Module 2 Flashcards
T or F: Indirect costs are frequently called overhead costs.
True.
T or F: As a result of the cost/benefit concept, a cost that could be traced directly to a cost object may still be treated as an indirect cost.
True
The process of assigning costs to two or more cost objects requires cost _____________, ____________, and cost/benefit analysis.
tracing
allocation
Costs that can be traced to objects in a cost-effective manner are called ___________ costs.
direct
Utility costs would be classified as an ___________ cost when assigning costs to a particular department of a large retail sales store.
indirect
T or F: Direct costs and variable costs are synonymous.
False.
The process of dividing a total cost into parts, and assigning the parts among relevant cost objects is called ____________ .
allocation
The allocation process requires us to answer 3 questions:
1)
2)
3)
1) What amount is to be allocated?
2) Where should it be allocated?
3) How will it be allocated?
Allocation rate is = ______________________ / _____ ________.
cost to be allocated / cost driver
What should you consider when picking the best cost driver for a particular allocation?
(1) Cause and effect relationship
(2) Available info
(3) Capacity to control the allocation base
If allocating a telephone bill among departments, the best cost driver would be _________________________.
number of telephones
T or F: If there is no cause & effect relationship between a cost driver and the cost to be allocated accountants may be forced to make an arbitrary allocation such as assigning an equal amount of cost to each unit of product
True
Do joint costs occur before or after the split-off joint?
Before
What are costs incurred in the process of making two or more products?
joint costs
T or F: To be relevant, information can either differ among alternatives or be context specific.
False, it must be both.
______ costs are not relevant to decision making.
sunk
What are the four levels to avoidable costs?
Unit level
Batch level
Product Level
Facility Level
Define a special order decision.
Situations where management must decide whether to accept unusual orders.
Strategic planning focuses on what?
long-term planning
An _____________ decision is one that asks a manufacturer to produce their product at a lower cost than they can afford.
outsourcing
The ____________ budget formalizes the overall goals and objectives of a company.
master/capital
Managers use actual cost data for: (2 answers)
Evaluating performance
Preparing financial data
What is another name for indirect costs?
overhead costs
Managers use cost estimates to do what? (6 answers)
(1) set prices, (2) bid on contracts, (3) evaluate proposals, (4) distribute resources, (5) plan production, (6) and set goals
