Midterm 1 (ch1-3)

Question 1

Period costs

Answer 1

Non-manufacturing cost (selling, admin, sales) ,accounted as expense

Question 2

Product cost

Answer 2

Production costs ( direct materials/labour, MOH), accounted as inventory (asset)

Question 3

Direct vs indirect costs

Answer 3

Direct: significant value, easily traced, essential part of product
Indirect: insignificant value, not easily traced

Question 4

MOH

Answer 4

Indirect costs incurred in production (rent, utilities, indirect material/labour, depreciation)

Question 5

Prime costs

Answer 5

Direct manufacturing costs (labour and materials)

Question 6

Conversion costs

Answer 6

Manufacturing costs needed to convert direct materials to finished goods
Direct labour and MOH

Question 7

Steps of cost of goods manufactured statement

Answer 7

1. Cost of direct materials used
2. Total manufacturing costs incurred
3. Cost of goods manufactured
4. Cost of goods sold

Question 8

Unit contribution margin formula

Answer 8

= selling price - variable cost

Question 9

Contribution margin ratio formula

Answer 9

Contribution margin/ total price