Ch 2

Question 1

cost object

Answer 1

anything for which cost data are desired

Question 2

direct cost

Answer 2

daily and conveniently traced to a specific cost object

Question 3

indirect cost

Answer 3

cannot be easily and conveniently trace to specified cost object

Question 4

common cost

Answer 4

incurred to support a number o cost injects but cannot be trace to them individually; it also an indirect cost

Question 5

raw materials

Answer 5

the materials that go into the final product

Question 6

direct materials

Answer 6

become an integral part of the finished product and who cost and be conveniently trace to the finished product

Question 7

indirect materials

Answer 7

include as part of manufacturing overhead

Question 8

direct labor

Answer 8

can be easily (physically and conveniently) faced to the individual units of product

Question 9

indirect labor

Answer 9

cannot be physically traced to a particle product or that can be traced only at great cost and inconvenience

Question 10

manufacturing overhead

Answer 10

third cost category; all manufacturing costa except direct material and direct labor

Question 11

selling costs

Answer 11

incurred to secure customer orders and get the finished product to the customer

Question 12

administrative costs

Answer 12

associate with the general management of an organization rather than with the manufacturing or selling

Question 13

product costs

Answer 13

all costs involved in acquiring or making a product

Question 14

inventoriable costs

Answer 14

when product costs are initially assigned to inventors

Question 15

period costs

Answer 15

all costs that are not product costs

Question 16

prime costs

Answer 16

sum o f direct material cost and direct labor cost

Question 17

conversion cost

Answer 17

sum of direct labor cost and manufacturing overhead cost

Question 18

cost behavior

Answer 18

how a cost reacts to changes in the level o activity

Question 19

cost structure

Answer 19

the relative proportion os each type of cost in a n organization

Question 20

variable cost

Answer 20

varies, in total, in direct proportion to changes in the level of activity.

Question 21

activity base

Answer 21

a measure of whatever causes the incurring of a variable cost

Question 22

fixed cost

Answer 22

remains constant,in total, regardless of changes in the level of activity

Question 23

committed fixed costs

Answer 23

represent organization investment with a multiyear planning horizon that can’t be significantly reduced even for short period of time without making fundamental changes

Question 24

discretionary fixed costs

Answer 24

often referred to as managed fixed costs usually arise form annual decisions by management to spend on certain fixed cost items

Question 25

relevant range

Answer 25

range o f activity thing which the assumption that cost behavior is strictly linear is reasonably valid

Question 26

mixed cost

Answer 26

contains both variable and fixed cost elements

Question 27

accounting analysis

Answer 27

an account is classified as either variable or fixed base on the analyst’s prior knowledge of how the cost in the account behaves

Question 28

engineering approach

Answer 28

involves a detailed analysis of what cost behavior should be, based on an industrial engineer’s evaluation o the production methods to be used, the materials specification, labor requirements, equipment usage, production efficiency, power consumption, and so on

Question 29

dependent variable

Answer 29

cost. because the mont of cost incurred during a period depends on the level of activity for the period.

Question 30

independent variable

Answer 30

activity. because it causes variations in the cost

Question 31

cost behavior is considered ___

Answer 31

linear

Question 32

linear

Answer 32

whenever a straight line is a reasonable approximation for the relation between cost and activity

Question 33

high-low method

Answer 33

to analyze mixed costs. identifying the period with the lowest level of activity and then the period with he hinges level of activity

Question 34

least-squares regression method

Answer 34

uses all of the data to separate a mixed cost into its fixed and variable components

Question 35

contribution approach

Answer 35

the crucial distinction between fixed and variable costs is as the heart of the ___ approach to constructing income statements

Question 36

contribution margin

Answer 36

the amount remain from sales revenues after variable expenses have been deducted

Question 37

differential costs

Answer 37

a difference in costs between any two alternatives

Question 38

differential revenue

Answer 38

a difference in revenues (usually just sales) between any two alternatives

Question 39

opportunity cost

Answer 39

the potential benefit that is given up when one alternative is selected over another

Question 40

sunk cost

Answer 40

a cost that has already been incurred and cannot bet change by any decision made now or in the future