Module 2

Question 1

T or F: Indirect costs are frequently called overhead costs.

Answer 1

True.

Question 2

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.

Answer 2

True

Question 3

The process of assigning costs to two or more cost objects requires cost _____________, ____________, and cost/benefit analysis.

Answer 3

tracing

allocation

Question 4

Costs that can be traced to objects in a cost-effective manner are called ___________ costs.

Answer 4

direct

Question 5

Utility costs would be classified as an ___________ cost when assigning costs to a particular department of a large retail sales store.

Answer 5

indirect

Question 6

T or F: Direct costs and variable costs are synonymous.

Answer 6

False.

Question 7

The process of dividing a total cost into parts, and assigning the parts among relevant cost objects is called ____________ .

Answer 7

allocation

Question 8

The allocation process requires us to answer 3 questions:
1)
2)
3)

Answer 8

1) What amount is to be allocated?

2) Where should it be allocated?

3) How will it be allocated?

Question 9

Allocation rate is = ______________________ / _____ ________.

Answer 9

cost to be allocated / cost driver

Question 10

What should you consider when picking the best cost driver for a particular allocation?

Answer 10

(1) Cause and effect relationship
(2) Available info
(3) Capacity to control the allocation base

Question 11

If allocating a telephone bill among departments, the best cost driver would be _________________________.

Answer 11

number of telephones

Question 12

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

Answer 12

True

Question 13

Do joint costs occur before or after the split-off joint?

Answer 13

Before

Question 14

What are costs incurred in the process of making two or more products?

Answer 14

joint costs

Question 15

T or F: To be relevant, information can either differ among alternatives or be context specific.

Answer 15

False, it must be both.

Question 16

______ costs are not relevant to decision making.

Answer 16

sunk

Question 17

What are the four levels to avoidable costs?

Answer 17

Unit level

Batch level

Product Level

Facility Level

Question 18

Define a special order decision.

Answer 18

Situations where management must decide whether to accept unusual orders.

Question 19

Strategic planning focuses on what?

Answer 19

long-term planning

Question 20

An _____________ decision is one that asks a manufacturer to produce their product at a lower cost than they can afford.

Answer 20

outsourcing

Question 21

The ____________ budget formalizes the overall goals and objectives of a company.

Answer 21

master/capital

Question 22

Managers use actual cost data for: (2 answers)

Answer 22

Evaluating performance

Preparing financial data

Question 23

What is another name for indirect costs?

Answer 23

overhead costs

Question 24

Managers use cost estimates to do what? (6 answers)

Answer 24

(1) set prices, (2) bid on contracts, (3) evaluate proposals, (4) distribute resources, (5) plan production, (6) and set goals

Question 25

T or F: A cost that supports multiple cost objects but can’t be traced to a specific object is called a joint cost.

Answer 25

False, its called a common cost.

Question 26

Which costs can be influenced by a manager’s decisions and actions?

Answer 26

controllable costs

Question 27

What is the best cost driver for allocating variable overhead costs?

Answer 27

volume measures (these costs would increase or decrease in proportion to the volume being produced - think indirect materials, labor etc)

Question 28

T or F: Cost driver selection can influence a manager’s decisions.

Answer 28

True

Question 29

To be relevant, information must be________________ and ___________________.

Answer 29

future oriented

differ among alternatives