Chapter 2

Question 1

Difference between manufacturing and merchandise firm

Answer 1

Manufacturing are service type companies that produces and sells directly to consumer. Merchandise resell

Question 2

Direct materials

Answer 2

raw material inputs that become a part of finished product and can be easily traced to it

Question 3

Examples of direct materials

Answer 3

aircraft engines on Boeing 777, intel processing chip in computer

Question 4

direct labor

Answer 4

that portion of labor costs that can be easily traced to a product

Question 5

manufacturing overhead

Answer 5

all manufacturing costs other than direct materials and direct labor

Question 6

prime cost

Answer 6

direct materials + direct labor

Question 7

conversion costs

Answer 7

direct labor + manufacturing overhead

Question 8

Manufacturing costs

Answer 8

costs incurred to make a product

Question 9

3 types of manufacturing cost

Answer 9

direct materials, direct labor, and manufacturing overhead

Question 10

nonmanufacturing costs

Answer 10

selling costs and administrative costs

Question 11

marketing costs

Answer 11

costs include cost of sales, taking customer orders, and delivering the product to customers; aka order-getting and order-filling costs

Question 12

administrative costs

Answer 12

all executive, organizational, and clerical costs that are not classified as production or marketing costs

Question 13

period costs

Answer 13

costs expensed in the time period in which they are incurred

Question 14

what rules apply to period costs

Answer 14

costs are incurred when they are earned

Question 15

what are typically composed of period costs

Answer 15

selling and administrative costs

Question 16

product costs

Answer 16

costs that are added to units of product as they are incurred and are not treated as expenses until the units are sold

Question 17

what is another name for product costs

Answer 17

inventoriable costs

Question 18

when are product costs on financial statement

Answer 18

it appears as an expense on the income statement when units are sold

Question 19

What type of costs are included in WIP?

Answer 19

raw materials released to production departments and direct labor and manufacturing overhead when incurred

Question 20

when are finished goods inventory account expensed?

Answer 20

when finished goods are sold

Question 21

What can COGS be composed of?

Answer 21

manufacturing costs incurred during a period,

Question 22

Where is the relevant rage?

Answer 22

where curvilinear cost function can be approximated as a straight line.

Question 23

What happens outside relevant range

Answer 23

fixed cost might not be fixed or variable cost might be be variable