CGA module 1 important terms

Question 1

What are product costs

Answer 1

Product costs are also called inventoriable costs they are the costs that are involved in making the product (direct materials, direct labour and MOH)
Before the finished product is sold, the costs are shown as assets on the balance sheet. when they are sold they are shown as COGS on the income statement (expensed)

Question 2

what are period costs

Answer 2

costs such as administration, commissions, selling expenses
they are expensed on the income statement as operation expense on the Income statement when they incur. are not associated with the purchase and manufacture of goods.

Question 3

what are direct costs and indirect costs

Answer 3

focus on controlling costs

Question 4

What is a cost object

Answer 4

anything for which cost data is required such as a desk and text book, department, employee etc.

Question 5

What is a direct cost

Answer 5

any cost that can be easily traced back to the cost object. Such as wood for a desk or paper for a textbook
direct materials, and direct labour

Question 6

What is an indirect cost

Answer 6

can’t be easily traced back to the cost object
depreciation, glue for textbook, salary of supervisor
indirect material and indirect labour

Question 7

which costs are easier to control direct costs or indirect costs

Answer 7

direct costs. ex. photo copy, enter a code when used, it tracks the costs and can be easily traced

Question 8

Cost behaviour uses what?

Answer 8

variable and fixed costs

Question 9

What are variable costs

Answer 9

increase in total as the activity that drives these costs increases.

Question 10

What are fixed costs

Answer 10

remains constant regardless of the changes in activity of the cost driver. as the activity increases, the cost per unit becomes smaller

Question 11

What is differential costs?

Answer 11

is a change in cost between alternatives that are considered. often used in decision making process.

Question 12

What is an example of a differential cost

Answer 12

make vs buy decision. skateboard company can buy skateboards preassembled at a certain cost or buy them unassembled at another cost and assemble at the store. The costs that wouldn’t have been incurred if you choose one decision over another (I think)

Question 13

What is a differential revenue

Answer 13

the change in benefits between alternatives used in decision making

Question 14

what is a simple definition of differential cost

Answer 14

Differential cost (also known as incremental cost) is the difference in cost of two alternatives

Question 15

What is a simple definition of a differential revenue

Answer 15

difference in revenue of two alternatives is known as differential revenue

Question 16

Opportunity costs

Answer 16

a benefit lost because one course of action was taken instead of another

Question 17

Sunk Costs

Answer 17

costs already incurred and cant be changed by a future decision. you dont use this to make a decision.

Question 18

labour - overtime premium

Answer 18

additional hourly rate paid to workers who work above the normal time required.
usually beyond 8 hour shift
- usually the extra cost should be classified as overhead. so that it is applied evenly.
unless it is for a specific job

Question 19

Labour - idle time

Answer 19

unproductive time

• waiting for materials, machine down time
• usually treated to overhead unless it can be traced to a specific job