Chapter 1

Question 1

___ are indirect costs incurred to support a number of cost objects?

Answer 1

Common Costs

Question 2

What are products costs for Retailers? For Manufacturers?

Answer 2

Product Costs for:

Retailers
-all costs required to purchase inventory

Manufacturing
-all costs required to manufacture inventories

Question 3

3 parts of Product Costs

Answer 3

DM
DL
OH

Question 4

What are Raw Materials? Are they a product cost or selling and administrative cost?

Answer 4

Raw Materials

• includes Direct Materials(DM) that go into product
• includes Indirect Materials traced to final product (ex: oil for machines)

*Raw Materials are not Selling and Aministrative Costs or part of Product Costs

Question 5

What is the treatment of Product Costs?

What is the treatment of Period Costs?

Answer 5

Product Costs
-expensed through COGS when Inventory is sold

Period Costs
-expensed in the period incurred

Question 6

How are wages and salaries classified?

Answer 6

As Product Costs

• Salaries are OH
• Wages are DL

Question 7

Selling and Administrative Costs?

Answer 7

rent on non-factory buildings
insurance on non-factory
depreciation non-factory equipment
property taxes
sales commissions

Question 8

Mixed Costs

Answer 8

contain VC and FC

Question 9

Cost Behavior

Answer 9

How a cost will react (inc./dec.) to changes in level of activity

Question 10

Activity Base

Answer 10

The Cost Driver

thing that makes the cost go up or down

EX: buying more inventory