Lesson 1

Question 1

What is Managerial Accounting?

Answer 1

Provides information to people within the organization and focuses on managing business segments to improve future performance.

Question 2

In what 3 ways does managerial accounting focus on improving future performance?

Answer 2

Planning, controlling, and decision-making

Question 3

Costs are classified in ways to:

Answer 3

Enable managers to predict future costs, compare actual costs to budgeted costs, assign costs to segments of the business, and contrast cost associated with alternatives.

Question 4

Manufacturing costs include?

Answer 4

Direct materials, direct labor, manufacturing overhead, and non manufacturing costs.

Question 5

Any materials used in the final products

Answer 5

Raw materials

Question 6

Direct materials is:

Answer 6

Raw materials whose costs can be easily traced to finished products

Question 7

Direct labor

Answer 7

Labor costs easily traceable to a specific cost object (finished products)

Question 8

Direct materials + direct labor=

Answer 8

Prime costs

Question 9

All manufacturing costs except direct materials and direct labor

Answer 9

Manufacturing overhead

Question 10

T/F: Manufacturing overhead costs are direct costs

Answer 10

False

Question 11

Manufacturing overhead includes:

Answer 11

Indirect materials and indirect labor

Question 12

Indirect materials are:

Answer 12

Raw materials whose costs cannot be easily traced to finished products

Question 13

Employees who play an essential role in running a manufacturing facility; however the cost of compensating these people cannot be easily traced to finished products

Answer 13

Indirect labor

Question 14

T/F: only the indirect costs associated with **operating the factory are included in manufacturing overhead

Answer 14

True

Question 15

Conversion costs:

Answer 15

The sum of direct labor and manufacturing overhead

Question 16

What two categories are nonmanufacturing costs divided into?

Answer 16

Selling costs and administrative costs

Question 17

Include all costs incurred to secure customer orders and get finished product to customer

Answer 17

Selling costs

Question 18

Advertising, shipping, sales travel, sales commissions, sale salaries and costs of finished goods warehouses are examples of:

Answer 18

Selling costs

Question 19

T/F: Selling costs can only be direct costs

Answer 19

False: selling costs can be direct or indirect

Question 20

Administrative costs:

Answer 20

All costs associated with general management of an organization

Question 21

Executive compensation, general accounting, legal counsel, secretarial, public relations, and similar costs involved in the administration of the organization as a whole

Answer 21

Administrative costs

Question 22

T/F: Administrative costs can either be direct or indirect costs

Answer 22

True

Question 23

Which cost behavior is constant in total and does not change regardless of level of activity?

Answer 23

Fixed costs

Question 24

Which cost behavior has variable and mixed elements in response to changes in activity?

Answer 24

Mixed costs

Question 25

Which cost is proportional to changes in activity?

Answer 25

Variable costs

Question 26

Cost object:

Answer 26

Anything for which cost data are desired-products, customers, plants, office locations, etc

Question 27

T/F: costs are either direct or indirect

Answer 27

True

Question 28

Which cost can be easily traced to a specific cost object? A. Direct Costs B. Indirect Costs

Answer 28

A. Direct Costs

Question 29

Which cost cannot be easily traced to a specific cost object? A. Direct Costs B. Indirect Costs

Answer 29

B. Indirect Costs

Question 30

To be traced to a cost object such as a particular product, the cost must be caused by:

Answer 30

The cost object

Question 31

Manufacturing costs consist of?

Answer 31

Direct cost, direct labor, and manufacturing overhead

Question 32

Is manufacturing overhead a: A. Direct cost B. Indirect cost

Answer 32

B. Indirect cost

Question 33

What are raw materials?

Answer 33

Any materials used in the final product

Question 34

What is direct materials?

Answer 34

Raw materials whose costs can be easily traced to finished products?

Question 35

What is direct labor?

Answer 35

Labor costs easily traceable to finished products.

Question 36

What two costs convert direct materials into finished products?

Answer 36

Direct labor and manufacturing overhead

Question 37

What is the matching principle?

Answer 37

Costs incurred to generate a particular revenue should be recognized as an expense in the same period the revenue or benefit is recognized.

Question 38

Cost should only be recognized as an expense when the sale takes place:

Answer 38

Product costs

Question 39

Which costs is involved in acquiring or making a product?

