Chapter 2 | Basic Cost Management Concepts Flashcards
2.1 What is defined as the sacrifice made to achieve a particular purpose, usually measured by the resources expended or given up?
Cost
2.1 True or false: Cost can have different meanings depending on the context in which it is used.
True
2.1 What is defined as the cost incurred when a resource (asset) is used up for the purpose of generating revenue? The resource used up can be any of the following: cash, expended directly; a promise to use up cash in the future, recognized as a liability (accounts payable); or the reduction in value of a recorded asset such as plant and equipment (via depreciation) or inventory (via cost of goods sold)
Expense
2.1 What two terms are used to describe the timing with which various expenses are recognized?
Product cost and period cost
2.1 What is a cost assigned to inventory, to goods that are either purchased or manufactured for resale?
Product cost
2.1 The ___ cost is used to value the inventory of manufactured goods or merchandise until the goods are sold.
Product cost
2.1 In the period of the sale, when the inventory asset is reduced, the product costs that have been recorded are reclassified as an expense called __ __ __ __.
Cost of goods sold
2.1 The product cost of merchandise inventory acquired by a retailer or wholesaler for resale consists of the __ __ of the inventory plus any __ __ paid by them.
purchase cost; shipping charges
2.1 The __ __ of manufactured inventory includes all of the costs incurred in its manufacture (ex: labor cost of a production employee)
product cost
2.1 What is another term for product cost, as a product cost is stores as the cost of inventory until the goods are sold?
Inventoriable cost
2.1 What are all costs that are not product costs, identified with the period of time in which they are incurred rather than with units of purchased or produced goods?
Period costs
2.1 _____ costs are recognized as expenses during the time period in which they are incurred.
Period costs
2.1 What types of costs are all R&D, selling, and administrative costs treated as?
Period costs
2.1 What includes all costs of developing new products and services (cost of running laboratories, building prototypes of new products, and testing new products)?
Research and development (R&D) costs
2.1 What includes salaries, commissions, and travel costs of sales personnel; shipping costs incurred by a manufacturer; and the costs of advertising and promotion?
Selling costs
2.1 What refers to all costs of running the organization as a whole (ex: salaries of all top-management personnel and the costs of the accounting, legal, and public relations activities)?
Administrative costs
2.1 In year 1 for a retailer or wholesaler, merchandise is acquired; product cost is equal to the __ __ __ plus the __ __.
cost of purchase; transportation cost
2.1 In year 1 for a manufacturer, goods are manufactured; product cost is equal to __ __ in the manufacturing process.
costs incurred
2.1 In year 2 for a retailer or wholesaler, merchandise is sold; expense called cost of merchandise sold (or cost of sales) is equal to the __ __ identified with the merchandise sold.
product cost
2.1 In year 2 for a manufacturer, goods are sold; expense called cost of goods sold is equal to the __ __ identified with the goods sold.
product cost
2.1 At the end of year 1, any inventory on hand is an __, which is valued at its product cost.
asset
2.1 In an income statement, all period costs are recorded as expenses during the years that they were incurred, so there is __ __ to record at the end of the year.
no asset
