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Questions and Answers
How do total fixed costs behave as production levels change?
What happens to fixed costs per unit as production increases?
What is the first step in creating an Excel table from a data set?
Which action is used to extract a specific subset from large data sets?
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Which of the following describes a function of data analytic tools?
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Which of the following is considered a direct cost for manufacturing a desk?
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In the context of a grocery store's Produce Department, which of the following would be classified as an indirect cost?
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What determines whether a cost is considered direct or indirect?
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Which of the following items would typically be classified as a product cost?
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Which option best describes period costs?
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When analyzing costs for a manufacturing firm, which category do sold goods typically fall under?
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What type of cost is associated with the oil used for machinery in desk production?
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Which of the following represents a scenario where a cost can be classified differently based on the cost object?
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Which cost is considered irrelevant for decision making?
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Which statement describes fixed costs?
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How do variable costs behave as production levels change?
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Which of the following is an example of a controllable cost?
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What characterizes an uncontrollable cost?
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Which statement regarding total variable costs is correct?
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Which type of company primarily provides services rather than products?
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What are the three inventory accounts used by manufacturing companies?
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Which of the following is a main characteristic of merchandising companies?
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In the context of managerial accounting, which costs are considered relevant?
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Which type of company is likely to produce its own inventory?
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What type of costs are typically classified as period costs?
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Which of the following is an element of the value chain?
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What distinguishes direct costs from indirect costs?
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What is the total service revenue reported by the service company?
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What is the net operating income for the merchandising/manufacturing company?
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How much is the cost of goods sold for the merchandising/manufacturing company?
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What is the net income reported by the service company?
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What is the formula used to calculate the cost of goods sold?
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Which of the following is considered an operating expense for the merchandising/manufacturing company?
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What total amount is deducted from sales revenue to calculate net sales for the merchandising/manufacturing company?
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How are gross income and net operating income related in the merchandising company?
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How would Honda classify materials like steel and glass before car manufacturing?
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What classification would Walmart use for its clothing held for sale?
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How does Honda categorize its partially completed vehicles during production?
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In the value chain, what does the term 'marketing' refer to?
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Which part of the value chain would depreciation on a factory be classified under?
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What role does a technical support hotline play in the value chain?
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What distinguishes a direct cost from an indirect cost?
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Why might certain costs be categorized differently based on the cost object?
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What happens to fixed costs per unit as production levels change?
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How can you sort data in Excel?
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Describe the process of filtering data in Excel.
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What is the initial action required to convert a dataset into an Excel table?
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How do total fixed costs behave when production levels decrease?
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What are the three main categories of product costs in manufacturing?
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Define prime costs and conversion costs in the context of manufacturing.
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What types of inventory accounts do manufacturers maintain?
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How do total costs differ from inventoriable product costs?
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Which costs would you classify as manufacturing overhead?
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What is meant by period costs?
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Identify an example of a cost that could be both a period cost and a product cost depending on context.
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What distinguishes a service company from a merchandising company in terms of inventory?
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What is the sequence of inventory cost flow in a manufacturing company?
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Which calculation follows the cost of goods manufactured in determining a manufacturer's operating income?
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What distinguishes the balance sheets of manufacturing businesses from service businesses?
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Which item would be included on the balance sheet of a service company?
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Given the cost of goods manufactured is $500,000, what does it imply about the production efficacy for Active Apparel Company?
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What are the main components used to calculate the cost of goods manufactured?
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What does the ending work in process inventory indicate for a manufacturing company?
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How does ending finished goods inventory affect the calculation of cost of goods sold?
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What are direct costs associated with manufacturing a desk?
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How would the grocery store manager identify direct costs in the Produce Department?
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Explain what is meant by 'cost object' in cost accounting.
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What examples represent indirect costs in manufacturing?
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What distinguishes period costs from product costs?
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Can the same cost be classified as direct or indirect? Give an example.
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How are inventoriable product costs defined?
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In the context of a grocery store, which items generally represent product costs in the Produce Department?
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What happens to total fixed costs when production levels change?
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How do fixed costs per unit behave as production levels increase?
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What is the first step in creating a filter in Excel to analyze data?
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What role does filtering play in data analysis using data analytic tools?
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How do you convert a dataset into an Excel table?
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What type of inventory would Honda classify partially completed vehicles as?
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How are steel, glass, and plastic classified before their use in manufacturing cars?
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What inventory classification does Walmart assign to clothing held for sale?
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What is the sequence of inventory cost flow in a manufacturing company?
