Lecture 2

Question 1

price - cost = ?

Answer 1

profit

Question 2

what influences the price of a product?

Answer 2

supply, demand, competition

Question 3

steps of controlling costs = ?

Answer 3

classify
measure
allocate

Question 4

does cost = expense?

Answer 4

no

Question 5

cost = ?

Answer 5

the amount sacrificed to attain something

Question 6

what’s the difference between costs & expenses?

Answer 6

costs involve the attainment of a long term asset, a one-off purchase

expenses provide short term benefits (e.g., rent expense)

Question 7

expense = ?

Answer 7

an ongoing payment to function business

Question 8

cost object = ?

Answer 8

an item being costed (e.g., product, service, process, department, customer)

Question 9

cost driver = ?

Answer 9

any factor that drives costs (e.g., no. of units produced, direct labour hours, machine hours)

Question 10

what’s the difference between direct and indirect costs?

Answer 10

direct costs are traceable,

indirect costs aren’t traceable

Question 11

cost components = ?

Answer 11

raw materials
labour
manufacturing overhead

Question 12

manufacuting overheads = ?

Answer 12

supporting activities to produce the produce/service

Question 13

raw materials = ?

Answer 13

raw components to makeup the product

direct/indirect materials

Question 14

labour = ?

Answer 14

work involved in producing the product or providing the service

direct/indirect labour

Question 15

direct materials + direct labour + manufacturing overhead = ?

Answer 15

cost of a product

Question 16

prime cost = ?

Answer 16

direct materials & direct labour

Question 17

conversion cost = ?

Answer 17

direct labour + manufacturing overhead

Question 18

difference between product cost & period cost = ?

Answer 18

if the product in inventoriable, product cost

if the product isn’t inventoriable, period cost

Question 19

product costs = ?

Answer 19

recorded as balance sheet items

Question 20

period costs = ?

Answer 20

recorded as expenses on income statement

Question 21

direct material + direct labour + manufacturing overhead = ?

Answer 21

cost of goods/manufactured

Question 22

opening inventory + cost of production = ?

Answer 22

cost of goods available for sale

Question 23

cost of goods available for sale - closing inventory = ?

Answer 23

cost of goods sold

Question 24

process for manufacturing-sector companies?

Answer 24

raw materials
work in progress
finished goods

Question 25

process for merchandising-sector companies?

Answer 25

sell finished goods

Question 26

process for service-sector companies?

Answer 26

perishable
work in progress (sometimes)

Question 27

perishable = ?

Answer 27

services are perishable as they’re consumed

never stored as inventory

Question 28

what are the two types of cost?

Answer 28

fixed costs
variable costs

Question 29

variable costs = ?

Answer 29

costs that alter dependent on the level of activity (e.g., cost of sales)

Question 30

fixed costs = ?

Answer 30

costs that remain constant, regardless of activity level (e.g., rent)

Question 31

relevant range = ?

Answer 31

the range of activity within which cost behave in a specific and predictable way

Question 32

are all variable costs direct?

Answer 32

no

Question 33

are all fixed costs indirect?

Answer 33

no

Question 34

total costs = ?

Answer 34

total direct materials + total direct labour + manufacturing overhead

Question 35

unit cost = ?

Answer 35

total manufacturing costs / number of units manufactured

Question 36

what is the difference between relevant & irrelevant costs?

Answer 36

relevant costs are impacted by future decisions

indirect costs aren’t impacted by future decisions

Question 37

sunk costs = ?

Answer 37

costs of resources already acquired and are unaffected by the choice between the various alternatives (e.g., depreciation)

real but irrelevant

Question 38

opportunity costs = ?

Answer 38

cost that measures the opportunity that is lost or sacrificed when the choice of a course of action requires an alternative to be sacrificed

not real, but relevant

Question 39

are irrelevant costs avoidable?

Answer 39

no, they’re unavoidable

Question 40

are relevant costs avoidable?

Answer 40

yes

Question 41

costing system two steps = ?

Answer 41

accumulates costs
assigns costs to particular objects

Question 42

cost accumulation = ?

Answer 42

the collection of data in an organised way through an accounting system

Question 43

cost assignment = ?

Answer 43

encompasses tracing and allocating costs to an object