Chapter 2 Cost Concepts

Question 1

Cost

Answer 1

monetary measure of the amount of resources given up or used for some purpose or objective. it is measured by the price paid or required to be paid to acquire goods or services to attain future benefits.

Question 2

Cost and Expense

Answer 2

Expense are gross outflow of economic benefits during the period in the course of ordinary activities when those outflows result in decreases in equity, other than those relating to distributions to owners.

Cost are incurred to produce benefits. Costs are used up in making revenues, they are said to expire.

Question 3

Expenses

Answer 3

expired costs which are matched with revenues to determine income in a given period.

Question 4

Cost Accumulation

Answer 4

involves collecting cost by natural classification, such as materials or labor.

Question 5

Cost object

Answer 5

anything for which is computed.

examples: a product, product line, a segment of the organization.

Question 6

Cost Driver

Answer 6

any variable, such as level of activity or volume that usually affect costs over a period of time
Examples: productions, sales, number of hours

Question 7

Cost pool

Answer 7

A grouping of individual cost items, an account in which a variety of similar costs are accumulated
Examples: WIP, FOC

Question 8

Activity

Answer 8

an event, transaction, task or unit of work with a specified purpose.

Question 9

Value-Adding Activity

Answer 9

activities that are necessary to produce the product

Question 10

Non-Value-Adding Activity

Answer 10

activities that do not make the product or services more valuable to the customer

Question 11

Relevant Range

Answer 11

the assumed range of activity that reflects the company’s normal operating range.