Test 1; Chapter 2
a change in revenues between two alternatives is known as ___ revenue or incremental revenue
differential
cost objects include: 1. anything for which cost data is desired 2. anything for which revenue is desired 3. customers 4. organizational subunits
1. anything for which cost data is desired 3. customers 4. organizational subunits
cost objects (check all that apply): 1. can be products, customers or jobs 2. may only be assigned direct costs 3. may be assigned costs to help control spending
1. can be products, customers, or jobs 3. may be assigned costs to help control spending
manufacturing costs include (check all that apply): 1. direct materials 2. administrative costs 3. indirect labor 4. selling costs 5. direct labor
1. direct materials 3. indirect labor 5. direct labor
costs that are shared by multiple cost objects in a company are known as __ costs
common
in an automobile manufacturing plant, the assembly line workers are considered to be _ __ costs.
direct labor
in an automobile manufacturing plant, the assembly line workers are considered to be __ ___ __
direct labor costs
materials that become an important component of the finished product and their costs can be easily and conveniently traced to the finished product are __ __
direct materials
preventing, detecting, and dealing with defects causes __ costs. opportunity marginal sunk quality
quality
the level of activity within which variable and fixed cost assumptions are valid is known as the __ __
relevant range
what is the formula that represents a contribution income statement?
sales- variable expenses = contribution margin - fixed expenses = net income
fixed costs remains constant in __ over the __ range of activity
total, relevant
A __ cost changes in direct proportion to changes in the activity level
variable
__ costs vary in total, in direct proportion to changes in activity level 1. opportunity 2. differential 3. fixed 4. variable
variable
which of the following statements are true? (check all that apply): 1. product costs are also called inventoriable costs 2. inventoriable costs are expensed in the period in which they are incurred 3. period costs are expensed when incurred 4. all costs in a merchandising company are period costs
- product costs are also called inventoriable costs - period costs are expensed when incurred
which of the following statements are true? (check all that apply) - product costs are always expensed in the same period in which the related products are produced - product costs include all costs involved in making and selling a product - product costs attach to units of product as they are purchased for resale or produced - product costs are also called inventoriable costs
- product costs attach to units of product as they are purchased for resale or produced - product costs are also called inventoriable costs
Within the relevant range in activity, variable costs (check all that apply): 1. remain constant per unit 2. vary in total 3. remain constant in total 4. vary per unit
1. remain constant per unit 2. vary in total
cost __ refers to how individual costs change as the level of activity increases or decreases
behavior
the variable cost per unit using the high low method is calculated as
change in cost divided by change in activity
the variable cost per unit using the high low method is calculated as: -total cost minus fixed cost -change in activity divided by change in cost -y=a+bx -change in cost divided by change in activity
change in cost divided by change in activity
a __ cost is a type of indirect cost incurred to benefit more than one cost object: opportunity common sunk prime
common
Sales revenue minus variable expenses is __ __
contribution margin
sales revenue minus variable expenses is...
contribution margin
managers use __ __ to predict how costs will change as the level of activity changes
cost analysis
cost objects include (check all that apply) anything for which revenue data is desired customers organizational subunits anything for which cost data is desired
customers organizational subunits anything for which cost data is desired
administrative costs include... 1. executive compensation and public relations costs 2. sales commissions and factory supervisors salaries, 3. shipping costs and sales commissions, 4. factory maintenance workers wages and factory supervisors salaries
executive compensation and public relation costs
Which of the following are most likely fixed costs?
factory rent, administrative salaries, factory insurance
__ costs remain constant in total within the relevant range of activity
fixed
A __ __ is a cost that remains constant, in total, regardless of changes in the level of activity.
fixed cost
a fixed cost remains fixed __ within the relevant range of activity - in total -per unit
in total
salaries of factory supervisors and factory maintenance personnel are ___ labor costs
indirect
manufacturing overhead includes (check all that apply) - administrative costs - indirect labor -selling costs - direct materials - direct labor
indirect labor direct labor direct materials
indirect materials and indirect labor are classified as..
manufacturing overhead
the revenue from selling one additional unit is called __ revenue
marginal
direct materials, direct labor, and manufacturing overhead are all __ costs
product
costs that have already been incurred and cannot be changed by decisions made in the current period or in future periods are called ___ ___
sunk costs
costs that have already been incurred and cannot be changed by decisions made in the current period or in future periods are called...
sunk costs
which of the following statements are true? (check all that apply): - direct labor and indirect labor are product costs - advertising and sales commissions are period costs - factory cleaning and maintenance are period costs - sales commissions and shipping costs are product costs
-direct labor and indirect labor are product costs -advertising and sales commissions are period costs
minor items such as nails and glue guns are considered to be 1. indirect materials 2. direct materials 3. administrative costs 4. selling costs
1 indirect materials (while it could be traced, it isn't worth the cost and effort to do it)
which statements regarding the high/low method are true? (check all that apply): 1. it only uses two data points 2. it is a better method than least squares regression 3. when applying this method, use the data points with the highest and lowest level of costs 4. the high low method should be used if a scatter graph indicates a linear relationship between cost and activity
1. it only uses two data points 4. the high/low method should be used if a scatter graph plot indicates a linear relationship between cost and activity
fixed costs (check all that apply): 1. remain constant in total regardless of changes in activity 2. should not be expressed on a per unit basis when making decisions 3. per unit becomes progressively larger as the level of activity increases 4. generally include rent and supervisor salaries
1. remain constant in total regardless of changes in activity 2. should not be expressed on a per unit basis when making decisions (when it is sometimes necessary, when fixed costs are expressed on a per unity basis, it gives the false impression that fixed costs behave like variable costs. Thus it should not be done for decision making purposes. 4. generally include rent and supervisor salaries.