Answer 39

Product costs

Question 40

Once products are sold, product costs become expense that are?

Answer 40

Cost of goods sold

Question 41

T/F: Because product costs are initially signed to inventories, they are known as inventorial costs?

Answer 41

True

Question 42

What 3 product costs flow through 3 inventory accounts on the balance sheet?

Answer 42

Raw materials, work in process, and finished goods.

Question 43

Units of product that are only partially complete and will require further work before they are ready for sale:

Answer 43

Work in process

Question 44

Finished goods are:

Answer 44

Completed units of product that have been sold to customers

Question 45

All of the costs that AREN’T product costs?

Answer 45

Period costs

Question 46

Period costs are all:

Answer 46

Selling and administrative expenses

Question 47

Period costs are expenses on income statement in:

Answer 47

Period incurred as selling and admin expenses

Question 48

How a cost reacts to change?

Answer 48

Cost behavior

Question 49

Cost structure is:

Answer 49

Relative proportion of each type of cost in an organization

Question 50

Variable costs?

Answer 50

Varies in total in direct proportion to changes in level of activity (affected by production)

Question 51

What are some common variable costs?

Answer 51

Costs of goods sold for merchandising company, direct materials, direct labor, indirect materials, supplies

Question 52

For a cost to be variable it must:

Answer 52

Vary with respect to it’s activity base

Question 53

Activity base is:

Answer 53

A measure of whatever causes incurrence of a variable cost.

Question 54

Common activity bases:

Answer 54

Direct labor hours, machine hours, units produced and units sold

Question 55

T/F: Activity base under consideration is total volume of goods and services provided by org

Answer 55

True

Question 56

Remains constant in total regardless of activity

Answer 56

Fixed costs

Question 57

Manufacturing overhead that includes fixed costs are:

Answer 57

Depreciation, insurance, property taxes, rent

Question 58

T/F: Total fixed costs remain in influx

Answer 58

False. Total fixed costs remain constant unless influenced by some outside force

Question 59

Fixed costs can either be:

Answer 59

Committed or discretionary

Question 60

Committed fixed costs are:

Answer 60

Organizational investments with a multiyear planning horizon that cannot be significantly reduced without making fundamental changes

Question 61

T/F: if options are interrupted or cut back, committed fixed costs are largely changed in short term.

Answer 61

False. They remain largely unchanged in short term.

Question 62

Usually arise from annual decisions by management to spend on certain fixed cost items

Answer 62

Discretionary fixed costs

Question 63

Relevant range is:

Answer 63

Range of activity within which the assumption that cost behavior is strictly linear is reasonably valid.

Question 64

Differential cost

Answer 64

A future cost that differs between any two alternatives

Question 65

Is differential cost always a relevant cost?

Answer 65

Yes

Question 66

Is differential cost fixed or variable?

Answer 66

Can be both.

Question 67

What is differential revenue?

Answer 67

Revenue that differs between any two alternatives. A relative benefit.

Question 68

Incremental cost?

Answer 68

An increase in cost from one alternative to another.

Question 69

Decremental costs:

Answer 69

Decrease in costs from one alternative to another

Question 70

Revenue obtained from selling one more unit of product.

Answer 70

Marginal revenue

Question 71

Cost involved in producing one more unit:

Answer 71

Marginal cost

Question 72

Sunk costs are?

Answer 72

Costs that have already been incurred and cannot be changed by any decision made now or in the future.

Question 73

Is a sunk cost a relevant or irrelevant cost?

Answer 73

Irrelevant

Question 74

Can be influenced by the manager being evaluated:

Answer 74

Controllable costs

Question 75

Uncontrollable costs:

Answer 75

Cannot be influenced by the manager being evaluated

Question 76

Increases value of products and services provided to the company’s stakeholders

Answer 76

Value added cost

Question 77

Does non-added value costs provide any benefit?

Answer 77

No

Question 78

Why are contribution format income statements prepared?

Answer 78

For internal management purposes to use cost classifications for predicting cost behavior to beget inform decisions affecting future.

Question 79

What is the contribution approach?

Answer 79

Separates costs into fixed and variable categories, deducting all variable expenses from sales to obtain contribution margin.

Question 80

Amount remain from sales revenue after all variable expenses have been deducted

Answer 80

Contribution margin (amount CONTRIBUTES toward covering fixed expenses and then profits).