Ch 2 Key terms

Question 1

actual cost

Answer 1

cost that has been incurred (historical/ past cost)

Question 2

cost

Answer 2

monetary value of resources (such as labor) sacrificed or forgone to achieve a specific objective

Question 3

budgeted cost

Answer 3

predicted or forecasted cost (future cost) as distinguished from an actual/ historical cost

Question 4

cost object

Answer 4

anything for which a measurement of costs is desired

Question 5

cost accumulation

Answer 5

collection of cost data in some organized way by means of an accounting system

Question 6

direct costs of a cost objective

Answer 6

costs related to the particular cost object that can be unambiguously traced to that object in an economically feasible (cost effective way)

Question 7

cost tracing

Answer 7

describes the assignment of direct costs to a particular cost object

Question 8

indirect costs of a cost object

Answer 8

costs related to the particular cost object that cannot be traced unambiguously to that object in an economically feasible (cost effective) way

Question 9

cost allocation

Answer 9

assignment of indirect costs to a particular cost object

Question 10

cost assignment

Answer 10

general term that encompasses both (1) tracing accumulated costs that have a direct relationship to a cost object and (2) allocating accumulated costs that have an indirect relationship to a cost object

Question 11

variable cost

Answer 11

cost that changes in total in proportion to changes in the related level of total activity or volume

Question 12

fixed cost

Answer 12

cost that remains uncharged in total for a given time period, despite wide changes in the related level of total activity/ volume

Question 13

relevant range

Answer 13

band of normal activity level/ volume in which there is a specific relationship between the level of activity/ volume and cost in?

Question 14

unit cost

Answer 14

cost computed by dividing total cost by the number of units (average costs)

Question 15

inventoriable costs

Answer 15

all costs of a product that are considered as assets in the balance sheet when they are incurred and that become COGS only when product is sold

Question 16

revenue

Answer 16

inflows of assets (usually cash/ Accounts Receivable) received for products/ services

Question 17

manufacturing- sector companies

Answer 17

companies that purchase materials and components and convert them into various finished goods

Question 18

merchandising sector companies

Answer 18

companies that purchase and then sell tangible products without changing their base form

Question 19

service sector companies

Answer 19

company that provide services/ intangible products to their customers

Question 20

direct materials inventory

Answer 20

direct materials in stock and awaiting use in the manufacturing process

Question 21

work in process inventory

Answer 21

goods partially worked on but not yet completed

Question 22

finished goods completed

Answer 22

goods completed, but not yet sold

Question 23

direct materials cost

Answer 23

acquisition costs of all materials that eventually become part of the cost object (WIP–> Finished goods) and that can be easily traced to the cost object in an economically feasible way

Question 24

DM manufacturing labor costs

Answer 24

include the compensation of an manufacturing labor that can be easily traced to the cost object (WIP–> Finished goods) in an economically feasible ways

Question 25

indirect manufacturing costs

Answer 25

all manufacturing costs that are related to the cost object (WIP--> finished goods) but that cannot be traced to that cost object in an economically feasible way. Also called manufacturing overhead costs and factory overhead costs

Question 26

period costs

Answer 26

all costs in the income statement other than COGS

Question 27

cost of goods manufactured

Answer 27

COGS brought to completion, whether they were started before/ during the current accounting period

Question 28

operating income

Answer 28

total revenue from operations- COGS and op (period) costs (excluding interest expense and income taxes)

Question 29

prime costs

Answer 29

all DM costs

Question 30

conversion costs

Answer 30

all manufacturing costs other than DM costs

Question 31

product cost

Answer 31

sum of the costs assigned to a product for a specific purpose