Classification of Costs

Question 1

a cost is a…

Answer 1

sacrifice of an economic resource

Question 2

three ways to typically account for costs

Answer 2

1. expense in current cost period it is incurred on the income statement
2. include cost in inventory until sold, then expense on IS
3. report on BS as an asset then expense when as it is used to produce revs

Question 3

when do you report cost on BS as an asset and then report on IS as an asset as it creates revenue for the company?

Answer 3

PP&E, intangible assets

Question 4

all costs that provide ________ are expensed as incurred

Answer 4

no future economic benefit

Question 5

all costs that provide ______ are reported as an asset until the asset is used up

Answer 5

future economic benefit

Question 6

product costs include…

Answer 6

all costs required to make products for sale to customers (inventory)

Question 7

do product costs provide future economic benefit?

Answer 7

yes

Question 8

Cost of inventory sold is reported as an…

Answer 8

asset until until it is sold

Question 9

period costs are…

Answer 9

costs required to support the operations of a business

Question 10

do period costs provide future economic benefits?

Answer 10

no

Question 11

period costs are reported as an…

Answer 11

expense in period incurred

Question 12

the cost to make products that were sold are…

Answer 12

product costs

Question 13

costs incurred during the period in order to support the revenure generated process are…

Answer 13

period costs

Question 14

revenues associated with units sold is matched to…

Answer 14

cost of units sold

Question 15

the matching principle requires…

Answer 15

all expenses be reported in the same period as revenue generated

Question 16

managerial accountants do not tytpically analyze what accounts?

Answer 16

under operating income

Question 17

product costs include what three aspects?

Answer 17

1. direct labor
2. direct material
3. MOH

Question 18

all three costs included in inventory become what on the IS?

Answer 18

cost of goods sold

Question 19

period costs are _______ to make the product

Answer 19

not required

Question 20

examples of period costs

Answer 20

exec salaries, admin salaries, admin expenses, sales commision, advertising, research, warehouse, employees who move inventory,
legal expenses

Question 21

direct costs are costs that…

Answer 21

costs that can easily be traced to one product

Question 22

direct costs are _____, ______, and _____, that can be…

Answer 22

direct labor, direct materials, and period costs incurred as a %of sales

Question 23

period costs are considered direct costs if…

Answer 23

they are incurred as a % of sales

Question 24

indirect costs are costs that…

Answer 24

cannot be easily traced to one product

Question 25

indirect costs are incurred to…

Answer 25

support the manufacturing of ALL PRODUCTS

Question 26

indirect costs typically include…

Answer 26

MOH and most period costs

Question 27

what costs are related to MANUFACTURING?

Answer 27

product costs

Question 28

examples of product costs

Answer 28

materials, cost of workers who make the product, the costs of facility and management required to make the product

Question 29

direct labor is…

Answer 29

workers that touch the product to make it or operate a machine that makes a product

Question 30

managers and supervisors are considered ___ labor

Answer 30

indirect

Question 31

MOH includes…

Answer 31

all costs incurred at the manufacturing facility to make the product that are not included in DM or DL

Question 32

MOH primarily consists of…

Answer 32

cost of using the facility and the cost of managing the production process

Question 33

the cost of using the facility and the cost of managing the production process are…

Answer 33

MOH

Question 34

for a cost to be considered a MOH, it MUST…

Answer 34

be incurred at the manufacturing facility