Chapter 1-5

Question 1

Costs that can be easily and
conveniently traced to a unit of
product or other cost object

Answer 1

Direct costs

Question 2

Costs that cannot be easily and
conveniently traced to a unit of
product or other cost object

Answer 2

Indirect costs

Question 3

3 types of manufacturing cost classifications

Answer 3

direct materials, direct labor, manufacturing overhead

Question 4

Raw materials that
become an integral
part of the product
and that can be
conveniently traced
directly to it

Answer 4

Direct materials

Question 5

Those labor costs
that can be easily
traced to individual
units of product

Answer 5

Direct labor

Question 6

All manufacturing
costs except direct
material and direct
labor. These costs
cannot be readily
traced to finished
products

Answer 6

Manufacturing overhead

Question 7

expenses
directly related to creating
finished products

Answer 7

Prime cost

Question 8

expenses
incurred when turning raw
materials into a product

Answer 8

Conversion cost

Question 9

Costs necessary to
secure the order and
deliver the product

Answer 9

Selling costs

Question 10

All executive,
organizational, and
clerical costs

Answer 10

Administrative costs

Question 11

include direct
materials, direct labor, and
manufacturing overhead

Answer 11

Product costs

Question 12

include all selling
costs and administrative costs

Answer 12

Period costs

Question 13

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

Answer 13

Variable cost

Question 14

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

Answer 14

Fixed cost

Question 15

Two types of fixed costs

Answer 15

committed - can change in long term
discretionary - can change in short term

Question 16

The ___________ ________ of
activity for a fixed cost is
the range of activity over
which the graph of the
cost is flat.

Answer 16

Relevant range

Question 17

contains both variable and fixed
elements

Answer 17

Mixed cost

Question 18

difference in cost between any two alternatives

Answer 18

Differential or incremental costs

Question 19

A. What is always relevant to decisions?
B. What must be considered in every decision?
C. What is irrelevant to when making decisions?

Answer 19

a. differential cost/revenue
b. opportunity cost
c. sunk cost

Question 20

The potential benefit that is given up
when one alternative is selected over
an other

Answer 20

Opportunity cost

Question 21

have already been incurred and cannot be changed now or in the future

Answer 21

Sunk costs

Question 22

Predetermined overhead rate formula

Answer 22

est. total manufacturing overhead cost/est. total units in the allocation base

Question 23

When a company creates overhead rates based on the activities that it
performs, alternative approach to developing multiple POHR

Answer 23

Activity based costing

Question 24

When a company applies less overhead to production than it actually incurs,
it creates what is known as _____________ overhead

Answer 24

underapplied

Question 25

When a company applies more overhead to production than it actually incurs, it creates what is known as _____________ overhead

Answer 25

overapplied

Question 26

The adjustment for underapplied overhead ____________ cost of goods sold and ____________ net operating income.

Answer 26

increases, decreases

Question 27

The adjustment for overapplied overhead _____________ cost of goods sold and _____________ net operating income

Answer 27

decreases, increases

Question 28

What types of companies use job order costing?

Answer 28

manufacturing and service

Question 29

Job order costing systems are used when:

Answer 29

1. Many different products are produced each period 2. Products are manufactured to order 3. Each order requires allocating costs to each job

Question 30

Manufacturing overhead includes:

Answer 30

indirect materials and indirect labor

Question 31

Why use an allocation base?

Answer 31

a. It is impossible or difficult to trace overhead costs to particular jobs b. MOH consists of many different items ranging from grease used in machines to the production manager's salary c. Many types of MOH costs are fixed even though output fluctuates during the period

Question 32

Predetermined overhead rates are used

Answer 32

1. actual overhead is not know until end of period, thus inhibiting the ability to est. job costs during the period 2. actual overhead costs can fluctuate seasonally, misleading decision makers

Question 33

What is the issue with job order costing system that uses a single plantwide overhead rate to allocate all MOH? What's the solution?

Answer 33

overly simplistic, can be solved using multiple POHR

Question 34

Job order costing systems can accurately trace _____ materials and ______ labor costs to jobs

Answer 34

direct, direct

Question 35

Schedules contain three types of costs:

Answer 35

direct materials, direct labor, manufacturing overhead

Question 36

Schedules calculate:

Answer 36

a. cost of raw material and direct labor used in production and the amt of MOH applied to production b. manufacturing costs associated w/ goods finished during the period

Question 37

What's the difference between process costing and job order costing?

Answer 37

Process costing: - single homogeneous product produces continually - costs accumulated by dept. - unit costs computed by dept. Job order costing: - many different jobs - costs accumulated by individual job - unit costs computed by job

Question 38

What are similar between job order and process costing?

Answer 38

- assign material, labor and overhead costs to products and compute unit costs - use same manufacturing accounts - flow of costs is basically the same

Question 39

1. Makes no distinction between work done in prior or current periods. 2. Blends together units and costs from prior and current periods. 3. Determines equivalent units of production for a department by adding together the number of units transferred out plus the equivalent units in ending Work in Process Inventory.

Answer 39

weighted average method

Question 40

level of sales at which the total contribution margin equals the total fixed costs

Answer 40

break-even point

Question 41

measure of how sensitive net operating income is to a given percentage change in dollar sales

Answer 41

Operating leverage

Question 42

excess of budgeted or actual sales dollars over the break-even sales dollars

Answer 42

Margin of safety

Question 43

refers to the relative proportions in which a company's products are sold

Answer 43

Sales mix

Question 44

total units to be accounted for = total unites accounted for

Answer 44

beg. WIP inventory + units started in production = units completed and transferred + ending WIP inventory

Question 45

Cost of goods available for sale

Answer 45

beg. balance of finished goods + cost of goods manufactured

Question 46

in job order costing, depreciation expense goes into which account

Answer 46

manufacturing overhead