ACCT 202 Exam 1 Flashcards

Questions and Answers

Wages paid to production supervisors would be classified as manufacturing overhead.

True

Depreciation is always considered a period cost in a manufacturing company.

False

Product costs are also known as inventoriable costs.

True

Depreciation on equipment a company uses in its selling and administrative activities would be classified as a period cost.

True Signup and view all the answers

Direct labor cost is classified as a Conversion cost AND Prime cost.

True Signup and view all the answers

Prime cost consists of:

direct materials and direct labor Signup and view all the answers

Property taxes on a company's factory building would be classified as a(n):

product cost Signup and view all the answers

Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory?

the amount paid to the individual who stained the chair Signup and view all the answers

A factory supervisor's wages are classified as:

indirect labor and manufacturing overhead Signup and view all the answers

Depreciation on company's retail outlets is classified as:

Period Signup and view all the answers

Management accounting is primarily concerned with providing information to:

managers inside the organization Signup and view all the answers

Managers dealing with both short-term and long-term issues is an example of:

Planning Signup and view all the answers

Managers use whatever information is relevant to the decision even if it does not conform to generally accepted accounting principles. This is related to:

decision making Signup and view all the answers

Managerial accounting places considerable weight on:

nonmonetary data that may be difficult to quantify Signup and view all the answers

The primary advantage of managerial accounting is to:

provide information for planning, control, and decision making Signup and view all the answers

The cost of lubricants used to grease a machine in production is an example of:

an indirect material cost Signup and view all the answers

Fixed costs are represented as:

Fixed per unit Signup and view all the answers

The depreciation on equipment in a manufacturer's headquarters can be classified as a(n):

Non-manufacturing cost Signup and view all the answers

The costs of drugs administered by the nursing station to patients would be classified as:

direct costs Signup and view all the answers

The controller of ABC Manufacturing considers the cost of salaries paid to personnel in his/her department to be:

indirect Signup and view all the answers

Straight-line depreciation on a computer used in the marketing department would be classified as:

a period cost that is fixed in terms of cost behavior Signup and view all the answers

Predetermined manufacturing overhead rate multiplied by actual allocation base is referred to as:

application of overhead Signup and view all the answers

When the actual overhead is more than the overhead allocated to jobs, it is termed:

underapplied Signup and view all the answers

If more overhead cost has been applied to jobs than has been incurred during the period, this entry that:

remains on the credit side of the MOH account Signup and view all the answers

The field of accounting that focuses on providing information for external decision makers is:

Financial Accounting Signup and view all the answers

The area of accounting that focuses on reporting information to internal users is:

Managerial Accounting Signup and view all the answers

Variable costs are defined as:

Costs that vary directly with the level of production Signup and view all the answers

Fixed costs are defined as:

Costs that remain constant as output changes Signup and view all the answers

Mixed costs consist of:

Costs that contain both a variable- and a fixed-cost element Signup and view all the answers

Fixed Cost Formula:

total cost - variable cost Signup and view all the answers

Mixed Cost Formula:

y = a + bx Signup and view all the answers

Variable cost formula:

total cost - fixed cost Signup and view all the answers

Manufacturing costs are comprised of:

direct materials, direct labor, manufacturing overhead Signup and view all the answers

Non-manufacturing costs include:

selling and administrative costs Signup and view all the answers

Product costs consist of:

All costs involved in acquiring or making a product Signup and view all the answers

Period costs are defined as:

Costs that are matched with the revenue of a specific time period Signup and view all the answers

Direct materials refer to:

Raw materials that can be physically and directly associated with manufacturing the finished product Signup and view all the answers

Direct labor involves:

the work of factory employees that can be physically and directly associated with converting raw materials into finished goods Signup and view all the answers

Manufacturing overhead encompasses:

all manufacturing costs except direct materials and direct labor Signup and view all the answers

Total cost is calculated as:

fixed costs plus variable costs Signup and view all the answers

Cost per unit is defined as:

total cost/total units Signup and view all the answers

The Traditional Income Statement format includes:

Sales Revenue - Cost of Goods Sold = Gross Margin - Selling & General and Administrative Expenses = Net Income from Operations Signup and view all the answers

