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Cost Accounting > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

Resource sacrifice or forgone to achieve a specific object.

A

Cost

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2
Q

Usually measured as the monetary amount that must be paid to acquire goods/services.

A

Cost

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3
Q

A cost the has occurred

A

Actual cost

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4
Q

The cost incurred ( a historical /past cost)

A

Actual Cost

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5
Q

A predicted or forecasted cost (a future cost)

A

Budgeted cost

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6
Q

Putting a price on a particular thing

A

Cost Object

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7
Q

Anything for which a cost measurement is desired.

A

Cost Object

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8
Q

2 stages on how cost system determine the cost of various cost object.

A
  1. Cost Accumulation
  2. Cost Assignment
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9
Q

The collection of a cost data in an organized way by means of an accounting system.

A

Cost Accumulation

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10
Q

A general term that encompasses the gathering of accumulated costs to a cost object.

A

Cost Assignment

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11
Q

2 ways of gathering the accumulated costs to a costs object

A
  1. Tracing cost with direct relationship to the cost object
  2. Allocating accumulated cost with an indirect relationship to a cost object.
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12
Q

Can be conveniently and economically traced (tracked) to a cost object.

A

Direct Costs of a Cost Object

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13
Q

Cannot be conveniently or economically traced (tracked) to a cost object.
Instead of being traced, these cost are allocated to a cost object in a rational and systematic manner

A

Indirect Costs of a Cost Object

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14
Q

2 Classification of Cost

A
  1. Direct cost of a cost object
  2. Indirect cost of a cost object
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15
Q

2 Cost Assignment

A
  1. Cost Tracing
  2. Cost Allocation
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16
Q

Used to describe the assignment of direct costs to a particular cost object

A

Cost Tracing

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17
Q

Used to describe the assignment of indirect costs to a particular cost object.

A

Cost Allocation

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18
Q

Direct Costs

A

Direct Materials
Direct Labor

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19
Q

Examples of Indirect costs

A

Electricity, Rent, Property Taxes, Plant Administration Expenses

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20
Q

Factors Affecting Direct/ Indirect Cost Classifications

A
  1. The materiality of the cost in question
  2. Available information-gathering technology
  3. Design of Operations
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21
Q

The smaller the amount of a cost - that is , the more immaterial the cost is- the less likely it is economically feasible to trace it to a particular cost object.

A

The materiality of the cost in question

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22
Q

Improvements in information- gathering technology make it possible to consider more and more costs as direct costs.

A

Available information-gathering technology

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23
Q

Classifying a cost as direct is easier if a company’s facility is used exclusively for a specific cost object, such as a specific product or a particular customer.

A

Design of Operations

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24
Q

True/False?
A specific cost may be both a direct cost of one cost object and an indirect cost of another cost object.

A

True

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25
Q

True/False?
The direct/ indirect classification depends on the choice of the cost object.

A

True

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26
Q

2 Cost Behavior Patterns

A
  1. Variable Costs
  2. Fixed Costs
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27
Q

It changes in total in proportion to changes in the related level of activity or volume of output produced.

A

Variable Costs

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28
Q

Remains unchanged in total for a given time period, despite changes in the related level of activity or volume of output produced.

A

Fixed cost

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29
Q

Costs are fixed or variable for a specific activity and/or for a given time period. T/F?

A

T

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30
Q

(Total Dollars)
Change in proportion with output (more output= more cost)

A

Variable Costs

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31
Q

(Cost Per Unit)
Unchanged in relation to output

A

Variable Costs

32
Q

(Total Dollars)
Unchanged in the relation to output (within the relevant range)

A

Fixed Costs

33
Q

(Cost per Unit)
Change inversely with output (more output= lower cost per unit)

A

Fixed Costs

34
Q

Have both fixed and variable elements

A

Mixed/ Semivariable Costs

35
Q

A variable, such as the level of activity or volume, that casually affects costs over a given time span.

A

Cost Driver

36
Q

Is an event, task or unit of work with a specified purpose

A

Activity

37
Q

The level of activity/ volume whose change causes proportionate changes in the variable cost.

A

Cost Driver of Variable Costs

38
Q

Costing systems that identify the cost of each activity such as testing, design/setup.

A

Activity -based costing systems

39
Q

The band or range 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.

A

Relevant Range

40
Q

Fixed costs are considered fixed only within the relevant range. T/F?

