Question 1

direct cost

Accepted Answer

a cost that can be easily and conveniently traced to a specified cost object (can be easily traced)

Question 2

indirect cost

Accepted Answer

a cost that cannot be easily and conveniently traced to a specified cost object (cannot be easily traced)

Question 3

common cost

Accepted Answer

a cost that is incurred to support a number of cost objects but cannot be traced to them individually. (a common cost is a type of indirect cost)

Question 4

Manufacturing companies such as (Texas Instruments, Ford, and DuPont) separate their costs into 2 broad categories:

Accepted Answer

1. manufacturing costs 2. nonmanufacturing costs

Question 5

Most manufacturing companies further separate their manufacturing costs into 2 direct cost categories, (_____ & _____) AND one indirect cost category (_______)

Accepted Answer

1. direct materials 2. direct labor 3. manufacturing overhead

Question 6

raw materials & they may include (1._____ & 2. _____)

Accepted Answer

materials that go into the final product 1. direct materials 2. indirect materials

Question 7

direct materials

Accepted Answer

those materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product

Question 8

2 examples of direct materials

Accepted Answer

1. seats that Airbus purchases from subcontractors ton install in its commercial aircraft 2. electronic components that Apple uses in its iPhones

Question 9

direct labor

Accepted Answer

consists of labor costs that can be easily (physically & conveniently) traced to individual units of products

Question 10

direct labor is sometimes called ________

Accepted Answer

touch labor b/c direct labor workers typically touch the product while it is being made

Question 11

indirect labor

Accepted Answer

labor costs that cannot be physically traced to particular products, or that can be traced only at a great cost & inconvenience

Question 12

manufacturing overhead

Accepted Answer

3rd manufacturing cost category, includes all manufacturing costs except direct materials and direct labor

Question 13

nonmanufacturing costs are often divided into 2 categories:

Accepted Answer

1. selling costs 2. administrative costs

Question 14

selling costs

Accepted Answer

includes all costs that are incurred to secure customer orders and get the finished product to the customer

Question 15

administrative costs

Accepted Answer

includes all costs associated w/ general management of an organization rather than with manufacturing or selling

Question 16

matching principle

Accepted Answer

based on the accrual concept that costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized

Question 17

product costs

Accepted Answer

include all costs involved in acquiring or making a product

Question 18

inventoriable costs

Accepted Answer

because product costs are initially assigned to inventories

Question 19

period costs

Accepted Answer

are all the costs that are not product costs

Question 20

All __________ and ______________ expenses are treated as period costs

Accepted Answer

1. selling 2. administrative

Question 21

product cost =

Accepted Answer

direct materials + direct labor + manufacturing overhead

Question 22

period cost =

Accepted Answer

selling expenses + administrative expenses

Question 23

conversion cost =

Accepted Answer

direct labor + manufacturing overhead

Question 24

prime cost =

Accepted Answer

direct materials + direct labor

Question 25

variable cost

Accepted Answer

varies, in total, in direct proportion to changes in the level of activity

Question 26

variable cost is constant if __________________

Accepted Answer

expressed on a per unit basis

Question 27

fixed cost

Accepted Answer

cost that remains constant, in total, regardless of changes in the level of activity

Question 28

relevant range

Accepted Answer

is the range of activity within which the assumption that cost behavior is strictly linear is reasonably valid

Question 29

mixed cost

Accepted Answer

contains both variable and fixed cost elements (aka semivariable costs)

Question 30

Y = a + bX

Accepted Answer

Y = total mixed cost a = total fixed cost b = variable cost per unit of activity X = activity level

Question 31

account analysis

Accepted Answer

an account is classified as either variable or fixed based on analyst\'s prior knowledge of how the cost in the account behaves

Question 32

engineering approach

Accepted Answer

to cost analysis involves a detailed analysis of what cost behavior should be, based on an industrial engineer\'s evaluation of the production methods to be used, the material specifications, labor requirements, equipment usage, production efficiency, power consumption, and so on

Question 33

dependent variable

Accepted Answer

cost (the amount of cost incurred during a period depends on the level of activity for the period) -- total maintenance cost--Y

Question 34

independent variable

Accepted Answer

activity (causes variations in the cost) --activity ---X

Question 35

cost behavior is considered _________ whenever a straight line is a reasonable approximation for the relation b/w cost and activity

Accepted Answer

linear

Question 36

the fixed and variable cost elements of a mixed cost can be estimated using the ______________ method

Accepted Answer

high-low method / least-squares regression method

Question 37

variable cost =

Accepted Answer

(slope of line) =  (cost at high activity level - cost at the low activity level) / (high activity level - low activity level) OR change in cost / change in activity

Question 38

fixed cost element =

Accepted Answer

total cost - variable cost element

Question 39

least-squares regression method

Accepted Answer

uses all of the data to separate a mixed cost into its fixed and variable components

Question 40

cost of goods sold =

Accepted Answer

beginning ending  merchandise + purchases -- merchandise  inventory inventory

Question 41

contribution margin

Accepted Answer

is the amount remaining from sales revenues after variable expenses have been deducted (this amount contributes toward covering fixed expenses and then toward profits for the period)

Question 42

differential cost

Accepted Answer

a diff. in costs b/w any 2 alternatives (aka \"incremental cost\")

Question 43

differential revenue

Accepted Answer

a diff. in revenues (usually just sales) b/w any 2 alternatives

Question 44

marginal revenue

Accepted Answer

the revenue that can be obtained from selling one or more unit of product

Question 45

opportunity cost

Accepted Answer

the potential benefit that is given up when one alternative is selected over another

Question 46

sunk cost

Accepted Answer

cost that has already been incurred and that cannot be changed by any decision made now or in the future (**should always be ignored)

Question 47

A particular cost is either direct or indirect, regardless of the cost object (true/false?)

Accepted Answer

false

Question 48

an individual cost may be indirect to one cost object and direct to another (true/ false?)

Accepted Answer

true

Question 49

a regional sales manager\'s salary would be a direct cost of the regional office in which the sales manager works (true/ false?)

Accepted Answer

true

Question 50

a direct cost can be easily and conveniently traced to a specific cost object (true/false)

Accepted Answer

true

Question 51

a direct cost is sometimes referred to as a common cost (true/false)

Accepted Answer

false

Question 52

marginal cost

Accepted Answer

the cost added by producing one extra item of a product

Question 53

direct materials & direct labor are both:

Accepted Answer

manufacturing costs

Question 54

manufacturing costs can be divided into 3 categories:

Accepted Answer

1. direct materials 2. direct labor 3. manufacturing overhead

Question 55

indirect materials & indirect labor are classified as:

Accepted Answer

manufacturing overhead

Question 56

indirect materials include:

Accepted Answer

nails, glue, thread

Question 57

costs associated w/ the general management of an organization is called _______________ costs

Accepted Answer

administrative costs

Question 58

advertising & sales commissions are ____________ costs

Accepted Answer

period costs

Question 59

direct labor & indirect labor are ___________ costs

Accepted Answer

product costs

Question 60

period costs are also called inventoriable costs (true/false)

Accepted Answer

false

Question 61

the wages of assembly line workers are period costs (true/false)

Accepted Answer

false

Question 62

nonmanufacturing costs are period costs (true/false)

Accepted Answer

true

Question 63

period costs are expensed in the same period in which they were incurred (true/false)

Accepted Answer

true

Question 64

a _____ cost changes in direct proportion to changes in the activity level: (mixed/variable/fixed)

Accepted Answer

variable

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