Chapter 2

Question 1

cost

Answer 1

resource sacrificed or forgone to achieve a specific objective

Question 2

actual cost

Answer 2

the incurred costs (historical costs)

Question 3

budgeted costs

Answer 3

predicted or forecasted

Question 4

cost object

Answer 4

anything for which a separate measurement tof costs is desired.

Question 5

cost accumulation

Answer 5

collection of cost data in some organized way through an accounting system

Question 6

cost assignment

Answer 6

general term that encompasses both tracing accumulated costs to a cost object and allocating accumulated costs to a cost object

Question 7

costs that are traced to a cost object are..

Answer 7

direct costs

Question 8

costs that are allocated to a cost object are

Answer 8

indirect costs

Question 9

direct costs of a cost object are

Answer 9

costs that are related to the particular cost object and that can be traced to it in an economically feasible (cost-effective) way.

Question 10

indirect costs of a cost object are

Answer 10

costs that are related to the particular cost object but cannot be traced to it in an economically feasible way

Question 11

cost tracing

Answer 11

the assigning of direct costs to the chosen cost object

Question 12

cost allocation

Answer 12

assigning of indirect cost to the chosen cost object

Question 13

cost assignment

Answer 13

encompasses bot cost tracing and cost allocation

Question 14

draw the table of cost assignment

Answer 14

cost tracing
—– direct cost —————> cost object
cost assignment
—– indirect cost ————> cost object
cost allocation

Question 15

Several factors influence whether a cost is classified as direct or indirect:

Answer 15

1. size of the cost: high cost are worth tracking
2. Available technology: barcodes
3. Designs of the operations

Question 16

can a product be indirect and direct at the same time

Answer 16

yes, depends on what a company is measuring

Question 17

Cost reduction efforts frequently identify two key areas

Answer 17

1. focus on value-added activities
2. efficiently managing the use of the cost drivers in those value-added activities

Question 18

cost driver (= cost generator.cost determinant)

Answer 18

any factor that affects total costs

Question 19

cost management

Answer 19

Set of actions that managers take to satisfy customers while continuously reducing and controlling costs.

Question 20

Variable costs and fixed costs have some important assumptions:

Answer 20

1 Costs are labeled as V/F depending on what they are being assigned to (the cost object).
2. The time period must be clear.
3. The total costs change lineair.
4. There’s only one main factor (cost driver) causing the costs to change.
5. Other factors are either ignored or thought to have a small effect.
6. The changes in the cost driver happen within a specific range (relevant range).

Question 21

Relevant range

Answer 21

range of the cost driver in which a specific rela between cost and the level of activity or volume is valid

Question 22

Service-sector companies

Answer 22

provide services/tangible products to their customers (law firms, accounting firms, advertising agencies and television stations).

Question 23

Merchandising-sector companies

Answer 23

provide tangible products they have previously purchased in the same basic form from suppliers (retailing, distributing, wholesaling)

Question 24

manufacturing-sector companies

Answer 24

provide tangible products that have been converted to a different form that of the products purchased from suppliers. (computer, food processing and textile companies).

Question 25

direct material costs (part of the manufacturing costs)

Answer 25

the acquisition costs of all materials that eventually become part of the cost object and that can be traced to the cost object in an economically feasible way.

Question 26

direct manufacturing labour costs(part of the manufacturing costs)

Answer 26

the compensation of all manufacturing labour that is specifically identified with the cost object, and that can be traced to the cost object in an economically feasible way

Question 27

indirect manufacturing costs (part of the manufacturing costs) = manufacturing overhead costs/factory overhead costs

Answer 27

all manufacturing costs considered to be part of the cost object, but that cannot be individually traced to that cost object in an economically feasible way

Question 28

Capitalized cost

Answer 28

Recorded as an asset when they incurred because they are presumed to the provide future benefits to the company in all three sectors of the economy.

Question 29

Revenue costs

Answer 29

recorded as expenses of the accounting period when they are incurred.

Question 30

operating costs

Answer 30

all costs associated with generating revenues other than costs of goods sold

Question 31

stock-related costs (inventoriable costs)

Answer 31

costs associated with the purchase of goods for resale or costs associated with the acquisition and conversion of materials and all other manufacturing inputs into goods for sale

Question 32

period cost

Answer 32

all costs in the income statement other than cost of goods sold

Question 33

absorbing costing

Answer 33

the method in which all manufacturing costs are inventoriable

Question 34

prime costs

Answer 34

all direct manufacturing costs

Question 35

conversion costs

Answer 35

all manufacturing costs other than direct material costs

Question 36

product cost

Answer 36

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

Question 37

three purposes of product costs:

Answer 37

1. product pricing and product emphasise
2. contracting with a government agencies
3. financial statements

Question 38

classification of costs

Answer 38

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