A

T

41
Q

Cost may be classified as:

A
  1. Direct/ Indirect
  2. Variable/ Fixed
42
Q

Multiple classifications give rise to important cost combinations:

A
  1. Direct and Variable
  2. Direct and Fixed
  3. Indirect and Variable
  4. Indirect and Fixed
43
Q

Although unit costs are regularly used in financial reports and for making product mix and pricing decisions, managers should think in terms of total costs rather than unit costs for many decisions. T/ F?

A

T

44
Q

Also called an average cost
Calculated by dividing the total cost by the related number of units produced.

A

Unit Cost

45
Q

Formula of Unit Cost

A

Total manufacturing cost/ No. of units manufactured= unit cost

46
Q

Different Types of Firms

A
  1. Manufacturing- sector companies
  2. Merchandising- sector companies
  3. Service-sector companies
47
Q

Purchase materials and components and convert them into various finished goodsm

A

Manufacturing- sector companies

48
Q

Purchase and then sell tangible products without changing their basic form.

A

Merchandising- sector companies

49
Q

Provide services ( intangible products) like legal advice/ audits

A

Service-sector companies

50
Q

Types of Inventory

A
  1. Direct Materials Inventory
  2. Work- In- Process (or progress) Inventory
  3. Finished Goods Inventory
51
Q

Resources in-stock and available for use.

A

Direct Materials (Inventory)

52
Q

Goods partially worked on but not yet completed, often abbreviated as WIP

A

Work-In- Process Inventory

53
Q

Goods completed but not yet sold.

A

Finished Goods Inventory

54
Q

Merchandising-sector companies hold only one type of inventory: merchandise inventory. True/ False?

A

True

55
Q

Commonly Used Classifications of Manufacturing Costs

A
  1. Direct Materials
  2. Direct Labor
  3. Indirect Manufacturing
56
Q

Also known as inventoriable costs.

A
  1. Direct Materials
  2. Direct Labor
  3. Indirect Manufacturing
57
Q

Acquisition costs of all material that will become part of the cost object.

A

Direct Materials

58
Q

Compensation of all manufacturing labor that can be traced to the cost object.

A

Direct Labor

59
Q

All manufacturing costs that are related to the cost object but cannot be traced to that cost object in an economically feasible way.

A

Indirect Manufacturing

60
Q

Are all costs of a product that are considered assets in a company’s balance sheet when the cost are incurred and that are expensed as cost of goods sold only when the product is sold.

A

Inventoriable costs

61
Q

True/False?
All manufacturing costs are inventoriable costs

A

True

62
Q

Are all cost in the income statement other than cost of goods sold.
They are treated as expenses of the accounting period in which they are incurred.

A

Period Costs

63
Q

The cost of goods manufactured and the costs of goods sold section of the income statement are accounting representations of the actual flow of costs through a production system. T/F?

A

True

64
Q

Other Cost Considerations

A
  1. Prime Cost
  2. Conversion Cost
  3. Overtime Premium
  4. Idle Time
65
Q

A term referring to all direct manufacturing costs ( materials and labor)

A

Prime Cost

66
Q

A term referring to direct labor and indirect manufacturing costs.

A

Conversion Cost

67
Q

Considered as part of indirect overhead costs.
The wage rate paid to workers in excess of their straight- time wage rates.

A

Overtime Premium

68
Q

It refers to wages paid for unproductive time caused by lack of orders, machine or computer breakdown, work delays, poor scheduling.

A

Idle Time

69
Q

It includes employer payments for employee benefits such as SSS, insurance and pension.

A

Payroll Fringe Costs

70
Q

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

A

Product Cost

71
Q

Making decisions about pricing, promoting products, maximizing profits.

A

Pricing and Product- Mix Decisions

72
Q

Very specific definitions of allowable cost for “cost plus profit” contracts.

A

Reimbursement under government contracts

73
Q

Used for services and development contracts

A

Cost-plus agreement

74
Q

GAAP- driven product costs only

A

Preparing FS for external reporting under GAAP

75
Q

A Framework for Cost Accounting and Cost Management (3 features of cost& management accounting - help managers make decisions)

A
  1. Calculating the cost of products, services and other cost object
  2. Obtaining information for planning and control and performance evaluation
  3. Analyzing the relevant information for making decisions.

Cost Accounting (4 decks)

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