Ch. 2

Question 1

actual cost

Answer 1

the cost actually incurred

Question 2

budgeted cost

Answer 2

the predicted or forecast cost

Question 3

cost

Answer 3

a resource sacrificed or forgone to achieve a specific objective

Question 4

cost object

Answer 4

anything for which a measurement of cost is desired

Question 5

cost accumulation

Answer 5

the collection of costs in some organized way, usually by some accounting system

Question 6

cost allocation

Answer 6

describes the assignment of indirect costs to a particular cost object

Question 7

cost assignment

Answer 7

general term that encompasses both (1) tracing of direct costs and (2) allocating indirect costs

Question 8

cost tracing

Answer 8

the term used to describe the assignment of direct costs to a particular cost object

Question 9

direct costs of a cost object

Answer 9

related to the particular cost object and can be traced and can be traced to it in a cost effective way

Question 10

fixed cost

Answer 10

unchanged in total and changes in the related level of activity or total volume

Question 11

indirect costs of a cost object

Answer 11

are related to the particular cost object but cannot be traced to it easily or in a cost effective way

Question 12

variable cost

Answer 12

changes in total in proportion to changes in the related level of total volume activity

Question 13

relevant range

Answer 13

the band of normal activity level or volume in which there is a specific relationship between the level of activity or volume and the cost in question

Question 14

manufacturing-sector companies

Answer 14

purchase materials and components and convert them into various finished goods

Question 15

unit cost (average cost)

Answer 15

total cost/the related number of units

Question 16

service sector companies

Answer 16

provide intangible services (law office)

Question 17

direct manufacturing labor costs

Answer 17

the compensation of all manufacturing labor that can be traced to the cost object easily

Question 18

direct materials cost

Answer 18

acquisition costs of all materials that eventually become part of the cost object (WIP then FG) and can be traced to the cost object easily

Question 19

direct materials inventory

Answer 19

direct materials in stock and waiting to be used in the manufacturing process

Question 20

finished goods inventory

Answer 20

goods completed but not yet sold

Question 21

indirect manufacturing OH costs (factory OH costs) (manufacturing OH costs)

Answer 21

all manufacturing costs that are related to the cost object but cannot be easily traced to that cost object

Question 22

inventoriable costs

Answer 22

are all costs of a product that are considered as assets in the balance sheet when they are incurred and that become cost of goods sold only when the product is sold

Question 23

WIP inventory (work in progress)

Answer 23

goods partially worked on but not yet completed

Question 24

merchandising-sector companies

Answer 24

purchase and then sell tangible products without changing their basic form

Question 25

period costs

Answer 25

all costs in the income statement other than COGS. selling, general and administrative costs

Question 26

conversion costs

Answer 26

all manufacturing costs other than direct materials costs

Question 27

cost of goods manufactured

Answer 27

refers to the cost of goods brought to completion whether they were started before or during the current accounting period

Question 28

idle time

Answer 28

wages paid for unproductive rime caused by lack of orders, machine or computer breakdowns, work delays, poor scheduling, so on

Question 29

operating income

Answer 29

total revenues from operations - COGS and operating costs (excluding interest expense and income taxes OR GM - period costs

Question 30

overtime premium

Answer 30

the wage rate paid to workers (for both direct labor and indirect labor) in excess of their straight time work rates

Question 31

prime costs

Answer 31

all the direct manufacturing costs. direct materials costs+ direct manufacturing labor costs

Question 32

product cost

Answer 32

the sum of the costs assigned to a product for a specific purpose

Question 33

revenues

Answer 33

inflows of assets