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SCM (RECITATION FORMAT) > CHAPTER 1: Managerial Accounting and Cost Concepts > Flashcards

CHAPTER 1: Managerial Accounting and Cost Concepts Flashcards

1
Q

What are three classifications of manufacturing costs?

A
  1. Direct Materials
  2. Direct Labor
  3. Manufacturing Overhead
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2
Q

What are Direct Materials?

A

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

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3
Q

What are Administrative Costs

A

All executive, organizational, and clerical costs.

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3
Q

What are Indirect Materials?

A

Materials used to support the production process.

Examples: lubricants and cleaning supplies used in the automobile assembly plant.

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4
Q

What is Direct Labor?

A

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

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4
Q

What is Manufacturing Overhead?

A

Manufacturing costs that cannot be easily traced directly to specific units produced.

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5
Q

What are Period Costs?

A

These include all selling costs and administrative costs.

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5
Q

What is Indirect Labor?

A

Wages paid to employees who are not directly involved in production work.

Examples: maintenance workers, janitors, and security guards.

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5
Q

What are Selling Costs?

A

Costs necessary to secure the order and deliver the product.

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6
Q

What are Product Costs?

A

These include direct materials, direct labor, and manufacturing overhead.

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7
Q
A
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8
Q

Which costs are classified as Prime Costs?

A

Direct Materials and Direct Labor

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8
Q

Fill the statements with their respective financial statement:

Inventory -
COGS -
Expense -

A

Inventory - Balance Sheet
COGS - Income Statement
Expense - Income Statement

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9
Q

Which costs are classified as Conversion Costs?

A

Direct Labor and Manufacturing Overhead

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10
Q

Which of the manufacturing cost is included in both Prime Costs and Conversion Costs?

A

Direct Labor

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11
Q

What are the three cost behaviors?

A
  1. Variable Costs
  2. Fixed Costs
  3. Mixed Costs
12
Q

What are variable costs?

A

These are costs that changes the total in a constant manner as the activity level rises and falls

13
Q

What is an Activity Base (Cost Driver)?

A

It is a measure of what causes the incurrence of variable costs. As the level of the activity base increases, the total variable cost increases proportionally.

14
Q

What are Fixed Costs?

A

These are costs that do not change for changes in activity that fall within the “relevant range

14
Q

What are the two types of fixed costs?

A
  1. Committed
  2. Discretionary
15
Q

What are Committed Fixed Costs?

A

These are long-term costs and cannot be significantly reduced in the short term. Examples: Depreciation on Bldg. and Equipment

15
Q

What are Discretionary Fixed Costs?

A

These may be altered in the short-term by current managerial decisions. Example: Advertising and R & D

16
Q

What is the relevant range?

A

It is the range of activity over which the graph of the cost is flat.

17
Q

What is the behavior of Variable costs when in a “total basis”?

A

Total variable cost increases and decreases in proportion to changes in the activity level.

18
Q

What is the behavior of Variable costs when in a “per unit basis”?

A

Variable cost per unit remains constant

19
Q

What is the behavior of Fixed costs when in a “total basis”?

A

Total fixed cost is not affected by changes in the activity level within the relevant range.

20
Q

What is the behavior of Fixed costs when in a “per unit basis”?

A

Fixed cost per unit decreases as the activity level rises and increases as the activity level falls? (INVERSE)

21
Q

Which format is used primarily for external reporting?

A

Traditional Format

22
Q

What are the uses of the contribution format?

A
  1. CVP Analysis
  2. Budgeting
  3. Segmented reporting of profit data
  4. Special decisions such pricing and make-or-buy analysis
23
Q

Which format is primarily used by management.

A

Contribution Format

24
Q

What are Direct Costs?

A

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

Examples: Direct Materials and Direct Labor

25
Q

What are Indirect Costs?

A

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

Example: Manufacturing Overhead

26
Q

What are differential costs (or incremental costs) ?

A

It is the difference in cost between any two alternatives.

27
Q

What is differential revenue?

A

A difference in revenue between two alternatives

28
Q

What are Opportunity Costs?

A

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

29
Q

What are Sunk Costs?

A

These costs have already been incurred and cannot be changed now or in the future. These costs should be ignored when making decisions.

SCM (RECITATION FORMAT) (2 decks)

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