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## Glossary of Accounting Midterm AIS220

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Given the cost formula Y= \$17,500 +\$4X, at what level of activity will total cost be \$42,500.
A. 10,625 units
B. 4,375 units
C. 6,250 units
D. 5,250 units
C. 6,250 units
The cost of Rent for a manufacturing plant is generally considered to be a:
Prime Cost Product Cost
A. No Yes
B. No No
C. Yes No
D. Yes Yes
Prime Cost Product Cost
No Yes

A.
The following data pertains to activity and utility costs for two recent years:
Acvty lvl 12K 8K
Util costs 15K 12K
Using the high-low method, the cost formula for utilities is:
A. 1.50 per unit
B. 8,000 plus \$.50 per unit
C
D. \$6,000 plus .75 per unit
Managerial accounting is not governed by generally accepted accounting principles (GAAP)
True or False
True
Anaconda Mining COmpany shipped 9,000 tons of copper concentrate for \$450,000 in March and 11,000 tons for \$549,000 in April. Shipping costs for 12,000 tons to be shipped in May would be expected to be
A. 548,780
B. 549, 020
C. 594,000
D. 595,500
An opportunity cost:
A. the difference in total costs which results from selecting one alternative instead of another.
B. the benefit forgone by selecting one alternative instead of another.
C. a cost which may be saved by not adopting an
B. The benefit forgone by selecting one alternative instead of another.
Discretionary fixed costs arise from annual decisions by mgmt to spend in certain fixed cost areas.
True or False
True
The following data pertain to activity and costs for two recent months: Oct Nov
Act Lvl in Unts 5K 10K
Variable costs 10K 20K
Fixed Costs 30K ?
Mixed Costs 20K ?
Total Costs 60K 75K

Assuming that these activity levels
25,000
Just-in-time is a production system in which units are produced and materials are purchased only as needed to meet actual customer demand. True or False
True
At an activity level of 10,000 units, variable costs totaled 35,000 and fixed costs totaled 20,800. If 16,000 units are produced and this activity is within the relevant range, then:
A. total costs would equal 89,280
B. total unit cost would eq
B. total unit cost would equal 4.80
Managerial accounting:
A. has its primary emphasis on the future.
B. is required by regulatory bodies such as the SEC.
C. focuses on the organization as a whole, rather than on the organization's segments.
D. Reponses a, b, and c, are
A. has its primary emphasis on the future.
The following data pertains to activity and costs for two months: June July
Acvty lvl 10K 20K
Var costs 20K ?
Fixed Costs 15K ?
Mixed Costs 10K ?
Total Costs 45K 70K

