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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Concepts and terminology

From the choices presented in parentheses, choose the appropriate term for completing each of the following sentences:

a. The phase of the management process that uses process information to eliminate the source of problems in a process so that the process delivers the correct product in the correct quantities is called (directing, improving).

b. Direct labor costs combined with factory overhead costs are called (prime, conversion) costs.

c. The salaries of salespeople are normally considered a (period, product) cost.

d. The plant manager’s salary would be considered (direct, indirect) to the product.

e. Long-term plans are called (strategic, operational) plans.

f. Materials for use in production are called (supplies, materials inventory).

g. An example of factory overhead is (electricity used to run assembly line, CEO salary).

To determine

Period costs:

Period costs are the costs other than the product costs. These costs are not incurred in manufacturing the goods. These costs include the administrative expenses, and selling expenses.

Conversion cost:

A conversion cost refers to the cost of converting the raw materials into a finished product. Conversion cost includes direct labor as well as factory overhead costs.

To choose: The appropriate term for completing each of the following sentences.

Explanation

The appropriate term for completing each of the following sentences:

a. Improving
b. Conversion
c. Period
d. Indirect
e. Strategic
f. Materials inventory
g. Electricity used to run assembly line

Table (1)

  1. a. The management improves on the areas wherever it needs attention in order to deliver the correct product in the correct quantities. Hence, the phase of the management process that uses process information to eliminate the source of problems in a process so that the process delivers the correct product in the correct quantities is called improving.
  2. b. Conversion cost includes direct labor as well as factory overhead costs. Hence, direct labor costs combined with factory overhead costs are called conversion costs...

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