Acct Ch2 Quiz – Flashcards
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Merchandising companies include both wholesalers and retailers
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True
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Fixed Costs vary in total over a wide range of activity levels
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False
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Product costs and period costs receive similar treatment when presented in the financial statements
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False
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Typically do not have an inventory account
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Service Companies
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Raw materials inventory are converted into...
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Finished products
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Examples of Service Companies
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Insurance company, health care provider, a bank, etc.
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Buy products in bulk from producers, mark them up, and resell to retailers
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Wholesalers
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Report three types of inventory on the balance sheet
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Manufacturing companies
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For a company such as Staples, this includes all of the costs necessary to purchase products and get them into the store shelves
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Inventory (merchandise)
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Most for-profit organizations can be described as being one (or more) of three categories
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Merchandising, Manufacturing, or Service
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Composed of goods partially through the manufacturing process
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Work in Process inventory
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Land's End, Sears Roebuck, LL Bean are examples of...
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Merchandising Companies
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Inventoriable product costs consist of manufacturing overhead, direct labor and direct materials
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True
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Indirect costs cannot be traced to the cost objects, so they are allocated
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True
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Costs that differ between alternatives
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Differential Costs
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Management is able to influence or change the amount of the cost in the long run...
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Controllable Costs
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Costs that have already been incurred
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Sunk Costs
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The cost of making one more unit
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Marginal Costs
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Gasoline is an example of what in the operation of a vehicle?
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Variable Cost
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This cost should not be used to forecast total costs at different production volumes
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Average Costs
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Do not change in total with changes in production volume
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Fixed Costs
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Declines as a production facility produces more units
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Average Cost
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Over the long - term, all costs are uncontrollable
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False
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The schedule of cost of goods manufactured is prepared before the income statement for a manufacturing company
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True
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A marginal cost is the cost of making one more unit of a product
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True
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Cost of milk purchased from local dairy farmers
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Product - DM
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Depreciation on Marketing Department's computers
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Period
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Property tax on dairy processing plant
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Product - MOH
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Gasoline used to operate refrigerated trucks delivering finished dairy products to grocery stores
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Period
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Company president's annual bonus
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Period
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Depreciation on refrigerated trucks used to collect raw milk from local dairy farmers
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Product - MOH
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Plastic gallon containers in which milk is packaged
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Product - DM
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Research and development on improving milk pasteurization process
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Period
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Television advertisements for DariyPlains' products
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Period
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Lubricants used in running bottling machines
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Product - MOH
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Wages and salaries paid to machine operators at dairy processing plant
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Product - DL
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The activities in the value chain must take place in a specific order
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False
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Cost of prime-time TV ad featuring the new HP logo
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Marketing
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Salary of engineers who are redesigning the printer's on-off switch
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Design
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Depreciation on delivery trucks
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Distribution
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Transportation costs to deliver laser printers to retailers
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Distribution
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Costs of a customer support center website
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Customer service
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Plant manager's salary
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Production
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Purchase of plastic used in printer casings
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Production
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Depreciation on research lab
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R&D
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Cannot be directly traced to a cost object
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Indirect Costs
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Include the costs of all resources used throughout the value chain
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Total Costs
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GAAP requires companies to use only _______ for inventory reported on external financial statements
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Inventoriable Product costs
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May include health insurance, retirement plan contributions, payroll taxes, and paid vacations from the company
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Fringe Benefits
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when manufacturing companies sell their finished products, the costs of those finished products are removed from inventory and expensed as...
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Cost of Goods Sold
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The cost of transforming direct materials into finished goods
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Conversion Costs
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Include R&D, marketing, distribution and customer service costs
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Period Costs
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Direct material + direct labor =
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Prime costs
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Costs of materials that can be traced to specific units or batches are...
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Direct Costs
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Inventoriable product costs are initially treated as ______ on the balance sheet
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Assets
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The allocation process results in a less precise cost figure being assigned to the...
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Cost Objects
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Indirect manufacturing costs should be included in manufacturing overhead
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True
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The income statements of manufacturing companies are more complex than those of service or merchandising companies
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True
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An inventoriable cost could be the cost of the marketing and distribution of the product
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False
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Variable costs per unit decrease as production volume increases
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False
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Only manufacturing companies have finished goods inventory
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True
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The value chain concept helps companies control costs over the value chain as a whole
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True
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The total cost of a product equals the total fixed costs plus the total variable costs
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True
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Standard packaging materials used to package individual units of product for sale (cereal boxes)
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Product - DM
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Lease payment on administrative headquarters
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Period
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Telephone bills relating to the customer service call center
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Period
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Property insurance - 40% of building is used for Sales and Admin Property insurance - 60% of building is used for manufacturing
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Period Product - MOH
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Wages and benefits paid to assembly-line workers
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Product - DL
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Depreciation on automated production equipment
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Product - MOH
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Salaries paid to quality control inspectors in the plant
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Product - MOH
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Repairs and maintenance on factory equipment
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Product - MOH
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Sunk costs are irrelevant to the decision making process
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True
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Cost of TV ads promoting environmental awareness
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Period Costs
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Purchase of lumber to be cut into boards
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Inventoriable Product cost
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Salaries of scientists studying ways to speed forest growth
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Period Costs
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Cost of a new software to track inventory during production
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IPC
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Salaries of top executives
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Period Costs
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Cost of chemical applied to lumber to inhibit mold from developing
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IPC
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Life insurance for the CEO
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Period Costs
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Cost of electricity at paper mill
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IPC
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Depreciation on the gypsum board plant
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IPC
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All of the components of manufacturing - from R&D through customer service after the sale - are part of a firm's value chain
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True
