Cost Concept

Question 1

What is a Cost Object?

Answer 1

A product, division, or department

Cost objects are used to determine the cost of specific items or segments within an organization.

Question 2

What is a Cost Pool?

Answer 2

WIP account

A cost pool is a grouping of individual costs, typically by department or service.

Question 3

Types of Fixed Cost
- Committed vs Discretionary

Answer 3

Committed
- Long term in nature
- cannot be eliminated
- examples : depreciation and long term leases

Discretionary
- periodic decision
- can be changed

Examples include depreciation and long-term leases.

Question 4

Other Term for Mixed Cost?

Answer 4

Semi-variable
(not semi-fixed)

Question 5

Define Step Cost.

LF

Answer 5

Lump sum increase with changes in activity

Step costs remain fixed over certain ranges of activity but increase in steps once thresholds are crossed.

Question 6

Cost Function Formula

Answer 6

y = a + bx

Question 7

How to compute Mixed Cost
- High-Low Method (basis and formula)

Can I use random points to compute for fixed and variable portion?

Answer 7

based on the highest and lowest activity levels (not costs)

Formula = change in cost / change in activity level

No (since ang basis mo is sa highest and lowest activity level, ayun lang rin gagamitin mo para magsolve ng fixed and variable portion)

Question 8

How to compute Mixed Cost
- Least-squares (Regression) Method
(formula and SEXY)

this is the most accurate method

Answer 8

1. ey na beks
2. exy exa beks 2
3. eliminate a (fixed cost)
4. substitute b (for variable cost)

Question 9

Define the Coefficient of Correlation (r).

Answer 9

Relationship between two variables

The value ranges from -1 to 1, indicating the strength and direction of a linear relationship.

Question 10

What is the Coefficient of Determination (r²)?

Answer 10

Strength of cost function predicting the dependent variable

Closer to 1 indicates a better predictive capability, but it should not exceed 1.