ch 2

Question 1

parts of manufacturing costs

Answer 1

direct materials, direct labour, manufacturing overhead

Question 2

define direct materials

Answer 2

materials that are integral part of finished product
not bought in bulk
only counted if USED during period

Question 3

define direct labour

Answer 3

labour costs easily traced to individual units (assembly workers, welders)

Question 4

parts of manufacturing overhead costs

Answer 4

indirect materials
indirect labour
other costs associated with factory operations

Question 5

define indirect materials

Answer 5

materials that can’t be tracked to specific product (thread, solder, bulk materials)

Question 6

define indirect labour

Answer 6

costs not directly associated with specific products (janitor, supervisor)

Question 7

parts of non-manufacturing costs

Answer 7

marketing/selling costs
admin costs

Question 8

define marketing/selling costs

Answer 8

order getting/fulfilling costs
packing, shipping

Question 9

define admin costs

Answer 9

general management and support of org:
executive (HR, accounting)
organizational
clerical

Question 10

how product costs vs period costs used

Answer 10

based on financial accounting

Question 11

define product/inventoriable/manufacturing cost

Answer 11

DM, DL, Manufacturing overhead
aka COGS

Question 12

define period costs

Answer 12

cost expenses on income statement in period incurred
(selling and admin costs)

Question 13

cost classification used on balance sheet

Answer 13

raw materials
WIP
finished goods

Question 14

define raw materials on a balance sheet

Answer 14

yet to be made into finished product

Question 15

define work in progress inventory

Answer 15

partially complete product

Question 16

define finished goods inventory

Answer 16

not yet sold but complete

Question 17

COGS equation on income statement

Answer 17

beginning finished goods + cost of completed goods - end finished goods

Question 18

predicting cost behaviour cost classifications:

Answer 18

variable cost
fixed cost
mixed cost

Question 19

define variable cost

Answer 19

total varies based on changes in activity level
stays constant on per unit basis

Question 20

define fixed cost

Answer 20

does not change based on activity
only in relevant range
per unit cost lowers with more activity (surface area)

Question 21

define mixed cost

Answer 21

variable and fixed cost elements

Question 22

example of variable cost

Answer 22

direct materials

Question 23

example of fixed cost

Answer 23

rent

Question 24

example of mixed cost

Answer 24

wages to sale staff
(salary + commission)

Question 25

explain relevant range

Answer 25

fixed cost stay the same within relevant range (eventually have to buy a new building to expand, and new relevant range starts)

Question 26

parts of cost classification for assigning costs to objects

Answer 26

direct cost indirect cost

Question 27

define cost object

Answer 27

any you it if analysis for which cost data is wanted (product, customer, job, dept.)

Question 28

define direct cost

Answer 28

cost easily traced to specific cost object

Question 29

define indirect cost

Answer 29

cannot be easily traced to cost object ex. factory manager is associated with many products, not just one)

Question 30

types of costs in decision making classification

Answer 30

differential cost/revenue opportunity cost sunk cost

Question 31

define differential cost/revenue

Answer 31

difference in rev and exp that may cause loss or gain

Question 32

define opportunity cost

Answer 32

potential benefit being given up when choose one alt over the other (work vs school)

Question 33

define sunk cost

Answer 33

cost already incurred and should not be considered in decision making