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1

Adventure Holiday sells thousands of your packages each month through its various branches. A branch manager's salary would be a(n) ______ of selling a tour package.

indirect cost

1. This is an indirect cost because the branch manager's salary is incurred as a consequence of running the entire branch—it is not incurred to generate one lead.


3. This is a direct cost. Remember to consider the cost object. In this case, the cost object is the branch.

2

A _____ is a cost that is incurred to support a number of cost objects but cannot be traced to them individually.

Common cost

2. A common cost is 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.

3

Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) ______ of the branch.

Direct cost.

3. This is a direct cost. Remember to consider the cost object. In this case, the cost object is the branch.

4

Manufacturing costs include all of the following except ________.
a. administrative
B. direct labor
c. direct materials
D. manufacturing overhead

administrative

5

Materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product are called ________.

direct materials

6

________ is sometimes called “touch labor.”

Direct labor

7

Items such as indirect materials, indirect labor, maintenance and repairs on production equipment, depreciation, and insurance on manufacturing facilities are included in ________.

manufacturing overhead costs

8

Property taxes associated with a company's administrative facility are considered ________.

nonmanufacturing costs

9

________ best describe the wages of a sheet metal worker in a fabrication plant.

Product costs

10

The ________ requires that the costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized.

matching principle

11

________ is common to both prime cost and conversion cost.

Direct labor

12

Which observation is true of period costs?

They are expensed in the period in which they are incurred.

13

If a firm increases its activity level, ________.

some costs will change, other costs will remain the same

14

A ______ ______ increases, in total, in population to activity.

variable cost.

15

Cyber Devices manufactures PCTV products that enable people to watch television content on their computers. It sells its product to retailers for $50. A tuner component that goes into each of these devices costs $5 to acquire. The total variable cost at an activity level of 1,000 units equal ________.

$5,000

$5 x 1,000 = $5,000

16

A fixed cost is a cost which ________.

remains constant in total with changes in the level of activity

17

In a small manufacturing facility, one welder is needed for every 200 hours of machine-hours or fewer in a month. The welder is paid a monthly salary of $2,500. If the total monthly requirement is 1,300 machine-hours, the total salaried employee expense is ________.

$17,500

7 welders x $2,500 per month = $17,500

18

In the equation, Y = a + bX, X represents ________.

the level of activity

19

Y = a + bX

Y = mix cost
A = fix cost
B = The variable cost per unit of activity
X = the level of activity

20

Differential costs are always ________.

relevant in making business decisions

21

________ is always an irrelevant cost.

Sunk cost

22

The potential benefit that is given up when one alternative is selected over another _______.

Opportunity cost

23

A cost that has already been incurred and that cannot be changed by any decision made now or in the future

Sunk cost

24

A difference in costs between any two alternatives

Differential cost

25

A difference in revenues between any two alternatives.

Differential revenue

26

The traditional income statement uses which of the following cost categories?

Cost of goods sold and selling and administrative expenses.

27

Audio Corporation purchased $20,000 of DVDs during the current year. The company had DVD inventory of $15,000 at the beginning of the year. An end of the year audit revealed that the company had DVD inventory of $10,000. The amount that would be reported as cost of goods sold in the income statement for the current year is ________.

$25,000

$15,000 + $20,000 - $10,000

28

Cost of Goods Sold = ________ x _______

Number of Units Sold x Unit Cost

29

Costs of Goods Sold = ________ + ________ - ________

Beginning Merchandise Inventory + Purchases - Ending Merchandise Inventory

30

Which of the following is true of the contribution approach?

It separates costs into fixed and variable categories.