accouting midterm#1 – Flashcards

any cost related to purchasing or manufacturing inventory. these costs are recorded in inventory accounts when incurred and become part of the cost of good sold when the products are sold

purchased inventory, manufacturing inventory (direct materials, direct labor, and manufacturing overhead)

indirect labor-salaries of people who work in the factory but don't make the products (production manager, maintenance staff, security, janitorial crews, etc) indirect materials-materials used in production that are too small to keep track of individually (glue, cleaning supples, etc) other overhead (factory rent, property tax, and insurance, machine deprecation, toilet paper in factory bathroom, etc)

all non product costs. these costs are expenses immediately on the income statement. selling costs: salaries/wages for marketing department cost of delivering products to customers advertising and promotion costs rent,insurance,property tax on building where marketing department resides depreciation on office equipment used by marketing department general and administrative costs: all costs related to corporate headquarters ( rent, salaries of top executive, etc) costs associated with corporate support functions such as accounting, legal services, information technology, and research and development

b and e

e-can't tell from the information given to answer this question you need to know whether the utilities are a product cost or a period cost

can be easily/conveniently traced to the cost object *box of jelly beans:candy maker wages, ingredient cost *tesla model S: assembly line wages, steel, windshield, tires, etc

shared by more than one cost subject--cannot be easily traced to a single cost object--must be allocated using some arbitrary rule *box of jelly beans : equipment depreciation, production manager's salary, factory rent *tesla model S: depreciation on manufacturing robots, property tax for factory, salaries of factory maintenance crew

Individual car---------------------car factory windshield : (direct)(direct) factory managers salary: (Indirect)(direct) CEO's salary--(indirect)(indirect) Wages of assembly line workers: (direct) (direct) Factory property tax (indirect) (direct) Salary of Car division manager: (indirect) (indirect) sales commissions: (direct) (not applicable) sales commission is not a direct or indirect cost for the car factory because it does not relate to or benefit the car factory in any way

total stays the same as activity level changes within relevant range of activity decreases per unit as activity level goes up (cost is spread over more units) can be committed or discretionary committed: not easily changed in the short term (e.g., long-term lease) discretionary: can be changed by managerial decision (advertising costs)

constant per unit within relevant range total increase as activity level goes up

has both a variable and fixed component as activity level increases: total cost increases (because of the variable part) per unit cost decreases ( because of the fixed part)

increases (the fixed portion of the cost is spread over fewer units)

a

*a cost might be fixed with respect to one activity but variable with respect to another activity *we will mostly be concerned with how costs vary with sales levels and/or production levels

Fixed cost + variable cost per unit * Activity level