The Contribution Income Statement Format includes:

Sales Revenue - Variable Costs = Contribution Margin - Fixed Costs = Net Income Signup and view all the answers

Job Order Costing is described as:

a costing system used in situations where many different products, jobs, or services are produced each period Signup and view all the answers

A job order cost system provides:

product costs for each quantity of product that is manufactured Signup and view all the answers

A job order cost sheet is a:

subsidiary account to the work-in-process account Signup and view all the answers

A job cost sheet records:

the materials, labor, and manufacturing overhead costs charged to that job Signup and view all the answers

Cost per unit is a measure of:

a firm's efficiency, obtained by dividing total costs by the number of units produced Signup and view all the answers

The selling price is defined as:

the amount a business receives from the sale of an item of merchandise Signup and view all the answers

POHR stands for:

predetermined overhead rate Signup and view all the answers

The formula for POHR is:

Estimated total manufacturing overhead cost for the coming period / Estimated total units in the allocation base for the coming period Signup and view all the answers

Opportunity cost is defined as:

Cost of the next best alternative use of money, time, or resources when one choice is made rather than another Signup and view all the answers

What is opportunity cost?

whatever must be given up to obtain some item Signup and view all the answers

A sunk cost is defined as:

a cost that has already been committed and cannot be recovered Signup and view all the answers

Study Notes

Accounting Concepts

Wages for production supervisors are classified as manufacturing overhead.
Depreciation is not always treated as a period cost in manufacturing; context matters.
Product costs, also known as inventoriable costs, include expenses related directly to product creation.
Equipment depreciation used in selling and administrative activities is categorized as a period cost.
Direct labor is classified as both a conversion cost and a prime cost.

Prime Costs

Prime costs comprise direct materials and direct labor.

Cost Classifications

Property taxes for factory buildings are classified as product costs.
The wages of a factory supervisor fall under indirect labor and manufacturing overhead.
Depreciation on retail outlet equipment is categorized as a period cost.
Costs of drugs administered to patients are considered direct costs.

Management Accounting

Management accounting primarily serves the needs of managers within the organization.
Managers engage in planning both short-term and long-term strategies to align employee efforts with company goals.
Decision-making in management relies on relevant information, which may not adhere to standard accounting principles.
Managerial accounting emphasizes nonmonetary data, which can be challenging to quantify.

Cost Behavior

Costs can be classified as variable (changing directly with production) or fixed (remaining constant regardless of output).
Mixed costs contain both variable and fixed elements, and they change in total but not proportionately with activities.

Formulas

Fixed Cost Formula: Total cost minus variable costs.
Mixed Cost Formula: y = a + bx, where 'a' is the fixed cost and 'b' the variable cost per unit.
Variable Cost Formula: Total cost minus fixed costs.

Types of Costs

Manufacturing costs include direct materials, direct labor, and manufacturing overhead.
Non-manufacturing costs consist of selling and administrative expenses.
Product costs involve all expenses in acquiring or producing a product.
Period costs are matched with revenues in a specific period and charged to expense as incurred.

Cost Accounting Methods

Job order costing is suitable for varied products produced each period.
A job order cost sheet records the total materials, labor, and overhead costs associated with a specific job.
Cost per unit reflects a firm's efficiency by dividing total costs by the quantity produced.

Financial Statements

Traditional Income Statement format shows sales revenue, cost of goods sold, and expenses to arrive at net income.
Contribution Income Statement format distinguishes variable costs from fixed costs to showcase contribution margins.

Overhead Application

The predetermined overhead rate (POHR) is established by dividing estimated overhead costs by the base for allocation.
Underapplied overhead occurs when actual overhead exceeds allocated overhead to jobs.
Overhead application involves multiplying the predetermined rate by the actual allocation base.

Additional Costs

Opportunity cost refers to the value of the next best alternative when making a choice.
Sunk costs are expenses already incurred and cannot be retrieved.

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Test your knowledge with these flashcards for ACCT 202. Key concepts include manufacturing overhead, period costs, and product costs. Perfect for reviewing before the exam.