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In the context of the value chain, what does the term 'customer service' refer to?
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Which part of the value chain includes depreciation costs for a factory?
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Which calculation is made last when determining operating income for a manufacturer?
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What is the classification of costs associated with easily traceable expenses to a cost object?
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What is a primary difference between manufacturing and service company balance sheets?
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Which item would you expect to find on the balance sheet of a service company?
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How would you define 'indirect costs' in relation to cost objects?
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What role does marketing play in the value chain?
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What was the cost of goods manufactured reported by Active Apparel Company?
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How much work in process inventory was reported at the end for Active Apparel Company?
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What does the term 'finished goods inventory' indicate in manufacturing?
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In the context of manufacturing, what do raw materials and direct labor contribute to?
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What type of company is H & R Block classified as?
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How many inventory accounts do manufacturing companies typically have, and what are they?
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What distinguishes a manufacturing company from a merchandising company?
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Which type of company would typically analyze its costs using the value chain framework?
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What are the two main types of costs incurred when manufacturing a desk?
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What are period costs, and how do they differ from product costs?
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What type of company is General Mills classified as?
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How does the classification of a cost as direct or indirect depend on the cost object?
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What are direct costs, and how do they relate to manufacturing companies?
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Provide an example of a direct cost in the context of a grocery store's Produce Department.
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What are inventoriable product costs?
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In managing a manufacturing company, why is it important to distinguish between fixed and variable costs?
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What is a key characteristic of period costs?
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In manufacturing, how would one categorize the utility expenses of a factory?
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Explain the distinction between direct materials and direct labor in a manufacturing context.
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What would be an example of an indirect cost in a furniture manufacturing company?
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Study Notes
Distinguish between service, merchandising, and manufacturing companies
- Service companies provide intangible services to customers.
- Merchandising companies buy and resell finished goods without changing their form.
- Manufacturing companies convert raw materials into finished goods.
Identify the inventoriable product costs and period costs of merchandising and manufacturing firms.
- Inventoriable product costs: These are costs that are directly related to the production of goods and are included in inventory until the goods are sold.
- Period costs: Non-production costs are expensed in the period they are incurred, even if they are incurred in the period when product costs are incurred.
Manufacturing Costs
- Direct materials: The raw materials that are directly used in the production of goods.
- Direct labor: The wages of employees that are directly involved in the production of goods.
- Manufacturing overhead: Indirect costs related to the production of goods, including indirect materials, indirect labor, and other factory overhead.
Total Manufacturing Costs to Account For
- The total manufacturing costs to account for are the sum of the direct materials, direct labor, and manufacturing overhead costs.
Cost of Goods Sold:
- The cost of goods sold is the cost of the goods that were sold during a period.
- For a manufacturing company, this is the cost of goods manufactured, minus ending inventory.
Identify the inventoriable product costs and period costs of merchandising and manufacturing firms.
- Product costs: Costs that are directly related to the production of goods. These costs flow through the inventory accounts.
- Period costs: Costs that are not directly related to the production of goods. They are expensed in the period incurred.
Relevant Costs
- Relevant costs are future costs that differ between decision alternatives.
- Irrelevant costs are past costs (sunk costs) or future costs that are the same regardless of the decisions made.
Fixed and Variable Costs:
- Fixed Costs: Costs that stay the same in total over a wide range of volume levels.
- Variable Costs: Costs that change in total in direct proportion to changes in volume.
Direct and Indirect Costs:
- Direct costs can be traced directly to a specific cost object.
- Indirect costs cannot be traced directly to a specific cost object.
Distinguish between Service, Merchandising, and Manufacturing Companies
- Service Companies provide services instead of products.
- Merchandising Companies purchase finished goods and resell them to customers.
- Manufacturing Companies use raw materials to create products.
- Honda classifies steel, glass, and plastic as raw materials inventory since they'll be used in manufacturing their cars.
- Walmart classifies clothing it sells as merchandise inventory because they're ready for sale.
- Honda classifies partially completed vehicles as work in process inventory because they're not finished products.
Value Chain and Its Elements
- The value chain is a series of activities that add value to products and services and incur costs.
- The value chain includes research and development, design, production, marketing, distribution, customer service.
- Depreciation on factory equipment is part of the production stage of the value chain.
- Technical support hotlines are part of the customer service aspect.
Direct & Indirect Costs
- Direct Costs can be directly traced to a specific cost object.
- Indirect Costs cannot be easily traced to a cost object and must be estimated.
- A cost object can be something like products, departments, or customers.
