Chapter 1 HW & Quiz Review Flashcards
In account analysis, an account is classified as either variable or fixed based on an analyst’s prior knowledge of how the cost in the account behaves. True or False?
True
Contribution format income statements are prepared primarily for external reporting purposes. True or False?
False
A direct cost is a cost that can be easily traced to the particular cost object under consideration. True or False?
True
Variable costs per unit are not affected by changes in activity. True or False?
True.
A contribution format income statement separates costs into fixed an variable categories, first deducting variable expenses from sales to obtain the contribution margin. True or False?
True.
In a traditional format income statement, the gross margin is sales minus cost of goods sold. True or False?
True
In a contribution format income statement for a merchandising company, the cost of goods sold reports the product costs attached to the merchandise sold during the period. True or False?
False
Depreciation on equipment a company uses in its selling an administrative activities would be classified as a period cost. True or False?
True.
The potential benefit that is given up when one alternative is selected over another is called a sunk cost. True or False?
False.
As activity decreases within the relevant range, fixed costs remain constant on a per unit basis. True or False?
FAlse
A merchandising company typically will have a high proportion of which type of cost in its cost structure?
A) Step-Variable
B) Variable
C) Mixed
D) Fixed
Variable
Contribution margin is:
A) Sales less variable production expense.
B) Sales less cost of goods sold.
C) Sales less variable production, variable selling, and variable administrative expenses.
D) Sales less all variable and fixed expenses.
C) Sales less variable production, variable selling, and variable administrative expenses.
Differential costs can:
A) Be either fixed or variable.
B) Only be fixed costs.
C) Only be variable costs.
D) Be sunk costs.
Be either fixed or variable.
Factory overhead is typically a(n):
A) Variable cost.
B) Fixed cost.
C) Irrelevant cost.
D) Mixed cost.
Mixed cost.
In the standard cost formula Y= a + bX, what does the “X” represent?
A) Total cost
B) Variable cost per unit.
C) The level of activity.
D) Total fixed cost.
The level of activity.
Which costs will change with a decrease in activity within the relevant range?
A) Unit variable cost and unit fixed cost.
B) Unit fixed costs and total variable cost.
C) United fixed cost and total fixed cost.
D) Total fixed costs and total variable cost.
Unit fixed costs and total variable cost.
For an automobile manufacturer, the cost of a driver’s side air bag purchased from a supplier and installed in every automobile would best be described as:
A) Fixed Cost
B) Variable Cost
C) Mixed Cost
D) Step-Variable Cost
Variable Cost
In the standard cost formula Y= a + bX, what does the “Y” represent?
A) Total Cost
B) Variable Cost per Unit
C) Total Variable Cost
D) Total Fixed Cost
Total Cost
Direct labor cost is classified as:
Conversion Cost Prime Cost A) Yes Yes B) No No C) No Yes D) Yes No
Yes; Yes
Manufacturing overhead includes:
A) All direct material, direct labor, and administrative costs.
B) All manufacturing costs except direct labor and direct materials.
C) All manufacturing costs except direct labor.
D) All selling and administrative costs.
All manufacturing costs except direct labor and direct materials.
The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. Listed below are some of the costs that the company incurs.
Required:
For each cost, indicate whether it would most likely be classified as direct materials, direct labor, manufacturing overhead, selling, or an administrative cost.
1) The costs of a hard drive installed in a computer:
Direct materials cost.
The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. Listed below are some of the costs that the company incurs.
Required:
For each cost, indicate whether it would most likely be classified as direct materials, direct labor, manufacturing overhead, selling, or an administrative cost.
2) The cost of advertising in the Puget Sound Computer User newspaper.
Selling cost.
The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. Listed below are some of the costs that the company incurs.
Required:
For each cost, indicate whether it would most likely be classified as direct materials, direct labor, manufacturing overhead, selling, or an administrative cost.
3) The wages of employees who assemble computers from components.
Direct labor cost.
The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. Listed below are some of the costs that the company incurs.
Required:
For each cost, indicate whether it would most likely be classified as direct materials, direct labor, manufacturing overhead, selling, or an administrative cost.
4) Sales commissions paid to the company’s salespeople.
Selling cost