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Questions and Answers
Cost objects include ______.
Cost objects include ______.
Costs that can be easily and conveniently traced to a specific product are called ______ costs.
Costs that can be easily and conveniently traced to a specific product are called ______ costs.
direct
A cost that can be easily and conveniently traced to a specific cost object is a(n) ______ cost of that cost object, whereas costs that cannot be easily and conveniently traced to that specific cost object are ______.
A cost that can be easily and conveniently traced to a specific cost object is a(n) ______ cost of that cost object, whereas costs that cannot be easily and conveniently traced to that specific cost object are ______.
direct, indirect
There are two broad classifications of costs: manufacturing costs and ______ costs.
There are two broad classifications of costs: manufacturing costs and ______ costs.
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Direct materials and direct labor are both ______ costs.
Direct materials and direct labor are both ______ costs.
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Any item for which cost data is desired is called a(n) __________ __________.
Any item for which cost data is desired is called a(n) __________ __________.
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The material used to make a couch is a(n) ______ cost of the customer placing the order.
The material used to make a couch is a(n) ______ cost of the customer placing the order.
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A manufacturing cost that cannot be easily traced to a specific cost object is a(n) __________.
A manufacturing cost that cannot be easily traced to a specific cost object is a(n) __________.
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Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are __________.
Materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are __________.
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Manufacturing costs can be divided into three categories: direct ________, _________ materials, and manufacturing __________.
Manufacturing costs can be divided into three categories: direct ________, _________ materials, and manufacturing __________.
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Labor costs that can be easily and conveniently traced to specific products are ______ costs.
Labor costs that can be easily and conveniently traced to specific products are ______ costs.
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Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as ______.
Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as ______.
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A laptop computer manufacturer would consider the computer's processor chip to be a(n) ______ cost.
A laptop computer manufacturer would consider the computer's processor chip to be a(n) ______ cost.
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A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of ______.
A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of ______.
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Labor costs that can be specifically traced to a product are indirect labor costs.
Labor costs that can be specifically traced to a product are indirect labor costs.
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In an automobile manufacturing plant, the assembly-line workers are classified as ________ __________.
In an automobile manufacturing plant, the assembly-line workers are classified as ________ __________.
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Selling and administrative costs are _______ costs.
Selling and administrative costs are _______ costs.
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Factory materials, such as cleaning supplies, that are not components of finished products are classified as:
Factory materials, such as cleaning supplies, that are not components of finished products are classified as:
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Indirect materials include ______.
Indirect materials include ______.
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Indirect labor costs include:
Indirect labor costs include:
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Administrative costs include:
Administrative costs include:
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The accrual concept that costs incurred to generate revenue are expensed in the same period the revenue is recognized is known as the ________ principle.
The accrual concept that costs incurred to generate revenue are expensed in the same period the revenue is recognized is known as the ________ principle.
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Minor items such as nails and glue are usually considered to be ______.
Minor items such as nails and glue are usually considered to be ______.
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Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the:
Product costs flow through the inventory accounts until the goods are sold, at which time they are matched against sales on the:
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Period costs are always expensed on the income statement in the period in which:
Period costs are always expensed on the income statement in the period in which:
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A company purchased a 12-month insurance policy on October 1 at a cost of $1,200. On the December 31 annual financial statements:
A company purchased a 12-month insurance policy on October 1 at a cost of $1,200. On the December 31 annual financial statements:
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Any item for which cost data is desired is called a(n)
Any item for which cost data is desired is called a(n)
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How individual costs react to changes in activity level is referred to as cost _____
How individual costs react to changes in activity level is referred to as cost _____
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A cost that changes in direct proportion to changes in the activity level is a ______ cost.
A cost that changes in direct proportion to changes in the activity level is a ______ cost.
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Inventoriable costs is another term for _____ costs.
Inventoriable costs is another term for _____ costs.
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Within the relevant range of activity, ______ costs remain constant in total.
Within the relevant range of activity, ______ costs remain constant in total.
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Which of the following statements are true?
Which of the following statements are true?
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Cost assumptions are reasonably valid within the _____ _____ of activity.
Cost assumptions are reasonably valid within the _____ _____ of activity.
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Mixed costs are also commonly known as semi- ______ costs.
Mixed costs are also commonly known as semi- ______ costs.
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Cost behavior refers to how a cost will change as activity level changes and categorizes costs as fixed, mixed, and variable.
