1.2

Question 1

Financial Accounting

Answer 1

Deals with external reporting with a historical focus

Question 2

Management Accounting

Answer 2

Reporting to internal users and has a future orientation

Question 3

Cost Accounting

Answer 3

Supports both financial and management accounting. Has an internal and external focus and underlies effective reporting for both internal and external users

Question 4

Cost (management accounting)

Answer 4

A measurement in monetary terms of the amount of a resource used for some purpose

Question 5

Cost (financial accounting)

Answer 5

The sacrifice measured by the price paid or required to be paid to acquire a good or service.

Question 6

Direct materials

Answer 6

Tangible manufacturing inputs that can b practically traced to the product (metal for a tractor)

Question 7

Direct labor

Answer 7

The cost of human labor that can be practically traced to the product. (Welder welding a tractor)

Question 8

Manufacturing overhead

Answer 8

All manufacturing costs that are not direct labor or material (Indirect material, labor, and factory overhead)

Question 9

Indirect material

Answer 9

Tangible inputs that can’t be practically traced to the product (Staples used in a staple machine)

Question 10

Indirect labor

Answer 10

Cost of human labor connected with the manufacturing process that can’t be easily traced to the product (assembly line supervisors or janitorial staff)

Question 11

Factory operating costs (examples)

Answer 11

Utilities, real estate taxes, insurance, depreciation

Question 12

What are the two types of manufacturing cost classifications?

Answer 12

Prime costs and conversion costs

Question 13

Prime costs

Answer 13

The costs that are directly attributable to a product. (Equals direct material plus direct labor)

Question 14

Conversion costs

Answer 14

The costs of converting raw materials into a finished product. (Equals direct labor plus manufacturing overhead)

Question 15

What are the two categories of non-manufacturing costs

Answer 15

Selling (marketing) expenses and administrative expenses

Question 16

Administrative expenses

Answer 16

Costs incurred by a company not directly related to producing or marketing a product (executive salaries and depreciation on headquarters building)

Question 17

Selling (marketing) Expenses

Answer 17

Costs incurred on getting the product from the factory to the consumer (product transport, sales personnel salaries, advertising)

Question 18

Product costs

Answer 18

Are capitalized as part of finished goods inventory and go on to become cost of goods sold (also called inventoriable costs)

Question 19

Period costs

Answer 19

Costs that are not capitalized into finished goods inventory but are expensed as incurred

Question 20

Absorption costing

Answer 20

Treats all manufacturing costs (direct material, direct labor, variable overhead, and fixed overhead as product costs and all selling and administrative expenses as period costs

Question 21

Which form of accounting uses absorption costing

Answer 21

External financial accounting

Question 22

Variable costing

Answer 22

Capitalizes only variable manufacturing costs and treats all other costs (including fixed production costs as period costs)

Question 23

What are the two types of costs

Answer 23

Direct and indirect

Question 24

Direct costs

Answer 24

Can be easily associated with a particular cost object in an economically feasible way

Question 25

Indirect costs

Answer 25

Cannot be easily attributed to a particular cost object

Question 26

Cost Object

Answer 26

any entity to which costs can be attributed

Question 27

Cost driver

Answer 27

A basis used to assign cost to a cost object

Question 28

Cost pool

Answer 28

An account in which a variety of similar costs with a common cause are accumulated (i.e. manufacturing overhead)

Question 29

Common costs

Answer 29

A costs that is shared by two or more users. Must be allocated in a systematic way. (i.e. depreciation on a headquarters building for different departments)