Chapter 7 - Cost Management

Question 1

Direct Costs

Answer 1

Traceable to and responsibility of a particular operating department/division. Controllable by division manager.
Examples: Food/Bev sales, Operating expenses, linens, salaries/wages

Question 2

Indirect Costs

Answer 2

Cannot be traced and normally not the responsibility of operating departments’ or divisions’ managers.
Examples: overhead costs, building maintenance, administration expense, advertising/utility expenses

Question 3

Opportunity Cost

Answer 3

The value of the best alternative

Question 4

Fixed Cost

Answer 4

Not expected to change in the short run of an operating period.
Examples: management salaries, fire insurance expense, rent paid on a square-foot basis, committed cost of advertising campaign

Question 5

Variable Cost

Answer 5

Changes in direct proportion to a change in sales revenue

Examples: Cost of Sales of food and beverages

Question 6

Semifixed or Semivariable costs

Answer 6

Do not fit into fixed/variable costs. Examples: payroll, maintenance, utilities