chapter 3 Flashcards

1
Q

Define cost objects

A

resources or activities that serve as the basis for management decisions

require separate cost measurement and may e products, product lines, departments, georgraphic territories or any other classification taht aids in decision making

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

product costs

A

not expensed until the product is sold.

all costs related to the manufacture of the product

inventory and COGS

comprised of direct materials direct labor and manufacturing overhead appled

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

period costs

A

are expensed in the period in which they are incurred

not inventoriable like product costs

SG&A expense, interest expense

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

manufacturing cost

A

treated as product costs

include all costs asociated with the manufacture of a product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

nonmanufacturing costs

A

costs that do not relate to the manufacture of a porduct

i.e. period costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

type of cost - wages for factory employees?

A

direct labor - product cost

t

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

type of cost - wages for accounting department?

A

period cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

type of cost - sales and promotion expense

A

period cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

type of cost - raw materials purchased

A

direct material - product cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

type of cost - general and administrative costs

A

period cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

type of cost - manufacturing overhead

A

product cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

type of cost - interest expense

A

period cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is comprised in product costs?

A

DM + DL + MOH

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

define direct costs

A

can be easily (without excessive cost or significant error) traced to a cost pool or object, as the cost directly relates to that item

includes direct raw material and direct labor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

define direct raw materials

A

costs of materials purchased to be used in production (including freight in net of any applicable purchase discounts )PLUS a reasonable amount for normal scrap created by the process

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

define direct labor

A

cost of the labor that is directly related to the production of a product or the performance of a service PLUS a reasonable amount of expected downtime for the labor (i.e. breaks, setup , training, etc.)

17
Q

define indirect cost

A

not easily traceable to a cost pool or cost object. Typically incurred to benefit two or more cost pools or objects. The specific benefit each cost gives to the cost pool or object cannot be determined without making some sort of reasonable estimate or using an allocation methodology.

known as “overhead”

includes indirect material, indirect labor, other indirect costs

18
Q

define indirect materials

A

cost of materials that were not used specifically or could not be traced to the completed procut with ease Ii.e. cleaning supplies to clean up work space)

19
Q

define indirect labor

A

cost of labor that is not easily traceable to a particular product, service, etc.

most often, the type of labor supports the manufacturing process but does not work directly on the specific job

ex: maintenance owkrers, shift supervisors, workers in the receiving department, janitorial staff, inspectors, engineers, training, et.

included in manufacturing overhead

20
Q

define other indirect costs

A

“factory costs”

costs other than those for materials or labor

costs for depreciation, rent of production warehouse, machine maintenance, property tax on building, insurance, utilities, etc.

21
Q

prime cost

A

= DL + DM

22
Q

conversion cost

A

= DL + MOH

23
Q

Traditional costing

A

all indirect costs (MOH) are allocated to a single cost pool or account called overhead and allocated as a single pool.

  1. overhead rate = budgeted OH / est. cost drive
  2. applied OH = actual cost driver x OH rate
24
Q

variable cost

A

changes proportionally with the cost driver (typical cost drivers include sales volume and production volume)

change in total, but constant per unit

25
Q

fixed cost

A

does not change when the cost driver changes

remain constant in total but they vary per unity

26
Q

define relevant range

A

range for which the assumptions of the cost driver are valid (i.e. VC/unit and FC in total do not change

when the cost driver is no longer within the relevant range, the VC and FC assumptions cannot be used to allocate costs to cost objects