chapter 1

Question 1

different costs for different purposes

Answer 1

1) for assigning cost objects 2) for manufacturing companies 3) for preparing financial statements 4) for prediciting cost behavior 5) for making decisions

Question 2

costs are assigned to what

Answer 2

objects

Question 3

cost object

Answer 3

like products or custmoers. somethhing that is assigned costs

Question 4

reason to assign cost

Answer 4

to have accurate costs to make better decisions for pricing what product lines to emphasis and to control spending

Question 5

direct cost

Answer 5

cost that can be easily and conveniently traced to cost object like direct manufacturing or direct labor

Question 6

indirect cost

Answer 6

cost that cannot be easily traced to cost objective

Question 7

example of indirect cost

Answer 7

manufacturing overhead, indirect labor (janitor or security guard), indirect materials (glue, bolts), property taxes, rent, insurance

Question 8

common cost

Answer 8

(AKA indirect cost) costs incurred to support cost objects (ie products) but are not traced to them individually

Question 9

different types of orgs

Answer 9

manufacturing, merchandising, and service

Question 10

manufacturing costs

Answer 10

direct manufacturing, direct labor, manufacturing overhead

Question 11

manufacturing

Answer 11

converting raw materials into finished goods

Question 12

order of most to least for percent of total product cost

Answer 12

DM, DL, MOH

Question 13

hardest cost to trace

Answer 13

finsihed goods in MOH, assigning MOH costs to product lines is a form of estimation

Question 14

accurate costs

Answer 14

important to subsequent decisions

Question 15

direct mats

Answer 15

raw materials used to manufacture products can be classified as either DM or IDM

Question 16

what are included. in MOH

Answer 16

indirect mats and indirect labor

Question 17

manufacturing overhead

Answer 17

all product costs other than DL and DM

Question 18

allocating to products

Answer 18

companies use an actviity ase to assign OH to products or product lines

Question 19

nonmanufacturing costs

Answer 19

(AKA period costs) selling expenses and administrative expenses

Question 20

selling expense and ex

Answer 20

all costs necessary to secure customer orders and get finished goods into hands of customers

ex. ads, shipping

Question 21

administrative expnense and ex

Answer 21

include all costs associated with general management of org

ex. R&D, general accounting, pr

Question 22

when preparing balance sheet and income statemenr company must do what

Answer 22

classify costs as product or period

Question 23

product costs

Answer 23

costs necessary and integral part of prodcuing finished product

Question 24

how product cost become expenses

Answer 24

first recorded as inventory and expensed when inventory is sold (COGS)

Question 25

example of product cost

Answer 25

DM, DL, MOH

Question 26

period costs

Answer 26

nonmanufacturing costs that are matched with specific time period rather than included as part of a product (usually immediately expensed)

Question 27

example of period costs

Answer 27

selling and administrative

Question 28

cost behavior

Answer 28

way a cost reacts to chages in level of business actviity

Question 29

variable cost

Answer 29

cost that varies in total in direct proportion to changes in level of activity

Question 30

direct proportion

Answer 30

if activity level doubles then total variable cost also doubles

Question 31

activity base (cost driver)

Answer 31

whatever causes the vc to increase

Question 32

vc per unit

Answer 32

total vc go up with increases in level of activity but vc per unit osts remain constamt

Question 33

fixed cost

Answer 33

cost that remains constant in total regardless of changes in level of activity (ie insurnace or rent)

Question 34

fc per unit

Answer 34

declines with inc in activity level

Question 35

committed fixed costs

Answer 35

fixed costs that cannot be reduced to 0 without imparing profit of company

Question 36

discretionary fixed costs

Answer 36

fixed costs that can be cut for short periods with minimal damage to long term goals for company

Question 37

example of discretionary fixed costs

Answer 37

caritable donations

Question 38

cost of dec discretionary fixed costs

Answer 38

may impact companys long run position

Question 39

is a fixed costs either committed or discretionary

Answer 39

no, most fixed costs have characteristics of both (eg salaries of key personnel can be reduced)

Question 40

linearity assumption and relevant range

Answer 40

many costs fo not have strictly linear relationship with activity base

Question 41

approximation

Answer 41

linear relationdhip (straight line) can be use to approximate cost that has curvilinear relationship with volume

Question 42

relevant range

Answer 42

using straight line to approximate curvilinear relationship is most effective within relevant range

Question 43

very few costs are completely ____

Answer 43

fixed, most FC will go up or down when pushed outside companys relevant range

Question 44

relevant range

Answer 44

range of activity for which assumptions about VC and FC are valid

Question 45

mixed costs

Answer 45

costs w/ elements of both fc & vc

Question 46

differential costs

Answer 46

difference between two cost alternatives

Question 47

incremental cost

Answer 47

refers to increases/dec in costs between alternatives

Question 48

relevant

Answer 48

cost and revenues are ones that change between alternatives (costs that do not change can be ignored)

Question 49

opportunity cost

Answer 49

potential benefit given up when choice of one action precludes selection of another

Question 50

make or buy

Answer 50

opportunity cost of making a part, is company caanot launcg a new product with freed up manufacturing space

Question 51

sunk cost

Answer 51

costs that have already been incurred and will not be changed or avoided by any future decision

Question 52

COGS for merchandising company is what type of cost

Answer 52

variable

Question 53

controution margin

Answer 53

sales - VC

Question 54

merchandising company COGS should be entirely

Answer 54

variable

Question 55

manufacturing company COGS has both

Answer 55

variable and fixed costs