Chapter 2

Question 1

Actual Cost

Answer 1

Is the cost incurred (a historical or past cost).

Question 2

Budgeted Cost

Answer 2

Which is a predicted, or forecasted, cost(a future cost).

Question 3

Cost Object

Answer 3

Which is anything for which a cost measurement is desired.

Question 4

Cost Accumulation

Answer 4

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

Question 5

Cost Allocation

Answer 5

Is used to describe the assignment of indirect costs to a particular cost object.

Question 6

Cost Assignment

Answer 6

Is a general term that encompasses both 1) tracing direct costs to a cost object and 2) allocating indirect costs to a cost object.

Question 7

Direct Costs of a Cost Object

Answer 7

Are related to the particular cost object and can be traced to it in an economically feasible way.

Question 8

Indirect Costs of a Cost Object

Answer 8

Are related to the particular cost object but cannot be traced to it in an economically feasible way.

Question 9

Variable Cost

Answer 9

Changes in total in proportion to changes in the related level of total activity or volume of output produced.

Question 10

Fixed Cost

Answer 10

Remains unchanged in total for a given time period, despite wide changes in the related level of total activity or volume of output produced.

Question 11

Cost Driver

Answer 11

Is a variable, such as the level of activity or volume, that casually affects costs over a given time span.

Question 12

Relevant Range

Answer 12

Is the band or range of normal activity level or volume I which there is a specific relationship between the level of activity or volume and the cost in question.

Question 13

Unit Cost(Average Cost)

Answer 13

Is calculated by dividing the total cost by the related number of units produced.

Question 14

Direct Materials Inventory

Answer 14

Direct materials in stock that will be used in the manufacturing process.
Ex: computer chips and components

Question 15

Work-in-process Inventory

Answer 15

Goods partially worked on but not yet completed.

Question 16

Finished Goods Inventory

Answer 16

Goods completed but not yet sold.

Question 17

Direct Materials Cost

Answer 17

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

Question 18

Direct Manufacturing Labor Costs

Answer 18

Include the compensation of all manufacturing labor that can be traced to the cost object in an economically feasible way.
Ex: wages and fringe benefits

Question 19

Indirect Manufacturing Costs

Answer 19

Are all manufacturing Cost that are related to the cost object but cannot be traced to that cost object in an economically feasible way.

Question 20

Inventoriable Costs

Answer 20

Are all Costs of a product that are considered assets in a company’s balance sheet when the costs are incurred and that are expenses as cost of goods sold only when the product is sold.

Question 21

Revenues

Answer 21

Are inflows of assets received for products or services customers purchase.

Question 22

Period Costs

Answer 22

Are all Costs in the income statement other than cost of goods sold.

Question 23

Cost of Goods Manufactured

Answer 23

Refers to the cost of goods brought to completion, whether they were started before or during be the current accounting period.

Question 24

Operating Income

Answer 24

Equals total revenues from operations minus cost of goods sold and operating (period) costs (excluding interest expense and income taxes) or, equivalently, gross margin minus period costs.

Question 25

Prime Costs

Answer 25

Are all direct manufacturing costs.

Question 26

Conversion Costs

Answer 26

Are all manufacturing costs other than direct Materials costs.

Question 27

Overtime Premium

Answer 27

Is the wage rate paid to workers (for both direct labor and indirect labor) in excess of their straight-time wage rates.

Question 28

Idle Times

Answer 28

Refers to the wages paid for time caused by lack of orders, machine or computer breakdowns, work delays, poor scheduling, and the like.