Acct Chapter 18: Managerial Accounting Concepts and Principles

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Total fixed costs

____ costs do not change when activity changes.

Total variable costs

____ costs change in proportion to activity changes.

Mixed costs

____ costs are combinations of fixed and variable costs.

Direct Costs

____ costs can be traced to a single cost object. Examples of ____ costs are material and labor costs for a product.

Indirect costs

____ costs cannot be traced to a single cost object. An example of an _____cost is a maintenance expenditure that benefits two or more departments.

Sunk costs

____ costs have already been incurred and cannot be avoided or changed. ____ costs are never relevant to current and future decisions.

Sunk costs

Example of ____ costs. : An automobile purchased two years ago cost $15,000. The $15,000 cost is ____ because whether the car is driven, sold, traded, or abandoned, the cost will not change.

Out-of-pocket costs

____ costs require future outlays of cash. ____ costs are always relevant to current and future decisions.

Out-of-pocket costs

Example of ____ costs. :You plan on buying a new car for $25,000 next month. The cost of the new car is an ____ cost because you can choose to spend or not to spend the $25,000 next month.

opportunity cost

________cost is the potential benefit lost by choosing a specific action from two or more alternatives.
______costs are always relevant to a selection decision.

opportunity cost

Example of ____ costs. : If you were not attending college, you could be earning $20,000 per year. Your opportunity cost of attending college for one year is $20,000.

Product costs

________costs are incurred to manufacture a product. _______costs are not expensed as they are incurred. Instead, they are assigned to inventory and do not become expenses until the item is sold. Inventory is reported at cost as an asset on the balance sheet.

Period costs

Expenditures identified more with a time period than with finished products costs; includes selling and general administrative expenses.

Product costs

Costs that are capitalized as inventory because they produce benefits expected to have future value; include direct materials, direct labor, and overhead.

Conversion costs

Expenditures incurred in converting raw materials to finished goods; includes direct labor costs and overhead costs.

Prime costs

Expenditures directly identified with the production of finished goods; include direct materials costs and direct labor costs.

Factory overhead

Factory activities supporting the production process that are not direct material or direct labor; also called overhead and manufacturing overhead.

Factory overhead

is all manufacturing costs other than direct material and direct labor.

_______ costs are indirect manufacturing costs that support the major manufacturing activities. As indirect costs, they cannot be separately and readily traced to the individual units of product.

Direct material

Raw material that physically becomes part of the product and is clearly identified with specific products or batches of product

Direct labor

Efforts of employees who physically convert materials to finished product.

Direct materials

(component of an item) can be separately and readily traced to the individual units of a product being manufactured. ____________ are sufficiently significant in amount to justify the separate tracing.

Direct labor

is the effort of employees who actually convert materials into a finished product. ________ costs are the wages of _______ employees. ________ costs can be separately and readily traced to the individual units of product being manufactured.

Managerial accounting

Area of accounting mainly aimed at serving the decision-making needs of internal users; also called management accounting

Current Costs for Materials, Labor, and Overhead

Manufacturing Costs includes

Manufacturing Costs plus beginning goods in Process

Total Costs of goods in Process includes

Total Cost of Goods in Process less Ending Goods in Process
or Total Manufacturing Costs
+ Beginning Work in Progress
- Ending Work in Progress

Cost of Goods Manufactured includes

Contribution Margin

to determine a product's gross operating margin

cash, receivables, raw materials, goods in process, finished goods

Current Assets section of Manufacturers Balance sheet includes

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