Exam 1 (Chapters 1 & 2)

Question 1

This accounting is concerned with providing information to managers for use within the organization.

Answer 1

Managerial Accounting

Question 2

This accounting is concerned with reporting financial information to external parties, such as stockholders, creditors, and regulators.

Answer 2

Financial Accounting

Question 3

___________ is a part or activity of an organization about which managers would like cost, revenue, or profit data. Examples of business segments include product lines, customer groups (segmented by age, ethnicity, gender, volume of purchases, etc.), geographic territories, divisions, plants, and departments.

Answer 3

Segment

Question 4

_______ involves establishing goals and specifying how to achieve them.

Answer 4

Planning

Question 5

________ helps managers perform three vital activities—planning, controlling, and decision making.

Answer 5

Managerial Accounting

Question 6

_______ is a detailed plan for the future that is usually expressed in formal quantitative terms

Answer 6

Budget

Question 7

_________ compares budgeted data to actual data in an effort to identify and learn from excellent performance and to identify and eliminate sources of unsatisfactory performance. Performance reports can also be used as one of many inputs to help evaluate and reward employees.

Answer 7

Performance Report

Question 8

_______ is a “game plan” that enables a company to attract customers by distinguishing itself from competitors

Answer 8

Strategy

Question 9

This accounting is concerned with reporting financial information to external parties, such as stockholders, creditors, and regulators.

Answer 9

Financial Accounting

Question 10

This accounting is concerned with providing information to managers within an organization so that they can formulate plans, control operations, and make decisions.

Answer 10

Managerial Accounting

Question 11

What are the purposes of cost classification?

Answer 11

1. Assigning costs to cost objects
2. Accounting for costs in manufacturing companies
3. Preparing financial statements
4. Predicting cost behavior in response to changes in activity
5. Making decisions

Question 12

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

Answer 12

Direct Cost

Question 13

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

Answer 13

Indirect Cost

Question 14

Indirect costs incurred to support a number of cost objects. These costs cannot be traced to any individual cost object.

Answer 14

Common Cost

Question 15

Give examples of Direct Cost

Answer 15

Direct Material & Direct Labor

Question 16

Give an example of an Indirect Cost

Answer 16

Manufacturing Overhead

Question 17

What are the classifications of manufacturing Costs

Answer 17

• Direct Materials
• Direct Labor
• Manufacturing Overhead

Question 18

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

Answer 18

Direct Materials

Question 19

Given an example of Direct Materials

Answer 19

A radio installed in an automobile

Question 20

___________ are those labor costs that can be easily traced to individual units of product

Answer 20

Direct Labor Cost

Question 21

Give an example of a Direct Labor Cost

Answer 21

Wages paid to automobile assembly workers

Question 22

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

Answer 22

Manufacturing Overhead

Question 23

Manufacturing Overheard includes _________ & _________ that cannot be easily or conveniently traced to specific units of product

Answer 23

Indirect Materials & Indirect Labor costs

Question 24

Give examples of Manufacturing Overhead

Answer 24

• Depreciation of manufacturing equipment
• Utility costs
• Property taxes
• Insurance premiums incurred to operate a manufacturing facility

Question 25

Prime Cost =

Answer 25

Direct Material + Direct Labor

Question 26

Conversion Cost =

Answer 26

Direct Labor + Manufacturing Overhead

Question 27

_________ all executive, organizational, and clerical costs. Administrative costs can be either direct or indirect costs.

Answer 27

Administrative Cost

Question 28

________ Costs necessary to secure the order and deliver the product. Selling costs can be either direct or indirect costs.

Answer 28

Selling Cost

Question 29

What makes up non manufacturing Costs

Answer 29

Selling Costs & Administrative Costs

Question 30

__________includes all the costs that are involved in acquiring or making a product.

Answer 30

Product Costs

Question 31

Which costs “attach” to a unit of product as it is purchased or manufactured and they stay attached to each unit of product as long as it remains in inventory awaiting sale.

