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Question 1

What are the three major elements of cost?

Answer 1

Material, Labor, and Expenses

Question 2

What are cost pools?

Answer 2

Groups of a particular type of cost (e.g., material costs, labor costs)

Question 3

Give some examples of cost objects.

Answer 3

Products, departments, jobs, or events

Question 4

What are cost drivers?

Answer 4

Activities or factors that cause costs to be incurred

Question 5

What are fixed costs?

Answer 5

Costs that don’t vary depending on the level of production

Question 6

What are variable costs?

Answer 6

Costs tied to a company’s level of production

Question 7

What are semi-variable costs?

Answer 7

Costs that contain both fixed and variable components

Question 8

What are direct costs?

Answer 8

Costs that can be easily traced to a cost object

Question 9

What are indirect costs?

Answer 9

Costs that cannot be easily traced to a cost object; also called overheads

Question 10

What are operating costs?

Answer 10

Expenses associated with day-to-day business activities, not traced to one product

Question 11

Describe the High-Low method for analyzing cost behavior.

Answer 11

Separates semi-variable costs into fixed and variable components using high and low activity levels

Question 12

What is scatterplot analysis?

Answer 12

Plotting costs against activity levels to identify trends

Question 13

What is regression analysis, and what is its formula?

Answer 13

A statistical technique to estimate the relationship between costs and activity levels. Y = a + bX

Question 14

What is account analysis?

Answer 14

Classifying costs as fixed, variable, or mixed based on historical records and managerial judgment

Question 15

What is break-even analysis?

Answer 15

Determining the level of activity required to cover all fixed and variable costs

Question 16

Define ‘cost’ in accounting terms.

Answer 16

The monetary value of resources used in the production of goods or services

Question 17

What are direct materials?

Answer 17

Materials that are directly identifiable with and form a part of the finished product

Question 18

What are indirect materials?

Answer 18

Materials essential for the production process but not directly attributable to a specific product

Question 19

What is direct labor?

Answer 19

Labor directly involved in the production of a product or delivery of a service

Question 20

What is indirect labor?

Answer 20

Labor not directly associated with the production of a specific product but necessary for the overall production process

Question 21

What are direct expenses?

Answer 21

Costs directly attributable to a specific job, product, or process

Question 22

What are indirect expenses?

Answer 22

Costs not directly linked to a specific product or process but essential for the business

Question 23

What are factory overheads?

Answer 23

Costs related to the production facility, like rent or machine maintenance

Question 24

What are administrative overheads?

Answer 24

Costs associated with general business operations, like office salaries

Question 25

What are selling and distribution overheads?

Answer 25

Costs incurred to market, sell, and distribute products, like advertising

Question 26

What is Prime Cost?

Answer 26

Direct Material + Direct Labor + Direct Expenses

Question 27

What is Factory/Production Cost?

Answer 27

Prime Cost + Factory Overheads

Question 28

What is Cost of Sales?

Answer 28

Production Cost + Selling and Distribution Overheads

Question 29

What is Total Cost?

Answer 29

Cost of Sales + Administrative Overheads

Question 30

What is Job-Order Costing?

Answer 30

Assigning costs to specific jobs or batches of products

Question 31

Give examples of industries that use job-order costing.

Answer 31

Manufacturing, service, printing, and film industries

Question 32

What are the key cost components in job-order costing?

Answer 32

Direct Materials, Direct Labor, Manufacturing Overhead (MOH)

Question 33

What is a material requisition form?

Answer 33

A form prepared when materials are used for a specific job

Question 34

How are direct labor costs assigned in job-order costing?

Answer 34

Using time tickets or labor sheets to track time spent on specific jobs

Question 35

What is a predetermined overhead rate (POHR), and how is it calculated?

Answer 35

Rate used to allocate overhead costs to jobs. POHR = Estimated Total Overhead Costs / Estimated Total Activity Base

Question 36

What is a job cost sheet?

Answer 36

A summary of all costs related to a specific job

Question 37

What is the WIP account?

Answer 37

Work-in-Process account, where job costs are recorded until the job is finished

Question 38

What are integrated accounts?

Answer 38

A unified system where financial, operational, and strategic data are consolidated

Question 39

What are non-integrated accounts?

Answer 39

Accounts maintained separately across different systems or departments

Question 40

What are the benefits of integrated accounts?

Answer 40

Improved decision-making, operational efficiency, better strategic alignment, risk reduction

Question 41

What are the challenges of non-integrated accounts?

Answer 41

Inefficient reporting, misaligned goals, increased risk, reduced agility

Question 42

Describe reconciliation in non-integrated systems.

Answer 42

Comparing and aligning data from separate systems to ensure accuracy

Question 43

What are some best practices to improve reconciliation in non-integrated systems?

Answer 43

Standardization, regular audits, automation tools, clear procedures, training

Question 44

What is FIFO?

Answer 44

First-In, First-Out: The oldest inventory is used first

Question 45

What is LIFO?

Answer 45

Last-In, First-Out: The latest inventory is used first

Question 46

What is WAC?

Answer 46

Weighted Average Cost: The cost of materials is averaged over a period

Question 47

What is Specific Identification?

Answer 47

Each material unit is assigned its actual cost

Question 48

Name a material control method.

Answer 48

Inventory management systems (e.g., EOQ, JIT, ABC analysis).

Question 49

What are the two types of labor?

Answer 49

Direct and Indirect

Question 50

Name a labor costing method.

Answer 50

Time Rate System, Piece Rate System, Incentive Wage System

Question 51

Name a labor control technique.

Answer 51

Timekeeping systems or labor efficiency analysis

Question 52

What are overheads?

Answer 52

Indirect costs that cannot be directly traced to a specific product

Question 53

Name an overhead allocation method.

Answer 53

Absorption Costing or Activity-Based Costing (ABC)

Question 54

What is the formula for Overhead Absorption Rate?

Answer 54

Overhead Absorption Rate = Total Overheads / Total Units Produced or Labor Hours