Chapter 1

Question 1

What can cost objects be

Answer 1

Products, Lines of products, customers, divisions, departments, geographical regions, business segments

Question 2

Direct Costs

Answer 2

Costs that can be directly and conveniently traced to a product

Question 3

Indirect costs

Answer 3

Costs that cannot be easily and conveniently traced to a unit of a product or other cost

Question 4

What are the three types of classifications for Manufacturing Costs

Answer 4

Direct Materials, Direct Labor, Manufacturing Overhead

Question 5

What are direct materials

Answer 5

Direct Materials are raw materials that can be conveniently traced directly to units of product

Question 6

Give an example of direct materials

Answer 6

free response

Question 7

What is direct labor

Answer 7

Direct labor costs are those labor costs that can be easily traced to individual units of a product

Question 8

Give an example of direct labor costs

Answer 8

free response

Question 9

Manufacturing overhead

Answer 9

Includes all manufacturing costs except direct material and direct labor. These costs cannot be readily traced to finished products

Question 10

What are the two components of manufacturing overhead

Answer 10

indirect materials and indirect labor

Question 11

Give examples of manufacturing overhead

Answer 11

free response

Question 12

Prime Costs =

Answer 12

Prime Cost = Direct Material + Direct Labor

Question 13

Convergent Costs =

Answer 13

Convergent Costs = Direct Labor + Manufacturing Overhead

Question 14

What is classified as a non manufacturing cost

Answer 14

SG& A (Selling costs and administrative costs), R&D Expenses (Research and Development)

Question 15

What is classified as a manufacturing cost

Answer 15

Direct Labor + Direct Material = Prime Costs; Direct Labor + Manufacturing Overhead = Conversion Costs

Question 16

Selling Costs

Answer 16

Costs necessary to secure the order and delivery of a product. Selling can be indirect or direct

Question 17

Administrative Costs

Answer 17

All executive, organizational, and clerical costs. Administrative costs can be either direct or indirect costs

Question 18

Research costs

Answer 18

Costs of planned search or critical investigation aimed at discovery of new knowledge.

Question 19

Development Costs

Answer 19

Costs incurred to translate research findings into a plan or design for a new product or process

Question 20

What is the difference between product costs vs period costs

Answer 20

Product costs includes all the costs that are involved in acquiring or making a product

Question 21

Product costs “attach to”

Answer 21

Product costs “attach” to a unit of a product as it is purchased or manufactured and they stay attached to each unit of product as long as it remains in inventory awaiting sale

Question 22

Period costs are all costs

Answer 22

That are not product costs

Question 23

3 Components of Manufacturing Product Costs

Answer 23

Raw materials, work in process, finished goods

Question 24

Raw materials

Answer 24

Includes any materials that go into the final product. Also includes indirect materials

Question 25

Work in process

Answer 25

consists of units of product that are only partially complete and will require further work before they are ready for sale to the customer

Question 26

Finished goods

Answer 26

Consists of completed units of product that have not yet been sold to customers

Question 27

Outline of Cost flows

Answer 27

Draw Picture (See Chap 1 Slides)

Question 28

What is cost behavior

Answer 28

Cost behavior refers to how a cost will react to changes in level of activity

Question 29

Three most common classifications of cost behavior

Answer 29

Variable costs, fixed costs, mixed costs

Question 30

What is Variable Cost

Answer 30

A cost that varies, in total, in direct proportion to changes in the level of activity

Question 31

A variable cost per unit is

Answer 31

constant

Question 32

What is a fixed cost

Answer 32

A cost that remains constant, in total, regardless of changes in the level of the activity

Question 33

If fixed cost is expressed on a per unit basis

Answer 33

the average fixed cost per unit varies inversely with changes in activity

Question 34

What is the relevant range

Answer 34

refers to a normal range of volume or normal amount of activity in which the total amount of a company’s fixed costs will not change as the volume or amount of activity changes

Question 35

A mixed cost

Answer 35

Is a cost that contains both variable and fixed elements

Question 36

An example of a mixed cost

Answer 36

Utility cost

Question 37

draw fixed, mixed, variable, and relevant range graphs

Answer 37

see Chap 1 slides for help with drawing