CH 2 Cost Terms and Purposes

Question 1

What are Costs?

Answer 1

sacrificed resource to achieve a specific objective

Question 2

What are Budgeted Costs?

Answer 2

a predicted cost

Question 3

What are Actual Costs?

Answer 3

a cost that has occured

Question 4

What are Cost Object?

Answer 4

anything of interest for which a cost is desired

Question 5

Examples Cost Objects

Answer 5

Product, Services, Project

Question 6

What is Cost accumulation?

Answer 6

a collection of cost data in an organized manner

Question 7

Cost assignment

Answer 7

includes gathering accumulated costs to a cost object

Tracing and allocating of accumulated costs.

Question 8

Direct Costs

Answer 8

can conveniently and economically traced back to a cost objective

Question 9

Indirect Costs

Answer 9

can NOT conveniently and economically traced back to a cost objective. This costs are allocated in a rational and systematic manner.

Question 10

Direct Costs (Examples)

Answer 10

parts, wages of workers in an assembly line

Question 11

Indirect Costs (Examples)

Answer 11

Electricity, Rent, Property taxes

Question 12

Variable Costs

Answer 12

change in total proportion to the changes in the related level of activity or volume.

Question 13

Fixed Costs

Answer 13

remain unchanged regardless of output level changes.

Question 14

Cost dirver

Answer 14

a variable that causally affects costs over a given time span

Question 15

relevant range

Answer 15

the band of normal activity level (or volume) in which there is a specific relationship between the level of activity and given cost

Question 16

Problem with unit costs

Answer 16

change with different level of output or volume

Question 17

Types of firmes, and what they do

Answer 17

Manufacturing (purchase materials and components and convert them in products)
Merchandising (purchase and sell tangible products without chaining their form)
Service firms

Question 18

Types of Manufacturing Inventories

Answer 18

Direct Materials (resources on stock and available for use)
Work in progress (product started and not completed)
Finished goods (products ready for sale)

Question 19

Types of Product costs (3)

Answer 19

Direct materials (costs of buying of all materials needed)

Direct labor (Costs of all manufacturing labor traced to object)

Indirect Manufacturing costs (costs not traceable to a object)

Question 20

Inventoriable Costs

Answer 20

Inventoriable costs are capitalized as inventory until the good is sold, then they are transferred to Costs of goods sold.

Question 21

Period Costs

Answer 21

have no future value and are expressed for the period incurred

Question 22

3 main features of cost accounting and cost management

Answer 22

1. Calculating the cost of products, services
2. Obtaining information for planning and control
3. Analyzing the relevant information for decision marking