Ch 2 Flashcards
A cost is:
a sacrificed or forgone resource to achieve a specific objective
An Actual cost is:
a cost that has occurred
Budgeted cost is
a predicted cost
Cost object is
anything for which a cost measurement is desired (ex. product, R&D project, departments)
Cost accumulation is
the collection of cost data in an organized way by means of an accounting system
Cost assignment is
a general term that encompasses the gathering of accumulated costs to a cost object
two ways of gathering of accumulated costs to a cost object:
- Tracing costs with a direct relationship to the cost object (direct cost)
- Allocating accumulated costs with an indirect relationship to a cost object (indirect cost)
factors affecting the direct/indirect cost classification:
- The materiality of the cost in question (the smaller the cost, the less likely it will be economically feasible to trace the cost)
- The available information-gathering technology (technology makes it possible to consider more and more costs as direct)
- Design of operations (if parts of a facility are dedicated to a particular cost object such as a specific product or a particular customer, we are generally able to classify more costs as direct)
A specific cost may be a direct cost for one cost object and an indirect cost for another.
T or F ?
True
Costs are fixed or variable for a specific activity but not for a given time period.
T or F?
False
Costs are fixed or variable for a specific activity and/or for a given time period.
Variable costs are constant on a per-unit basis.
T or F?
True
Fixed costs per unit do not change with the level of production
T or F?
False
Fixed costs per !!unit!! change inversely with the level of production. As more units are produced, the same fixed cost is spread over more and more units, reducing the cost per unit.
Mixed costs have
both variable and fixed elements
A cost driver is
a variable, such as the level of activity or volume, that causally affects costs over a given time span
Relevant range is
the band or range of normal activity level (or volume) in which there is a specific relationship between the level of activity (or volume) and the cost in question
Fixed costs are considered fixed only within the relevant range.
Costs may be classified as
- Direct/Indirect
- Variable/Fixed.
Three different sectors of economy
- Manufacturing
- Merchandise
- Service sector
merchants dont change products basic form
true or false?
True
Types of inventory manufacturing
- direct materials
- Work-in-progress
- Finished goods
Merchandising-sector companies hold tree types of inventory:
True or False
Merchandising-sector companies hold only one type of inventory: Merchandise Inventory
Inventoriable costs are
all costs of a product that are considered assets in a company’s balance sheet when the costs are incurred and that are expensed as cost of goods sold only when the product is sold.
For manufacturing companies, all manufacturing costs are inventoriable costs.
T or F?
True
Period costs are
all costs in the income statement other than cost of goods sold. They are treated as expenses of the accounting period in which they are incurred because managers expect these costs to increase revenues in only that period and not in future periods.
Inventoriable costs go straight to the income statement
T or F?
False
Inventoriable costs go through the balance sheet accounts of direct materials,WIP and finished goods inventory before entering the CGS in the income statement.
Prime costs are referring to
all direct manufacturing costs (materials and labor).
Conversion costs are referring to
to direct labor and indirect manufacturing costs.
Direct manufacturing labor costs are a part of both prime costs and conversion costs.
T or F?
True
Do product cost vary for different purposes?
yes
