Chapter 1: Intro Flashcards
In automobile manufacturing plant, the assembly-line workers are consider to be
Direct labor
Within the relevant range of activity, variable costs
Vary in total.
Remain constant per unit.
Costs that can be easily traced to a specific product is called
Direct costs
What are the following?
Factory insurance.
Factory rent.
Administrative salaries.
Fixed costs.
Sales revenue minus variable expenses is
Contribution margin
These are:
Customers.
Organizational subunits.
Anything for which cost data is desired.
Cost objects
In the equation Y=a+bX, Y is the
Total mixed cost
Within the relevant range, ______ costs remain constant on a per unit basis
Variable
Direct materials and direct labor are both
Manufacturing costs
Fixed costs remain constant in ____ over the _____ relevant range of activity.
Total
Relevant
What type of costs is never relevant and should be disregarded when making decisions?
Sunk cost
Do mixed costs contain both variable and fixed cost elements?
Yes.
What can the equation of the straight-line method be used to express?
The relationship between mixed costs and the level of activity
Indirect materials can be easily traced to a specific product.
False
Costs incurred to obtain customers’ orders are known as
Selling costs
Using the high-low method, the fixed cost is calculated
Using either the high or low level of activity.
After the variable cost is calculated.
The difference costs in between two alternatives is called ______ cost.
Differential.
Variable costs?
Remain constant per unit and vary in total.
The relative proportion of each type of cost in an organization is known as the company’s _________
Cost structure.
What are product costs also called?
Inventoriable costs.
What do product costs “attach” to?
Units of product as they are purchased for resale or produced.
Contribution format income statement?
Organize costs by their behavior instead of by their function on a financial statement
Period costs
Are expenses on the income statement when incurred.
Inventoriable costs
Become part of inventory on the balance sheet.
An active base
Measures whatever causes costs to vary.
Is sometimes called a cost driver.
A particular cost may be direct or indirect depending on the cost object
True.
Direct materials, direct labor, and manufacturing overhead are all ______ costs.
Product
A fixed cost remains fixed ___ within the relevant range of activity
In total
The difference in revenues between two alternatives is called?
Differential revenue
Manufacturing costs can be divided into three categories:
Direct materials, direct labor, and manufacturing overhead.
Marginal cost
Is the cost of producing one more unit
The revenue obtained from selling one additional unit of product is called ______
Marginal revenue.
High-low method?
It uses two data points.
should be used if scatter graph plot indicates a linear relationship between cost and activity
When are period costs expensed?
In the same period in which they are incurred
What are non manufacturing costs?
They are period costs
Variable costs per unit using the high-low method is calculated by?
Change in cost divided by change in activity.
A method that uses all the available data points to divide a mixed cost into its fixed and variable components is called?
Least-squares regression
Differential costs are known as
Incremental costs
High-low method
Is based on the rise-over-run formula for the slope of a straight line
Total salaried employee expense may be step-variable costs
True
Step variable costs can be adjusted quickly as conditions change
True
In the equation Y=a+bX, b denotes the
Slope of the line.
Variable cost per unit of activity
If the high or low cost do not match the high or low levels of activity
Choose the period with the highest and lowest level of activity and their associated costs
The level of activity within which variable and fixed cost assumptions are valid is known as the
Relevant Range
