Cours 1

Question 1

Give a few examples of accounting activities within an organization.

Answer 1

• Prepare and communicate financial statements.
• Manage financial resources.
• Manage transactions.

Question 2

What is a cost object?

Answer 2

It is anything for which we want to calculate a cost. It is used to:
- Answer a particular need.
- Make a decision.

Question 3

Give examples of cost objects.

Answer 3

product divisions, department, service rendered, etc.

Question 4

What is a direct cost?

Answer 4

It is a cost that can be easily and conveniently traced to the particular cost object under consideration.

Question 5

What is an indirect cost?

Answer 5

It is a cost that cannot be easily and conveniently traced to the particular cost under consideration.

Question 6

What is a merchandising company?

Answer 6

It is a business that sells goods in the same form in which they are purchased.

Question 7

What is a manufacturing company?

Answer 7

It is a business that consists of activities and processes that convert raw materials into finished goods.

Question 8

What is a service company?

Answer 8

It is a business that is different from manufacturing companies in the way that services are immediately consumed by the consumer.

Question 9

What is a big difference in the balance sheet between services and manufacturing companies?

Answer 9

Services have low to no inventory.

Question 10

What are the 3 manufacturing costs?

Answer 10

• Direct materials (DM): apples, plastic bottles, etc.
• Direct labor (DL): factory employees that work directly transforming the raw material
• Manufacturing overhead (MOH): machinery depreciation, maintenance, and repair of machinery, maintenance on the plant building, etc.

Question 11

What are non-manufacturing costs?

Answer 11

Selling and administrative expenses, sales commissions, accountant’s salary, etc.

Question 12

What is a fixed cost?

Answer 12

• It is a cost that is independent of variations in the activity level.
• Fixed costs decrease per unit as the activity level rises and increase per unit as the activity level falls.

Question 13

What is the relevant range for fixed costs?

Answer 13

Fixed costs are valid with a specific zone of activity level.

Question 14

What is a variable cost?

Answer 14

THey are costs that are directly proportional to the activity level.

Question 15

What is the relevant range for variable costs?

Answer 15

It is the valid assumption within a specific zone of activity level.

Question 16

What is the total cost?

Answer 16

It is the addition of fixed costs and variable costs. It is the sum of all the resources required in the production of a cost object.

Question 17

what is the relevant range for the total cost?

Answer 17

It’s a zone in which the volumes are the most likely to be observed in a given period.

Question 18

What is the average cost?

Answer 18

It is the total cost divided by the number of units produced.

Question 19

What is an incremental cost?

Answer 19

It is the cost of resources consumed by the last unit produced.

Question 20

What is the other name for incremental cost?

Answer 20

Marginal cost

Question 21

What are mixed costs?

Answer 21

They are costs that have both a variable cost component and a fixed cost component. Mixed costs change in total but not proportionally with changes in the activity level.

Question 22

What are the 2 methods to calculate mixed costs?

Answer 22

-High-low method
- Simple linear regression

Question 23

What is the high-low method to calculate mixed costs?

Answer 23

This method uses the total costs incurred at the high and low levels of activity. The difference in costs between the high and low levels represents variable costs since only the variable cost component can change as activity levels change.

Question 24

What is simple linear regression to calculate mixed costs?

Answer 24

It is a more accurate analysis model because it considers all observations.

Question 25

What is the cost formula?

Answer 25

• Y: total cost
• a: fixed cost
• bx: per-unit variable cost *volume
  y=a+bx