, overhead

Cost behavior

Refers to how a cost will change as activity level changes categories costs as fixed, mixed and variable

selling costs include______

Sales salaries, advertising, sales commissions

committed fixed costs include

Top management salaries, real estate taxes

Cost of goods sold for merchandising company, direct materials and commissions are all examples of ___________ costs

Variable

Products costs

also called inventoriable costs, "attach" to units of product as they are purchased for resale or produced

Cost objects include...

anything for which cost data is desired, organizational subunits, customers

How individual costs react to change in activity levels is referred to as cost ____________

behavior

Nonmanufacturing costs include:

company president's salary, sales commissions

Any item for which cost data is desired is called a(n)

cost object

Within the relevant range of activity

costs and activity can be approximate by a straight line fixed costs remains constant in total

Cost that can be easily and conveniently traced to a specific product are called ________ cost

direct

Prime costs include....

direct materials and direct labor

selling and administrative costs are _____ costs

direct or indirect

Fixed costs that can be cut-back or eliminated without significant damage to a company's long-term goals are ____________ fixed cost and ________________ fixed costs can not be easily changed or eliminated

discretionary, commited

Indirect labor costs include:

factory security guard wages, assembly-line supervisor salary

Within the relevant range of activity, _________ costs remain constant in total

fixed

Salaries of factory supervisors and factory maintenance personnel are examples of_____ labor costs

indirect

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

Manufacturing costs include......

manufacturing overhead, direct materials, direct labor

A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of______

manufacturing overhead, indirect materials

The accrual concept that costs incurred to generate a revenue are expensed in the same period the revenue is recognized is known as the _________ principle

matching

The components of prime costs are direct _______ costs and direct ________costs

materials, labor

A cost that contains both variable and fixed cost elements is a(n) __________ cost

mixed

Indirect materials include:

nails, glue, thread

Inventoriable costs is another term for _______ costs

product

The assumption that cost behavior is strictly linear is reasonably valid within the __________, _________ of activity

relevant range

Nonmanufacturing costs include_______

sales commission

Selling costs include:

sales salaries, advertising, sales commissions

True or false: The finished product of one company can become raw materials for another company

true

As the level of activity moves outside of the relevant range, fixed costs, ___________

Increase or decrease in discrete steps

Period costs are always expensed on the income statement in the period in which

Incurred

Salaries of factory supervisors and factory maintenance personnel are examples of _____ labor costs

Indirect

True or false: Labor costs that can be specifically traced to a product are indirect labor costs

false

The materials that go into the final product are called ________materials

raw

Within the relevant range, a cost that changes in direct proportion to changes in the activity level is a _________ cost

variable


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