Concepts and classifications

Question 1

Cost

Answer 1

The cash or cash equivalent value sacrifice for goods and services that are expected to bring a current or future benefit to the organization

Question 2

Expenses

Answer 2

Expired cost

Question 3

Direct materials

Answer 3

Basic ingredients that are transformed into finished products through the use of labor and factory overhead in the production process

Question 4

Direct materials

Answer 4

Materials that are become part of a finished product and can be conveniently and economically traced to specific product units

Question 5

Direct labor

Answer 5

Amount paid as wages to those working directly on the product

Question 6

Direct labor cost

Answer 6

Include all labor cost for specific work performed on products that can be conveniently and economically trace to end products

Question 7

Indirect labor cost

Answer 7

Labor costs for production related activities that cannot be conveniently and economically traced to end products

Question 8

Prime cost

Answer 8

The sum of direct labor and direct materials

Question 9

Conversion cost

Answer 9

The sum of direct labor and factory overhead

Question 10

Factory overhead

Answer 10

Manufacturing cost that cannot be classified as direct materials or direct labor cost.

Question 11

Marketing or selling expenses

Answer 11

All cost necessary to secure customer orders and get the finished product or services into the hands of the customer

Question 12

Administrative or general expenses

Answer 12

All executive, organizational, and clerical expenses that cannot logically be included under either production or marketing

Question 13

Fixed cost

Answer 13

Items of cost which remain constant in total, irrespective of the volume of production

Question 14

Committed fixed cost

Answer 14

Cost that represent relatively long term commitments on the part of management as a result of a past decision

Question 15

Managed fixed cost

Answer 15

Cause that are incurred on a short term basis and can be more modified in response to changes in management objectives

Question 16

Variable cost

Answer 16

Items of cost which vary directly in total, in relation to volume of production

Question 17

Mixed cost

Answer 17

Items of cost with fixed and variable components

Question 18

Semi-variable cost

Answer 18

The fixed portion of a semi variable cost usually represents a minimum fee for making a particular item or service available

Question 19

Step costs

Answer 19

The fixed part of a step cost changes abruptly at various activity levels because these cost are acquired in indivisible portions

Question 20

Common cost

Answer 20

Cost of facilities or services employed in two or more accounting periods, operations, commodities, or services

Question 21

Joint cost

Answer 21

Cost of materials, labor, and overhead in the manufacture of two or more products at the same time

Question 22

Capital expenditure

Answer 22

Expenditure intended to benefit more than one accounting periods and is recorded as an asset

Question 23

Revenue expenditure

Answer 23

Expenditure that will benefit current period only and is recorded as an expense

Question 24

Direct departmental charges

Answer 24

Cause that are immediately charged to the particular manufacturing departments that incurred the cost

Question 25

Indirect departmental charges

Answer 25

Cost that are originally charged to some other manufacturing department or accounts but are later allocated or transferred to another departments that indirectly benefited from said costs

Question 26

Standard cost

Answer 26

Predetermined cost for direct materials, direct labor, and factory overhead

Question 27

Opportunity cost

Answer 27

The benefit given up when one alternative is chosen over another

Question 28

Differential cost

Answer 28

Cost that is present under one alternative but is the absent in whole or in part under another alternative

Question 29

Incremental cost

Answer 29

An increase in cost from one alternative to another

Question 30

Decremental cost

Answer 30

A decrease in cost from one alternative to another

Question 31

Marginal revenue

Answer 31

Revenue that can be obtained from selling one or more unit of product

Question 32

Marginal cost

Answer 32

The cost involved in producing one more unit of product

Question 33

Relevant cost

Answer 33

A future cost the charges across the alternatives

Question 34

Out of pocket cost

Answer 34

Cost that requires the payment of money as a result of their incurrence

Question 35

Sunk cost

Answer 35

A cost for which an outlay has already been made and it cannot be changed by present our future decision

Question 36

Cost Center

Answer 36

Departments that doesn’t directly add to profit of the business

Question 37

Cost Driver

Answer 37

Cost incurred by the departments