Answer 31

Product Costs

Question 32

For manufacturing companies, product costs | include:

Answer 32

Raw Materials, Work in Process, and Finished Goods Costs

Question 33

_______ includes any materials that go into the final product.

Answer 33

Raw Materials

Question 34

________ consists of units of product that are only partially complete and will require further work before they are ready for sale to the customer.

Answer 34

Work in Process

Question 35

__________ consists of completed units of product that have not yet been sold to customers.

Answer 35

Finished Goods Costs

Question 36

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

Answer 36

Product Costs

Question 37

________ include all selling costs and administrative costs.

Answer 37

Period Costs

Question 38

________ refers to how a cost will react to changes in the level of activity.

Answer 38

Cost behavior

Question 39

What are the classifications of cost behavior

Answer 39

Variable costs, fixed costs, and mixed costs

Question 40

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

Answer 40

Variable Costs

Question 41

A variable cost per unit is _________

Answer 41

constant

Question 42

A measure of what causes the incurrence of a variable cost?

Answer 42

- Units produced - Machine hours - Miles Driven - Labor hours

Question 43

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

Answer 43

Fixed Costs

Question 44

If expressed on a ____ _____ ______, the average fixed cost per unit varies inversely with changes in activity.

Answer 44

per unit basis

Question 45

What are the two types of fixed costs?

Answer 45

Committed and Discretionary

Question 46

This type of fixed cost is long-term, cannot be significantly reduced in the short term

Answer 46

Committed

Question 47

This type of fixed cost may be altered in the short-term by current managerial decisions

Answer 47

Discretionary

Question 48

A mixed cost contains both ________ & _________ elements

Answer 48

Variable & Fixed

Question 49

Give an example of a mixed costs? Why?

Answer 49

Utility Cost bc the fixed cost is the monthly rate (which stays the same) and t variable costs is the cost per hour (which varies)

Question 50

What is the equation for total mixed costs? What do they stand for?

Answer 50

``` Y = a +bX Y-> total mixed cost a-> fixed costs b-> the variable cost per unit of activity X-> the level of activity ```

Question 51

__________ are the difference in cost between any two alternatives.

Answer 51

Differential Costs

Question 52

A difference in revenue between two alternatives is called ________

Answer 52

Differential Revenue

Question 53

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

Answer 53

Sunk Costs

Question 54

What cost should be ignored when making decisions?

Answer 54

Sunk Costs

Question 55

What is the potential benefit that is given up when one alternative is selected over another?

Answer 55

Opportunity Cost

Question 56

These costs are not usually found in | accounting records but must be explicitly considered in every decision

Answer 56

Opportunity Costs

Question 57

When are job-order costing systems used?

Answer 57

1. Many different products are produced each period. 2. Products are manufactured to order. 3. The unique nature of each order requires tracing or allocating costs to each job, and maintaining cost records for each job.

Question 58

What are some examples of companies that would use job order costing?

Answer 58

- aircraft manufacturing - large scale construction - movie production

Question 59

An ____________ __________, such as direct labor hours, direct labor dollars, or machine hours, is used to assign manufacturing overhead to individual jobs

Answer 59

allocation base

Question 60

Why do we use an allocation base?

Answer 60

1. It is impossible or difficult to trace overhead costs to particular jobs. 2. Manufacturing overhead consists of many different items ranging from the grease used in machines to the production manager’s salary. 3. Many types of manufacturing overhead costs are fixed even though output fluctuates during the period.

Question 61

The __________ ________ ________ used to apply overhead to jobs is determined before the period begins.

Answer 61

Predetermined overhead rate (POHR)

Question 62

What is the POHR formula?

Answer 62

POHR= Estimated total manufacturingoverhead cost for the coming period/ Estimated total units in theallocation base for the coming period

Question 63

Why do we need the POHR?

Answer 63

1. Actual overhead for the period is notknown until the end of the period, thus inhibiting the ability to estimate job costs during the period. 2. Actual overhead costs can fluctuate seasonally, thus misleading decision makers.

Question 64

A _______ is a factor that causes overhead costs.

Answer 64

Cost driver