- For a furniture manufacturer, direct costs for a desk include the cost of the wood and wages for factory workers directly involved in production.
- Indirect costs for a desk include indirect materials like oil, wages for factory managers, rent, and utilities.
- Wages of workers in the Produce Department and the cost of fruits and vegetables are direct costs for the Produce Department.
- Wages of checkout clerks and cost of advertising are indirect costs for the Produce Department.
Inventoriable Product Costs and Period Costs
- Inventoriable Product Costs are included as part of inventory on the balance sheet.
- Period Costs are expensed in the period they are incurred on the income statement.
- Direct materials are the raw materials used in production.
- Direct labor is the cost of labor directly related to production activities.
- Manufacturing overhead includes all other costs related to production, excluding direct materials and labor.
- Depreciation on production equipment is a manufacturing overhead cost.
- Telephone bills related to customer service is a period cost.
- Wages of assembly line workers are a direct labor cost.
- Repairs and maintenance on factory equipment are a manufacturing overhead cost.
- Lease payments on administrative headquarters are a period cost.
- Salaries paid to quality control inspectors are a manufacturing overhead cost.
- Property insurance for the manufacturing portion of the building is a manufacturing overhead cost.
- Standard packaging materials are a manufacturing overhead cost.
Prime & Conversion Costs
- Prime Costs include direct materials and direct labor.
- Conversion Costs include direct labor and manufacturing overhead.
- Conversion costs are the costs associated with transforming raw materials into finished goods.
Financial Statements
- Service companies do not have inventory accounts on the balance sheet.
- Merchandisers have Merchandise Inventory on the balance sheet.
- Manufacturers have Raw materials, Work in Process, and Finished goods inventory on the balance sheet.
- Cost of goods manufactured is calculated for manufacturers.
- Cost of goods sold is calculated for both merchandisers and manufacturers.
- Work in Process accounts for partially completed goods.
- Cost of goods sold is one of the items on the income statement.
- The main difference between the balance sheet of a manufacturer and a service business is the presence of inventory accounts.
Variable and Fixed Costs
- Variable Costs are costs that change in direct proportion to the level of activity.
- Fixed Costs are costs that remain constant regardless of the level of activity.
- Variable costs per unit will remain constant.
- Fixed costs per unit will decrease as the level of activity increases.
Data Analytics Tools
- Data analytics tools are used to derive summary information from large data sets.
- Sorting helps organize data by specific criteria (like date or location).
- Filtering helps identify specific subsets of data.
Types of Companies
- Service: Provides services rather than goods. Examples: H&R Block, hair salons
- Merchandising: Buys and resells finished goods. Examples: Walmart, Amazon
- Manufacturing: Converts raw materials into finished goods. Examples: General Mills (cereal company)
- Manufacturing companies have three inventory accounts: Raw materials, Work in process, and Finished goods.
Value Chain
- Activities that add value to products and services and cost money.
- Value chain: Research and development, Design, Production, Marketing, Distribution, Customer Service
Cost Classification
- Direct cost: Directly traceable to a specific cost object.
- Indirect cost: Not directly traceable to a cost object and must be allocated. Examples: Rent, utilities, depreciation
Product vs Period Costs
- Product costs: Become part of inventory until sold. Examples: Raw materials, direct labor, manufacturing overhead.
- Period costs: Expensed in the period they are incurred. They are not part of inventory. Examples: Selling and administrative expenses, marketing costs.
Financial Statements
- Cost of goods manufactured: The cost of goods that have been completed during the period and are available for sale. Only applies to manufacturing firms.
- Cost of goods sold: The cost of goods that have been sold during the period.
- Service firms do not have inventory.
- Merchandising firms have one inventory account: Merchandise inventory.
Cost Behavior
- Fixed costs: Remains constant in total, regardless of changes in activity volume. Examples: Rent, salaries, depreciation.
- Variable costs: Changes in total in direct proportion to changes in activity volume. Examples: Direct materials, direct labor, sales commissions.
- Total fixed cost remains the same regardless of production levels
- Total variable cost changes with the level of direct labor used
- Fixed costs per unit decrease as production increases
- Variable costs per unit remain the same regardless of production levels
Data Analysis
- Sorting data: Arranging data in a specific order
- Filtering data: Selecting a subset of data to focus on
- Data analytics tools help analyze revenue, cost, and inventory data
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Description
This quiz covers the distinctions between service, merchandising, and manufacturing companies. It also addresses inventoriable product costs and period costs specific to merchandising and manufacturing firms, while defining key components of manufacturing costs.