Exam 2: An Introduction to Cost Terms and Purposes

Springfield Manufacturing produces electronic storage devices,and uses the following three-part classification for its manufacturing costs: direct materials,direct manufacturing labor,and indirect manufacturing costs.Total indirect manufacturing costs for January were $300 million,and were allocated to each product on the basis of direct manufacturing labor costs of each line.Summary data (in millions)for January for the most popular electronic storage device,the Big Bertha,was: Big Bertha Direct manufacturing costs \ 4,500,000 Direct manufacturing labor costs \ 1,500,000 Indirect manufacturing costs \ 4,250,000 Units produced 40,000 Required: a.Compute the manufacturing cost per unit for each product produced in January. b.Suppose production will be reduced to 30,000 units in February.Speculate as to whether the unit costs in February will most likely be higher or lower than unit costs in January; it is not necessary to calculate the exact February unit cost.Briefly explain your reasoning.

Answer the following questions using the information below: The following information pertains to Razor's Corp: Manufacturing costs \ 135,000 Units manufactured 15,000 Units sold 12,000 units sold for \ 15 per unit Beginning inventory \ 3,500 -What is the average manufacturing cost per unit?

A fixed cost remains unchanged in total for a given time period,despite wide changes in the related level of total activity or volume of output produced.

For a manufacturing company,direct material costs may be included in ________.

Cost accounting and cost management include calculating various costs,obtaining financial and nonfinancial information,and analyzing relevant information for decision making.

Describe a variable cost.Describe a fixed cost.Explain why the distinction between variable and fixed costs is important in cost accounting.

A cost is a resource sacrificed or forgone to achieve a specific objective.

At a plant where a union agreement sets annual salaries and conditions,annual labor costs usually ________.

Cost tracing is ________.

Which of the following influences the make or buy decision to the company?

Direct material costs are the acquisition costs of all materials that eventually become part of the cost object and cannot be traced to the cost object in an economically feasible way.

Samiera,Inc.,reports the following information for September sales: Sales \ 60,000 Variable costs 12,000 Fixed costs 16,000 Operating income \ 32,000 Promotional expenses for September were $1,000. Required: If sales double in October,what is the impact on the variable costs?

Conversion costs include ________.

On the assembly floor,Crystal is paid $20 an hour for straight-time assuming 8 working hours a day and five working days in a week.She is paid $30 an hour for overtime.One week she worked 52 hours. Required: a.What is Crystal's total compensation for the week? b.What amount of compensation would be reported as direct manufacturing labor? c.What amount of compensation would be reported as manufacturing overhead?

________ are all manufacturing costs that are related to the cost object but cannot be traced to that cost object.

Costs expensed on the income statement in the accounting period incurred are called ________.

R&D costs are treated as period costs because ________.

A unit cost is computed by dividing total cost by the number of units.

Assigning indirect costs is easier than assigning direct costs.

The distinction between direct and indirect costs is clearly set forth in Generally Accepted Accounting Principles (GAAP).