Chapter 2

Question 1

Cost

Answer 1

Sacrifice of resources

Question 2

Expense

Answer 2

Cost that is charged against revenue in an accounting period

Question 3

Outlay cost

Answer 3

Past, present, or future cash outflow

Question 4

Opportunity cost

Answer 4

Forgone benefit from the best alternative course of action

Question 5

Operating profit

Answer 5

Excess of operating revenues over the operating costs necessary to generate those revenues

Question 6

Product costs

Answer 6

Costs assigned to the manufacture of products and recognized when sold

Question 7

Period costs

Answer 7

Costs recognized when incurred

Question 8

Direct manufacturing/indirect manufacturing costs

Answer 8

Direct: product costs that can be identified with units of production
Indirect: All product costs except direct

Question 9

Direct materials

Answer 9

Materials directly identified with the product

Question 10

Direct labor

Answer 10

Labor directly identified with the product

Question 11

Manufacturing overhead

Answer 11

All production costs except direct labor and materials

Question 12

Prime costs

Answer 12

All direct costs

Question 13

Conversion costs

Answer 13

Direct labor and manufacturing overhead (what converts direct materials into final product)

Question 14

Marketing costs

Answer 14

Advertising, sales commissions, and shipping costs

Question 15

Administrative costs

Answer 15

Executive salaries, costs of data processing, and legal costs

Question 16

Cost allocation

Answer 16

Assigning costs

Question 17

Cost object

Answer 17

Any end to which a cost is assigned

Question 18

Cost pool

Answer 18

Collection of costs to be assigned to cost objects

Question 19

Direct cost

Answer 19

Any cost related to a cost object

Question 20

Indirect cost

Answer 20

Any cost NOT related to a cost object

Question 21

Work in process

Answer 21

Product in production, but not yet complete

Question 22

Finished goods

Answer 22

Product complete, not sold

Question 23

Fixed costs

Answer 23

Remain unchanged as the volume of activity changes

Question 24

Variable costs

Answer 24

Change in direct proportion to the change in volume of activity

Question 25

Relevant range

Answer 25

The range within which the total fixed costs and unit variable costs do not change

Question 26

Semivariable cost

Answer 26

Has both fixed and variable components

Question 27

Step costs (semifixed)

Answer 27

Costs that increase with volume in steps

Question 28

Full cost

Answer 28

The sum of all fixed and variable costs to manufacture and sell

Question 29

Full absorption cost

Answer 29

All variable and fixed manufacturing costs; amount of inventoriable cost

Question 30

Gross margin

Answer 30

Revenue - cost of goods sold
Per unit: Sales price - Full absorption

Question 31

Contribution margin

Answer 31

Sales price - variable costs per unit