Cost behavior refers to how a cost will change as activity level changes and categorizes costs as fixed, mixed, and variable.
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Which type of cost changes in total, in direct proportion to changes in activity level?
Which type of cost changes in total, in direct proportion to changes in activity level?
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Which of the following is not a COST CLASSIFICATION associated with decision making?
Which of the following is not a COST CLASSIFICATION associated with decision making?
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Which of the following are most likely fixed costs?
Which of the following are most likely fixed costs?
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The level of activity within which variable and fixed cost assumptions are valid is known as the _____ _____
The level of activity within which variable and fixed cost assumptions are valid is known as the _____ _____
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The difference in costs between two alternatives is called a(n) ______ cost.
The difference in costs between two alternatives is called a(n) ______ cost.
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A cost that contains both variable and fixed cost elements is a(n) ______ cost.
A cost that contains both variable and fixed cost elements is a(n) ______ cost.
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What type of cost is never relevant and should be disregarded when making decisions?
What type of cost is never relevant and should be disregarded when making decisions?
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Which of the following are differences between the traditional and contribution format to income statements?
Which of the following are differences between the traditional and contribution format to income statements?
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Differential costs, opportunity costs, and sunk costs are all cost classifications used in:
Differential costs, opportunity costs, and sunk costs are all cost classifications used in:
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Based on the following information, calculate net income for Dana's Dress Shop using the traditional format. Sales $360,000, Gross Margin $140,000, Contribution Margin $110,000, Total Selling & Administrative Exp. $60,000.
Based on the following information, calculate net income for Dana's Dress Shop using the traditional format. Sales $360,000, Gross Margin $140,000, Contribution Margin $110,000, Total Selling & Administrative Exp. $60,000.
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Sales revenue minus variable expenses equals _____ _____
Sales revenue minus variable expenses equals _____ _____
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Differential cost is:
Differential cost is:
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Costs that have already been incurred and cannot be changed by decisions made in the current period or in future periods are called ____ costs.
Costs that have already been incurred and cannot be changed by decisions made in the current period or in future periods are called ____ costs.
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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.
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.
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Contribution margin is:
Contribution margin is:
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Study Notes
Cost Objects
- Cost objects encompass anything for which cost data is desired, including customers and organizational subunits.
Cost Classifications
- Costs are mainly classified into manufacturing and nonmanufacturing categories.
- Manufacturing costs include direct materials and direct labor.
- Indirect costs cannot be easily traced to specific cost objects.
Direct vs. Indirect Costs
- Direct costs are directly traceable to cost objects, such as materials used in products.
- Indirect costs, like factory overhead, include items that support production but aren’t directly tied to any specific product.
Components of Manufacturing Costs
- Manufacturing costs divide into direct materials, direct labor, and manufacturing overhead.
- Direct materials are essential components traceable to finished products, like a processor chip in a laptop.
- Labor costs can be classified as either direct (e.g., assembly-line workers) or indirect (e.g., supervisor salaries).
Cost Behavior
- Cost behavior considers how costs change with activity level; costs can be fixed, variable, or mixed.
- Variable costs change in direct proportion to activity level, while fixed costs remain constant in total within a defined relevant range.
Accrual and Matching Principles
- The matching principle states costs incurred to generate revenue are expensed in the same period the revenue is recognized.
- Period costs are expenses incurred in the period they arise and don’t tie to production.
Inventory and Product Costs
- Product (inventoriable) costs flow through inventory until sold, at which point they impact the income statement.
- Costs like insurance on a purchased policy are recorded as expenses over time in financial statements.
Specific Cost Classifications
- Sunk costs cannot be changed by current or future decisions and should be disregarded during decision-making.
- Differential costs represent the cost differences between alternative choices and are crucial in decision-making processes.
Contribution vs. Traditional Income Statements
- Traditional income statements classify costs primarily into product and period costs while contribution format focuses on fixed vs. variable costs, aiding management.
Calculating Net Income
- Net income calculations take into account various components of revenue and specific costs incurred during the period.
Miscellaneous Costs
- Administrative costs and manufacturing overhead play significant roles in the overall cost structure of a business.
- Minor items, such as nails and glue, often get classified as indirect materials due to their lower significance in production costs.
Studying That Suits You
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Description
Test your knowledge with these flashcards from A202 Smartbook Chapter 1. The cards cover key concepts such as cost objects, direct costs, and more. Perfect for quick reviews and mastering essential terminology.