Assuming that these activity levels are within the r
C 15K
Activity rates in activity-based costing are computed by dividing costs from the first-state allocations by the activity measure for each activity cost pool
True or False
True
Given the cost formula Y=\$15,000 + \$5x, total cost at an activity level of 8,000 units would be.
A. 23,000
B. 15,000
C. 55,000
D. 40,000
C. 55,000
Advertising costs are considered product costs for external financial reports since they are incurred in order to promote specific products.
True or False
False
Paul Company has two products: A and B. The company uses Activity Based Costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows:
(The graphs will not fit)
Problem 7 on chpt 3 a
C. 19.47
Direct materials are part of:
Conversion Manufcrg Prime Cost
A. Yes Yes No
B. Yes Yes Yes
C. No Yes Yes
D. No No No
C. No Yes Yes
Green Company's costs for the month of Aug were as follows: direct materials, \$27,000: direct labor, \$34,000; sale salaries, \$14,000; indirect labor, \$10,000; indirect materials, \$15,000; general corporate administrative cost, \$12,000; taxes on manufactu
D 112,000
For a manufacturing company, which of the following is an example of a period rather than a product cost?
A. Depreciation of factory equipment.
B. Wages of salespersons.
C. Wages of machine operators.
D. Insurance on factory equipment
B. Wages of Salespersons.
The linear equation Y =a +bx is often used to express cost formulas. In this equation:
A. the B term represents variable cost per unit of activity.
B. the A term represents variable cost in total
C. The X term represents total cost.
D
A. The B term represents variable cost per unit of activity.
On a per unit basis, a fixed cost varies inversely with the level of activity. True or False.
True
An example of a commited fixed cost is:
A. a training program for salesperson
B. executive travel expenses
C. property taxes on the factory building.
D. new product research and development.
C. property taxes on the factory building.
For internal uses, managers are more concerned with receiving information that is:
A. completely objective and verifiable.
B. completely accurate and precise.
C. relevant, flexible, and immediately avaliable.
D. relevant, completely a
C. relevant, flexible, and immediately available.
The following journal entry would be made in a processing costing system when units that have been completed with respect to the work done in the final processing dept are transferred to the finished goods warehouse:
Finished goods xxx
Material
False
All costs incurred in a merchandising firm are considered to be period costs.
True or False
False
Expense A is a fixed cost; expense B is a variable cost. During the current year the activity level has increased, but is still within the relevant range. In terms of cost per unit of activity, we would expect that:
A. expense A has remained unchang
C. Expense A has decreased
Variable costs are costs whose per unit costs vary as the activity level rises and falls.
True or False
False
An activity-based costing system is generally easier to set up and run than a traditional cost system.
True or False
False
Work in process inventories consist of units that are only partially complete and will require further work before they are ready for sale to a customer. True or False
True
Process costing would be appropriate for each of the following except:
A. custom furniture
B. oil refining
C. Grain milling
D. newsprint production
A. Custom Furniture
The cost of fire insurance for a manufacturing plant is generally considered to be a:
A. product cost
B. Period Cost.
C. Variable Cost.
D. all of the above
A Product Cost
Last month a manufacturing company had the following operating results:
Beg finished goods inv. 74,000
Endg fnshed goods inv. 73,000
Sales 464,000
Gross Margin 52,000
What was the COGM for the month?
A. 413,000
B. 411,0
B. 411,000 (The way I remember this one is 411,000 is the "information" (4-1-1) that we need.)
Variable cost:
A. increases on a per unit basis as the number of units produced increases.
B. remains constant on a per unit basis as the number of units producted increases.
C. remains the same in total as production increases.
D. de
B. remains constant on a per unit basis as the number of units produced increases.
Prime cost consists of direct materials combined with:
A. direct labor
C. indirect materials
D. cost of goods manufactured.
A. Direct Labor.
The high-low method is generally less accurate than the least-squares regression method for analyzing the behavior of mixed costs. True or False
True
Gabel Inc. is a merchandising company. Last month the company's merchandise purchases totaled \$63,000. The company's beginning merchandise inventory was \$13,000 and its ending was \$15,000. What was the company's cost of goods sold for this month?
A.
D. 61,000
Within the relevant range of activity, variable cost per unit will:
A. increase in proportion with the level of activity
B. remain constant
C. vary inversely with the level of activity
D. none of these
B. remain constant.
Discretionary fixed costs:
A. vary directly and proportionately with the level of activity.
B. have a long term planning horizon, generally encompassing many years.
C. are made up of plant, equipment, and basic organizational costs.
D
D. none of the above.
An increase in the activity level within the relevant range results in:
A. an increase in fixed cost per unit.
B. A proportionate increase in total fixed costs.
C. an unchanged fixed cost per unit.
D. A decrease in fixed cost per unit
D. A decrease in cost per unit.
The contribution approach to the income stmt classifies costs of behavior rather than by function. True or False
True
A cost driver is:
A. the largest single category of cost in a company.
B. a fixed cost that cannot be avoided.
C. a factor that causes variations in a cost.
D. an indirect cost that is essential to the business
C. a factor that causes variations in a cost.
In a scattergraph, the line fitted to the plotted points is known as a regression line.
True or False
True
Which of the following levels of costs should not be allocated to products for decision-making purposes?
A. Unit-level activities
B. Batch-level activities
C. Product-level activities
D. Organization-sustaining activities
D. Organizational-sustaining activities.
A cost that is obtainable in large chunks and that increases or decreases only in response to fairly wide changes in the activity level is known as a step-variable cost.True or False
True
Significant reductions in commited fixed costs can usually be made on a temporary basis without seriously impairing the long-run goals of a firm. True or False
False
The following journal entry would be made in a processing costing system when units that have been completed with respect to the work doen in the processing dept Z are trans to Processing Dept Z to Processing Dept Y:
Work in Process, Dept Y xxx
True
In process costing, the same equivalent units figure is used for both materials and conversion costs.
True or False
False
The term "relevant range" means the range over which:
A. costs may fluctuate
B. A particular cost formula is valid
C. production may vary
D. relevant cost is incurred.
B. A particular cost formula is valid.
Contribution margin is the excess of revenues over:
A. cost of goods sold
B. manufacturing cost
C. all direct costs.
D. all variable costs
D. all variable costs
The Assembly Department started the month with 35,000 units in its beginning work in process inventory. An additional units 472,000 were transferred in from the prior dept during the month to begin processing in the Assembly Dept. There were 34,000 units
B. 473,000
Fabian Company uses the weighted-average method in its process costing system. The Assembly Dept started the month with 9,000 units in its beginning work in process inventory that were 70% complete with respect to conversion costs. An additional 90,000 u
D. 89,400
Using the following data for January, calculate the cost of goods manufactured:
Direct Materials \$38,000
Direct Labor \$24,000
Beg work in process \$10,000
Ending work in process \$11,000

The Cos
B. 78,000
Testing a prototype of a new product is an example of a:
A. Unit-level activity
B. Batch-level activity
C. Product-level activity
D. Organizational-sustaining activity.
C. Product-level activity
In traditional costing systems, all manufacturing costs are assigned to products--even manufacturing costs are not caused by the products. True or False
True
A mixed cost is partially variable and partially fixed.
True or False
True
In the second-stage allocation in activity-based-costing, activity rates are used to apply costs to products, customers, and other cost objects. True or False
True