Contribution margin is: 1. sales revenue minus variable costs 2. sales revenue minus cost of goods sold 3. sales revenue minus fixed costs 4. all revenues minus all costs
1. sales revenue minus variable costs
which of the following statements are true: (check all that apply) 1. within the relevant range of activity, fixed costs remain constant in total 2. the relevant range of activity is approximated by a straight line 3. within the relevant range of activity, total variable costs do not change
1. within the relevant range of activity, fixed costs remain constant in total 2. the relevant range of activity is approximated by a straight line
which of the following statements are true: (check all that apply) 1. a direct cost is sometimes referred to as a common cost 2. a regional sales managers salary would be a direct cost of the regional office in which the sales manager works 3. a particular cost is either direct or indirect, regardless of the cost object 4. a direct cost can be easily and conveniently traced to a specific cost object
2. a regional sales manager salary would be a direct cost object 4. a direct cost can be easily and conveniently traced to a specific cost object
which of the following statements are true? (check all that apply): 1. a particular cost is either direct of indirect, regardless of the cost object 2. a regional sales managers salary would be a direct cost of the regional office in which the sales manager works 3. a direct cost is sometimes referred to as a common cost 4. a direct cost can be easily traced to a specific cost object
2. a regional sales managers salary would be a direct cost of the regional office in which the sales manager works 4. a direct cost can be easily and conveniently traced to a specific cost object
an activity base (check all that apply): 1. is a measure of whatever causes fixed costs to occur 2. is sometimes called a cost driver 3. is part of the organization where major operations are planned and carried out 4. measures whatever causes costs to vary
2. is sometimes called a cost driver 3. measures whatever causes costs to vary
variable costs: 1. remain constant both in total and per unit 2. remain constant per unit and vary in total 3. vary both in total and per unit 4. remain constant in total and vary per unit
2. remain constant per unit and vary in total
which of the following statements are true? (check all that apply): 1. Mixed costs are also commonly known as step variable costs 2. the equation for a straight line can be used to express the relationship between mixed costs and the level of activity 3. mixed costs contain both fixed and variable costs 4. management cannot use account analysis when trying to estimate the components of a mixed cost
2. the equation for straight line can be used to express the relationship between mixed costs and the level of activity 3. mixed costs contain both fixed and variable elements
which of the following are indirect labor costs (check all that apply): 1. administrative assistant salary 2. assembly line worker wages 3. factory security guard wages 4. assembly line supervisor salary
3. factory security guard wages 4. assembly line supervisor salary
a contribution margin income statement (check all that apply): 1. is prepared primarily for external reporting purposes 2. reports gross margin and net income 3. separates costs into their fixed and variable components 4. can assist with management decision making
3. separates costs into their fixed and variable components 4. can assist with management decision making
which of the following statements are true (check all that apply): 1. mixed costs are also commonly known as step variable costs 2. management cannot use account analysis when trying to estimate the components of a mixed cost 3. the equation for a straight line can be used to express the relationship between mixed costs and the level of activity 4. mixed costs contain both fixed and variable elements
3. the equation for a straight line can be used to express the relationship between mixed costs and the level of activity 4. mixed costs contain both fixed and variable elements
Manufacturing overhead costs include: 1. direct materials, sales commissions, and factory assembly workers wages 2. administrative taxes and insurance, sales commissions, and factory assembly workers wages, 3. direct materials, administrative taxes and insurance, and sales commissions 4. indirect materials, factory supervisors salaries, and factory taxes and insurance
4. indirect materials, factory supervisors salaries, and factory taxes and insurance
Manufacturing overhead costs include: 1. indirect materials, factory supervisors salaries, and factory taxes and insurance 2. administrative taxes and insurance, sales commissions and factory assembly workers wages 3. direct materials, sales commissions, and factory assembly workers wages 4. direct materials, administrative taxes and insurance and sales commissions
indirect materials, factory supervisors salaries, and factory taxes and insurance
a dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of (check all that apply): administrative costs indirect materials direct materials manufacturing overhead
indirect materials, manufacturing overhead
An activity base (check all that apply): 1. measures whatever costs to vary 2. is sometimes called a cost driver 3. is a measure of whatever causes fixed costs to occur 4. is part of the organization where major operations are planned and carried out
measures whatever causes costs to vary is sometimes called a cost driver
__ costs are expensed on the income statement when incurred; ___ costs become part of inventory on the balance sheet
period, inventoriable
