Chapter 2 book

Question 1

which cost do managers need to know

Answer 1

both actual and budgeted cost

Question 2

the assignment of direct costs to a particular cost object

Answer 2

cost tracing

Question 3

the process of assigning indirect costs to a particular cost object

Answer 3

cost allocation

Question 4

What are the 2 ways of assigning cost

Answer 4

1. TRACING costs with a direct relationship to the cost object and
2. ALLOCATING accumulated costs with an indirect relationship to a cost object

Question 5

cost that changes in total proportion to changes in the related level of total activity or volume

Answer 5

variable cost

Question 6

cost that remains unchanged in total for a given time period despite wide changes in the related level of total activity or volume

Answer 6

fixed cost

Question 7

cost computed by dividing the total cost by the realted number of units produced

Answer 7

unit cost/average cost

Question 8

for many decisions, managers should think in terms of total costs or unit costs?

Answer 8

total costs

Question 9

what are the 3 sectors of the economy

Answer 9

1. manufacturing sector companies
2. merchandising sector companies
3. service sector companies

Question 10

purchase materials and components and convert them into various finished goods
ex. automotive companies, cellular phone producers, food processing companies, and computer companies
which sector of the economy is this?

Answer 10

manufacturing sector companies

Question 11

purchase and then sell tangible products without changing their basic form
ex. companies engaged in retailing, distribution, or wholesaling)
which sector of the economy is this?

Answer 11

merchandising sector companies

Question 12

provide services (intangible products) to their customers
ex. law firms, accounting firms, banks, mutual fund companies, insurance companies, transportation companies, advertising agencies, television stations, internet service providers, travel agencies, healthcare providers, and brokerage firms
which sector of the economy is this ?

Answer 12

service sector companies

Question 13

3 types of inventory ?

Answer 13

1. direct materials inventory
2. work in process inventory
3. finished goods inventory

Question 14

direct materials in stock that will be used in the manufacturing process

Answer 14

direct materials inventory

Question 15

goods partially worked on but not yet completed

Answer 15

work in process inventory

Question 16

goods completed, but not yet sold

Answer 16

finished goods inventory

Question 17

merchandizing sector companies hold only one type of inventory

Answer 17

merchandise inventory

Question 18

the acquisition costs of all materials that eventually become part of the cost object (work in process and then finished goods); they can easily and unabiguously be traced to the cost object.

Answer 18

direct materials costs

Question 19

include the compensation of all manufacturing labor that can easily and unambiguously be traced to the cost object (work in process and then finished goods)

Answer 19

direct manufacturing labor costs

Question 20

are all manufacturing costs that are related to the cost object (work in process and then finished goods), but that cannot easily and unambiguously be traced to the cost object
ex: indirect materials such as lubricants, indirect manufacturing labor such as plant maintenance and cleaning labor, plant rent, plant insurance, property taxes on the plant, plant depreciation, and the compensation of plant managers

Answer 20

indirect manufacturing cost
or manufacturing over head costs

Question 21

are all costs of a product that are considered assets in a companys balance sheet when the costs are incurred and that are expensed as cost of goods sold only when the product is sold.

Answer 21

inventoriable costs