Ch 2

Question 0

Actual cost

Answer 0

Cost incurred, historical cost

Question 1

Cost

Answer 1

Resource sacrificed or foregone to achieve specific objective

Question 2

Budgeted cost

Answer 2

Predicted or forecasted cost

Question 3

Cost object

Answer 3

Context of finding a cost

Anything where measurement of costs is desired

Question 4

6 examples of cost objects?

Answer 4

Product 
Service
Project
Customer
Activity
Department

Question 5

Cost accumulation and assignment

Answer 5

Collection of data in organized way using an accounting system

Manager accountants assign accumulated costs to
Designated cost objects

Question 6

Direct costs of a cost object

Answer 6

Related to particular cost object and can be traced
In cost effective way

Ex. Cost of steel tires is a direct cost to BMW X5

Question 7

Cost tracing

Answer 7

Describes assignment of direct costs to particular

cost object

Question 8

Indirect costs of cost object

Answer 8

Related to particular cost object but can not be traced in cost effective way

Ex. Salaries of plant managers that oversee production of many cars

Question 9

Cost allocation

Answer 9

Used for the assignment of indirect costs to

Particular cost object

Question 10

Cost assignment

Answer 10

Encompasses both tracing direct costs to cost object

And allocating indirect costs to cost object

Question 11

Materiality of cost in question

Answer 11

The smaller the amount of the cost, the less

Likely it is to trace the cost

Question 12

3 factors that are used to determine direct and indirect costs?

Answer 12

Materiality of cost

Info gathering technology

Design of operations

Question 13

Available information gathering technology, 1 ex?

Answer 13

Improvements in info gathering technology to consider
More costs as direct costs

Ex. Bar codes

Question 14

Design of operations

Answer 14

If operation is designed exclusively for

one specific cost object

Question 15

Variable costs

Answer 15

Changes in total in proportion to changes in related
Level of total activity

Remain unchanged on a per unit basis

Question 16

Fixed cost

Answer 16

Remains unchanged in total for given time period
Despite wide changes in activity level

Decrease on a per unit basis as activity increases

Question 17

Cost driver

Answer 17

Variable such as level of activity or volume that

Casually affects costs over a given time span

Question 18

Activity

Answer 18

Event, task or unit of work with a specified purpose

Question 19

Relevant range

Answer 19

Band of normal activity level where there is
Specific relationship between level of activity
And cost in question

Question 20

Calculate unit cost

Answer 20

Unit cost = total manufacturing costs/# units manufactured

Question 21

Manufacturing sector company

Answer 21

Purchase materials and components and

Converts them into finished goods

Question 22

Merchandiser sect companies

Answer 22

Purchase than sell tangible products without

Changing their basic form

Question 23

Service sector companies

Answer 23

Provide services of intangible products

Ex. Legal advice, audits for clients

Question 24

Direct materials inventory

Answer 24

Direct materials in stock and waiting for | manufacturing process

Question 25

Work in process inventory

Answer 25

Goods partially worked on but not completed

Question 26

Finished goods inventory

Answer 26

Goods completed but not yet sold

Question 27

Direct materials costs

Answer 27

Acquisition costs of all materials that eventually become part of cost object and can be traced To cost object in cost effective way

Question 28

Direct manufacturing labor costs

Answer 28

Compensation of all manufacturing labor that can be | Traced to cost object

Question 29

Indirect manufacturing costs AKA Manufacturing overhead costs

Answer 29

All manufacturing costs that are related to cost object | But can't be traced to cost object in cost effective way

Question 30

Inventoriable costs

Answer 30

All costs of a product that are considered assets on Balance sheet when they are incurred and become Cost of goods sold only when product is sold

Question 31

Revenues

Answer 31

Inflows of assets received for products or services | Provided to customers

Question 32

Period costs

Answer 32

All costs on income statement other than cost of goods sold All non manufacturing costs for manufacturing companies Include marketing, distribution, costumer service, R&D

Question 33

Cost of goods manufactured

Answer 33

Cost of goods brought to completion, whether | started before or during the current accounting period

Question 34

Operating income 2 equations?

Answer 34

Operating income = operating revenue - cost of goods sold -operating costs Operating income = gross margin - period costs

Question 35

Prime cost equation

Answer 35

Prime costs = direct materials cost + direct labor cost

Question 36

Conversion costs

Answer 36

All manufacturing costs other than direct materials cost Conversion costs = direct labor cost + manu. overhead cost

Question 37

Overtime premium

Answer 37

Wage rate paid to workers in excess of straight time Wage rates Considered an indirect cost or manufacturing overhead

Question 38

Idle time

Answer 38

Wages paid for unproductive time caused by lack of orders, Machine or computer breakdowns, work delays, poor Scheduling

Question 39

Fringe costs 4 examples?

Answer 39

Health insurance, social security, life insurance, pensions

Question 40

Product cost

Answer 40

Sum of costs assigned to a product for a specific purpose

Question 41

Pricing product mix decisions

Answer 41

For purpose of making decisions about pricing and which | Products provide the most profits

Question 42

Contracting with government agencies

Answer 42

Government contracts often reimburse contractors On basis of the coat of the product and prespecified Margin of profit

Question 43

What do product costs include under GAAP?

Answer 43

Only Inventoriable manufacturing costs

Question 44

3 features for cost accounting framework?

Answer 44

Calculate cost of products, services and other cost objects Obtain info for planning, control, performance evaluation Analyze relevant info for making decisions