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Accounting 2 > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

Which type of accounting is concerned with reporting financial information to external parties, such as stockholders, creditors, and regulators

A

Financial Accounting

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2
Q

Which type of accounting is concerned with providing information to managers within an organization so that they can plan, control operations, and make decisions

A

Managerial Accounting

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3
Q

What are the two different types of costs?

A

Direct Costs
Indirect Costs

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4
Q

What are the three classifications of manufacturing costs?

A

Direct Materials
Direct Labor
Manufacturing Overhead

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5
Q

T/F- the three classifications of manufacturing costs are also known as product costs

A

True

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6
Q

What type of manufacturing cost consists of raw materials that become an obvious part of the product and can be easily traced directly to it.

A

Direct Materials

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7
Q

T/F- A radio installed in a truck is known as direct materials

A

True

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8
Q

What type of manufacturing cost consists of labor costs
that can be easily traced to individual units of product

A

Direct Labor

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9
Q

T/F- An example of direct labor is: Wages paid to technician who installed the radio in the truck

A

True

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10
Q

What type of manufacturing cost includes all of the costs that are incurred to operate the manufacturing facility?

A

Manufacturing Overhead

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11
Q

T/F- Manufacturing Overhead are considered direct costs that cannot be traced to single products

A

FALSE, because the costs cannot be traced to a single product it is known as an INDIRECT cost

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12
Q

What are some examples of manufacturing overhead in a company?

A

Plant utilities
Depreciation and maintenance on equipment
insurance on factory

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13
Q

Materials consumed the factory but not put into the product is known as

A

Indirect Materials

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14
Q

Material put into the product that is too difficult to count or measure is also known as

A

Indirect Materials

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15
Q

What are some examples of indirect materials?

A

cleaning solvents, light bulbs, first aid, thread in a sofa or glue on a tennis shoe

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16
Q

Employees who work in the plant but are not directly
involved in the assembly or manufacture of the product is known

A

Indirect Labor

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17
Q

What are some examples of manufacturing overhead?

A

Depreciation of equipment
Plant utility costs
property taxes
insurance premiums in order to operate

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18
Q

T/F- All indirect costs associated with operating the factory are include in manufacturing OH. These costs will eventually be assigned to products

A

True

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19
Q

Manufacturing costs are often classified between what two costs?

A

Prime Cost
Conversion Cost

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20
Q

What terms make up prime cost?

A

Direct Material
Direct Labor

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21
Q

What terms make up conversion cost

A

Direct Labor
Manufacturing O/H

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22
Q

Costs incurred to secure orders and deliver the product. These costs can be
either direct (commission)
or indirect (advertising) are known as

A

Selling Costs

23
Q

All executive, organizational, and clerical costs. These costs can be either direct
(warranty registration)
or indirect (executive
salaries).

A

Administrative Cost

24
Q

All of the costs that are involved in buying or making a product is known as

A

Product Costs

25
Q

T/F- Product costs “attach to” or are added to a product when it is purchased or as it is manufactured. They stay attached to the product as long as the product is in inventory waiting to be sold.

A

True

25
Q

The inventory accounts used by manufacturing companies include what 3 things?

A

Raw Materials
Work in Process
Finished Goods

26
Q

T/F- Inventory is on an Income statement

A

False, Balance sheet

27
Q

T/F- Cost of Goods Sold is on the income statement

A

True

28
Q

Which of the following costs would be considered a period rather than a product cost in a manufacturing company?
A. Manufacturing equipment depreciation.
B. Property taxes on corporate headquarters.
C. Direct materials costs.
D. Electrical costs to light the production facility.
E. Sales commissions.

A

B) Property taxes on corporate headquarters
E) Sales Commisions

29
Q

Cost behavior refers to how a cost will react to changes in the level of activity. What are the three most common classifications

A

Variable
Fixed
Mixed Costs

30
Q

A measure of volume- the cause of a variable cost is known as

A

Cost Driver

31
Q

A cost that varies, in total,
in direct proportion to changes
in volume is known as

A

Variable Cost

32
Q

T/F- a variable cost per unit is constant

A

True

33
Q

What is an example of a variable cost per unit from the powerpoint?

A

the bun cost in a Chick-fil-A sandwich

34
Q

A cost that remains constant, in TOTAL, regardless of changes in volume is known as

A

Fixed Cost

35
Q

T/F-A fixed cost per unit varies inversely with changes in volume

A

True

36
Q

T/F- When volume increases, Fixed cost per unit decreases

A

True

37
Q

T/F- When volume decreases, fixed cost per unit increases

A

True

38
Q

What is an example of a fixed cost from the powerpoint?

A

The rent at Chick-fil-a

39
Q

What are the two types of fixed costs?

A

Committed and Discretionary

40
Q

A long-term fixed cost, cannot
be significantly reduced
in the short-term and an example of this is rent or a lease. Which fixed cost am i describing

A

Committed

41
Q

This type of fixed cost may be altered in the short-term by current managerial decisions an example of this is an office Christmas party. Which fixed cost am I describing?

A

Discretionary

42
Q

What term refers to a normal range of activity which is
not abnormally high or low. Cost behavior is predictable in
this range.

A

Relevant Range

43
Q

Which of the following costs would be variable
with respect to the number of ice cream cones sold at a Baskin & Robbins? (There
may be more than one correct answer.)
A. The cost of lighting the store.
B. The wages of the store manager.
C. The cost of ice cream.
D. The cost of napkins for customers

A

C. The cost of ice cream.
D. The cost of napkins for customers

44
Q

What type of cost is the difference in cost between two alternatives

A

Differential or Incremental Cost

45
Q

What is another name for differential costs?

A

Incremental

46
Q

A difference in revenue between two alternatives is called

A

Differential Revenue

47
Q

The potential benefit that is
given up when one alternative is selected over another is known as

A

Opportunity Cost

48
Q

Costs have already been incurred and cannot be
changed now or in the future are known as

A

Sunk Costs

49
Q

What costs should be ignored when making decisions?

A

Sunk Costs

50
Q

What type of format income statement is used by 3rd parties and conforms to GAAP

A

the Traditional Format

51
Q

What type of format income statement is only used by management and classifies costs by behavior( fixed or variable). This type also helps management predict how income will be affected by changes in volume

A

Contribution Format

52
Q

Suppose that your car could be sold now for $5,000. Is this a sunk cost?
A. Yes, it is a sunk cost.
B. No, it is not a sunk cost.

A

B. No, it is not a sunk cost.

Accounting 2 (3 decks)

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