Tutorial 4

Question 1

Manufacturing costs include

Answer 1

Direct Materials, Direct Labour, Manufacturing Overhead

Question 2

Prime costs comprise

Answer 2

Direct Materials and Direct Labour

Question 3

Conversion costs are

Answer 3

Direct Labour and Manufacturing Overhead

Question 4

Margin of Safety is computed by

Answer 4

Sales (actual or budgeted) - Breakeven sales

Question 5

Margin of Safety , Percentage

Answer 5

Margin of Safety /Sales (actual or budgeted)

Question 6

Degree of Operating Leverage

Answer 6

Contribution Margin/Net Operating Income

Question 7

Cost Object:

Answer 7

any product, any job order, any division, any anything to which you asign a cost.

Question 8

Traditional Costing

Answer 8

• One plantwide overhead rate
• easy to implement
• only allocates products costs
• can be used for exteral reports (COGS)
• require 1 set of books
• less accurate

Question 9

ABC

Answer 9

• multiple activity rates
• difficult to implement
• may allocate period costs
• cannot be used for external reports
• requires 2 set of books

Question 10

period cost

Answer 10

all costs that are not product costs (expense as incurred)

Question 11

Margin of safety ( in units)

Answer 11

Budgeted (or actual) sales quantity - Breakeven quantity

Question 12

The direct costs of a cost object are

Answer 12

costs related to a particular cost object that can be traced to that cost object in an economically feasible (cost-effective) way for example, the cost of purchasing the main computer board or the cost of parts used to make an iMac computer.

Question 13

The indirect costs of a cost object are

Answer 13

costs related to a particular cost object that cannot be traced to that cost object in an economically feasible (cost-effective) wa - for example, the salries of supervisors who oversee multiple products, only one of whichis the iMac, or the rent paid for ther repair facility that repairs many different object using a cost-allocation method.

Question 14

Cost assignment is

Answer 14

a general term for assigning costs, whether direct or indirect, to a cost object.

Question 15

Cost tracing is

Answer 15

the process of assigning direct costs.

Question 16

Cost allocation is

Answer 16

the process of assigning indirect costs

Question 17

Cost pool

Answer 17

is a grouping of individual indirect cost items. Cost pools can range from broad, such as all manufacturing-plant costs, to narrow, such as the costs of operating metal-cutting machines. Cost pools are often organized in conjunction with cost-allocation bases.

Question 18

Cost-allocation base is

Answer 18

a systematic way to link an indirect cost or group of indirect costs ( operating costs of all metal-cutting machines) to cost objects (different products)

Question 19

Job-costing system

Answer 19

In a job-costing system, the cost object is a unit or multiple units of a distinct product or service called a job.

Question 20

Process-costing system

Answer 20

In a process-costing system, the cost object is masses of identical or similar units of a product or service.

Question 21

One form of a job-costing system can be used is

Answer 21

actual costing, which is a costing system that traces direct costs to a cost object based on the actual direct-cost rates times the actual quantities of the direct-cost inputs used. Indirect costs are allocated based on the actual indirect-cost rates times the actual quantitities of the cost-allocation bases. An actual indirect-cost rate is calculated by dividing actual annual indirect costs by the actual annual quantity of the cost-allocation base

Question 22

Cost hierarchy categorizes

Answer 22

various activity cost pools on the basis of the different types of cost driver, cost-allocation bases, or different degrees of difficulty in determining cause-and effect (or benefits-received) relationships

Question 23

ABC systems commonly

Answer 23

use a cost hierarchy with four levels to identify cost-allocation bases that are cost drivers of the activity cost pools: (1) output unit-level costs, (2) batch-level costs, (3) product-sustaining costs and (4) facility-sustaining costs

Question 24

Output unit-level costs are

Answer 24

the costs of activities performed on each individual unit of a product or service.

Question 25

Batch-level costs are

Answer 25

the costs of activities related to a group of units of a product or service rather than each individual unit of product or service.

Question 26

Product-sustaining costs (service-sustaining costs) are

Answer 26

the costs of activities undertaken to support individual products or services regardless of the number of units or batches in which the units are produced.

Question 27

Facility-sustaining costs are

Answer 27

the costs of activities that managers cannot trace to individual products or services but that support the organi