By Ray Garrison, Eric Noreen and Peter Brewer
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Verified Chapter's 1- 16 | Complete
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,Table of Contents N N
Chapter One: Managerial Accounting and Cost Concepts
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Chapter Two: Job-Order Costing: Calculating Unit Product Costs
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Chapter Three: Job-Order Costing: Cost Flows and External Reporting
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Chapter Four: Process Costing
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Chapter Five: Cost-Volume-Profit Relationships
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Chapter Six: Variable Costing and Segment Reporting: Tools for Management
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Chapter Seven: Activity-Based Costing: A Tool to Aid Decision Making Chapter
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N Eight: Master Budgeting
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Chapter Nine: Flexible Budgets and Performance AnalysisChapter
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N Ten: Standard Costs and Variances
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Chapter Eleven: Responsibility Accounting Systems
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Chapter Twelve: Strategic Performance Measurement
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Chapter Thirteen: Differential Analysis: The Key to Decision Making
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Chapter Fourteen: Capital Budgeting Decisions
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Chapter Fifteen: Statement ofDCash Flows Chapter
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N Sixteen: Financial Statement Analysis
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,Chapter1 N
ManagerialAccountingandCostConcepts N N N N
Questions
1-1 The three major types of product cost s in N N N N N N N N
1-4
a manufacturing company are direct mat erials,
N N N N N N N a. Variable cost: The variable costDper unit is N N N N N N N
direct labor, and manufacturing overhe ad.
N N N N N N constant, but total variable cost changes in
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direct proportion to changes in volu me.
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1-2 b. Fixed cost: The total fixed cost is constant
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a. Direct materials are an integral part ofD a N N N N N N N within the relevant range. The average fix ed
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finished productDand their costs can be con
N N N N N N N cost per unitDvaries inversely with chan ges
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veniently traced to it.
N N N N in volume.
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b. Indirect materials are generally small ite N N N N N c. Mixed cost: A mixed cost contains bot h N N N N N N N
ms of material such as glue and nails. They may
N N N N N N N N N N N variable and fixed cost elements.
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be an integral part ofDa finished product buttheir
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Ncosts can be traced to the product only at great
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Ncost or inconvenience. N N a. Unit fixed costs decrease as the activity level
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c. Direct labor consists of labor costs th at N N N N N N N increases.
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can be easily traced to particular product s.
N N N N N N N N b. Unit variable costs remain constantDas the
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Directlaborisalso called―touchlabor.‖
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activity level increases.
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d. Indirect labor consists of the labor costs N N N N N N N c. Total fixed costs remain constant as the
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NofDjanitors, supervisors, materials handlers, and N N N N N activity level increases.
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Nother factory workers that cannotDbe conv
N N N N N d. Total variable costs increase as the activity
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eniently traced to particular products. These l
N N N N N N N level increases.
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abor costs are incurred to support production,
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but the workers involved do not directly wor
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1-6
kDon the product.
N N N a. Cost behavior: CostDbehavior refers to the
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e. Manufacturing overhead includes all ma N N N N way in which costs change in response t o
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nufacturing costs except direct materials and d
N N N N N N N changes in a measure of activity such a s
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irectDlabor. Consequently, manufacturing overh
N N N N sales volume, production volume, or ord ers
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ead includes indirect materials and indirect lab or
N N N N N N N N processed.
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Nas well as other manufacturing costs.
N N N N N b. Relevant range: The relevant range is th e N N N N N N N
range of activity within which assumpti ons
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1-3 about variable and fixed cost behavi or are
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A product cost is any costDinvolved in N N N N N N valid.
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purchasing or manufacturing goods. In the case
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of manufactured goods, these costs consist of
N N N N N N N 1-7 An activity base is a measure ofDw N N N N N N
direct materials, direct labor, and manufacturing
N N N N N N N hatever causes the incurrence of a variable
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overhead. A period cost is a cost that is taken
N N N N N N N N N N N cost. Examples of activity bases include uni ts
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directly to the income statement as an expense
N N N N N N N N N produced, units sold, letters typed, beds in a
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in the period in which it is incurred.
N N N N N N N N hospital, meals served in a cafe, servic e calls
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made, etc.
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, 1-8 The linear assumption is reasonably v
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alid providing that the cost formula is used on ly
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within the relevant range.
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