Chapter 9: Management Accounting and Cost Concepts

Question 1

Systematic planning for long-term investments in operating asset

Answer 1

Capital Budgeting

Question 2

Implementing management plans and identifying how plans compare with actual performance

Answer 2

Controlling

Question 3

Techniques for determining how changes in revenues, costs, and level of activity affect the profitability of an organization

Answer 3

Cost-Volume-Profit (C-V-P) Analysis

Question 4

Future costs that change as a result of a decision; also called incremental or relevant costs

Answer 4

Differential Costs

Question 5

Costs that are specifically traceable to a unit of business or segment being analyzed

Answer 5

Direct Costs

Question 6

Wages paid to those who physically work on direct materials to transform them into a finished product and are traceable to specific products

Answer 6

Direct Labor

Question 7

Materials that become part of the product and are traceable to it

Answer 7

Direct Materials

Question 8

Analyzing results, rewarding performance, and identifying problems

Answer 8

Evaluating

Question 9

Costs that remain constant in total, regardless of activity level, over a certain range of activity

Answer 9

Fixed Costs

Question 10

Costs normally incurred for the benefit of several segments within the organization; sometimes called common costs or joint costs

Answer 10

Indirect Costs

Question 11

Labor that is necessary to a manufacturing or service business but is not directly related to the actual production of the product

Answer 11

Indirect Labor

Question 12

Materials that are necessary to a manufacturing or service business but are not directly included in or are not a significant part of the actual product

Answer 12

Indirect Materials

Question 13

All costs incurred in the manufacturing process other than direct materials and direct labor

Answer 13

Manufacturing Overhead

Question 14

Managerial planning decisions regarding current and immediate future (one year or less) operations that are characterized by regularity and frequency

Answer 14

Operational Budgeting

Question 15

The benefits lost or forfeited as a result of selecting one alternative course of action over another

Answer 15

Opportunity Costs

Question 16

Costs that require an outlay of cash or other resources

Answer 16

Out-of-Pocket Costs

Question 17

Costs not directly related to a product, service, or asset. They are charged as expenses to the income statement in the period in which they are incurred

Answer 17

Period Costs

Question 18

Outlining the activities that need to be performed for an organization to achieve its objectives

Answer 18

Planning

Question 19

Costs associated with products or services offered

Answer 19

Product Costs

Question 20

Management continual evaluation of various product lines and divisions’ profitability in order to analyze and identify opportunities to improve profits

Answer 20

Production Prioritizing

Question 21

A measure of operating performance and efficiency in utilizing assets; computed in its simplest form by dividing net income by average total assets (aka return on assets or ROA)

Answer 21

Return on Investment

Question 22

Broad-long range planning usually conducted by top management

Answer 22

Strategic Planning

Question 23

Costs that are past costs and do not change as a result of a future decision

Answer 23

Sunk Costs

Question 24

Costs that change in total in direct proportion to changes in activity level

Answer 24

Variable Costs