Smartbooks Cost Accounting Chapter 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

Given: Sales of $360,000, Gross Margin of $140,000, Contribution Margin of $110,000, and Total Selling & Administrative Exp. of $60,000, net income using the traditional income statement format equals Blank______.

$80,000

The assumption that cost behavior is strictly linear is reasonably valid within the

Relevant range of activity

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

they are incurred

Which of the following statements are true?

Direct cost can be easily and conveniently traced to specific cost objects. A sales manager's salary is a direct cost of the sales office in which they work.

Selling and administrative costs are Blank______ costs.

Direct/Indirect

A factory produces a variety of tools. The factory manager's salary is a(n) Blank______ cost of a particular type of tool.

Indirect

Which of the following is not a COST CLASSIFICATION associated with decision making?

Indirect Costs

Which of the following are differences between the traditional and contribution format to income statements?

Traditional income statements focus on cost classifications. Contribution format statements focus on cost behavior. Contribution format statements make it easier to predict how decisions affect the future.

Opportunity costs Blank______.

are benefits lost when choosing one option over another should be considered in decision making

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

behavior

A(n) anything for which cost data are desired—including products, customers, plants, office

cost object

A change in revenues between two alternatives is known as

differential revenue

Administrative costs include

executive compensation and public relations costs

Costs that remain constant in total and vary per unit are

fixed

Within the relevant range of activity Blank______.

fixed costs remain constant in total and vary per unit the assumption that cost behavior is strictly linear is reasonably valid

On a traditional format income statement

gross margin is reported cost of goods sold includes both fixed and variable costs

Period costs Blank______.

include all costs that are not product costs are expensed in the period incurred

Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the

income statement

The difference in revenues between two alternatives is called Blank_

incremental revenue

A manufacturing cost that cannot be easily traced to a specific cost object is a(n)

indirect cost

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

matching principle

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

mixed

Cost objects include

organizational subunits / departments customers anything for which cost data is desired

Cost behavior Blank______.

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

Nonmanufacturing costs include

sales commissions company president's salary

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

Inventoriable costs is another term for

Products Costs

Costs that can be easily and conveniently traced to a specific product are called Blank______ costs.

direct

Direct materials and direct labor are both Blank______ costs.

manufacturing

Contribution margin is

sales revenue minus variable costs

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

variable