Cost Concepts, Classifications, Reporting and Analysis

Question 1

Refer to costs that arise in the passage of acquiring, processing, and using raw materials. Comprises cost of materials, cost of labor, other factory expenses, and the cost of primary packing.

Answer 1

Product Costs (inventoriable)

Question 2

Administration costs, selling costs, and distrubution costs. Expensed when incurred.

Answer 2

Period Cost (Non-inventoriable)

Question 3

The costs incurred in articulating business policies, directing the organization, and monitoring the operations of an undertaking.

Answer 3

Administration Costs

Question 4

Incurred to make and encourage demand and secure orders. Incurred in relation to marketing of products.

Answer 4

Selling Costs

Question 5

Are associated with the dispatch preparations for the packed product and facilitating the availability of the reconditioned, returned, and empty packages for re-use.

Answer 5

Distribution Costs

Question 6

The sacrifice made, usually measured by the resources given up, to achieve a particular purpose.

Answer 6

Cost

Question 7

Product Cost
Period Cost

Answer 7

Cost by Function

Question 8

Costs classified on the degree of traceabilty to the final product.

Direct Costs and Indirect Costs

Answer 8

Cost by Traceability

Question 9

These are costs directly related to a particular cost unit.

Answer 9

Direct Cost

Question 10

Costs that are not traceable to any particular product, process, or department. For various purposes, which are between many cost centres or units.

Answer 10

Indirect Costs

Question 11

Variable costs, fixed costs, and mixed costs.

Answer 11

Cost by Variability or Behavior

Question 12

Costs that fluctuate in a directly proportinal way to changes in the volume of output or sales. Vary in total, but constant in units.

Answer 12

Variable Costs

Question 13

Costs that generally stays unaffected by changes in sales volume/output. Fixed in total, but unit cost varies with output or sales.

Answer 13

Fixed Costs

Question 14

Costs that tend to fluctuate with changes in the volume of output, but which do not fluctuate with changes in a directly proportional way relative to such changes.

Answer 14

Mixed Costs

Question 15

Controllable Costs
Uncontrollable Costs

Answer 15

Cost by Controllabilty

Question 16

Costs that an entity in an undertaking can influence through their action.

Answer 16

Controllable Costs

Question 17

Costs that cannot be influenced by the action of a specified member of an undertaking.

Answer 17

Uncontrollable Costs

Question 18

Marginal Cost, sunk cost, opporunity cost, differential cost, and committed cost.

Answer 18

Cost by Relevance to Decision-making

Question 19

The amount at any given volume of output by which aggregate costs are altered if the volume of output is increased or decreased by one unit.

Answer 19

Marginal Cost

Question 20

Costs already incurred and cannot be changed by a future decision. Irrelevant costs.

Answer 20

Sunk Costs

Question 21

Benefits foregone by choosing another alternative.

Answer 21

Opportunity Costs

Question 22

The difference in total costs between 2 alternatives. Incremental and decremental.

Answer 22

Differential Costs

Question 23

The increase in total cost when choosing an alternative.

Answer 23

Incremental Costs

Question 24

The decrease in total costs when choosing an alternative.

Answer 24

Decremental Costs

Question 25

**Future costs** that **will not change** regardless of the decision made.

Answer 25

Commited Costs

Question 26

Costs associated with **preventing, detecting, and remediating** product issues related to quality. Conformance and Non-conformance.

Answer 26

Costs as to Quality

Question 27

The total cost of ensuring that a product is of **good quality**. Prevention cost and appraisal cost.

Answer 27

Conformance Costs

Question 28

Costs relating to any activity that **reduces the number of defects** in products and services. ## Footnote Quality planning, quality engineering, quality training, and systems development.

Answer 28

Prevention Cost

Question 29

Costs that are **associated with measuring and monitoring activities** to determine if products and services meet standards of quality. ## Footnote Checking of incoming material, process setup, and products, confirmation that quality system is functioning correctly, assessment and approval of suppliers.

Answer 29

Appraisal Cost

Question 30

The incremental **costs** incurred when it **fails to meet the quality requirements** for its products. Cost of **poor quality**. Internal and external failure costs.

Answer 30

Non-conformance Costs

Question 31

Costs incurred to **remedy defects discovered before** the product or service is **delivered** to the customer. ## Footnote Waste, crap, rework or rectification, failure analysis.

Answer 31

Internal Failure Cost

Question 32

Costs incurred to **remedy defects discovered by customers**. ## Footnote Repairs and servicing, warranty claims, complaints, product liability lawsuit.

Answer 32

External Failure Cost

Question 33

A schedule or statement that **shows the total production costs for a company during a specific period of time**. It is the total cost incurred to manufacture products and transfer them into finished goods inventory for retail sale.

Answer 33

Statement of COGM

Question 34

**Cost of all goods sold** during the period and includes the cogm plus the beginning fg inventory minus the ending fg inventory. ## Footnote Reported as an expense on the i/s and is the only time product costs are expensed.

Answer 34

COGS

Question 35

1. Cost Behavior 2. Cost Estimation 3. Cost Prediction

Answer 35

Phases in Analyzing Mixed Costs

Question 36

**Identifying** whether a particular cost is **variable, fixed, or mixed**.

Answer 36

Cost Behavior

Question 37

**Determining** the variable per unit costs and total fixed components.

Answer 37

Cost Estimation

Question 38

**Forecasting** the cost to be incurred in connection with the expected activity level.

Answer 38

Cost Prediction

Question 39

1. Qualitative Approach 2. Quantitative Approach

Answer 39

Methods of Analyzing Mixed Costs

Question 40

Uses **human judgment** in analyzing mixed costs. Account Analysis and Engineering Approach.

Answer 40

Qualitative Approach

Question 41

(What the cost has been?). Based on the controller's **prior knowledge** of *how the cost behaves*.

Answer 41

Account Analysis

Question 42

(What the cost should be?). Based on an **industrial engineer's evaluation** of different activities, required human resources, efficiency, etc.

Answer 42

Engineering Approach

Question 43

Uses **quantitative data** in analyzing mixed costs. It requires the simplifying assumption of a linear cost relationship: *y=a+bx*.

Answer 43

Quantitative Approach

Question 44

1. High-low Method 2. Scattergraph or Visual Fit 3. Least Square Regression Analysis

Answer 44

Methods of Separating Mixed Costs into Variabl and Fixed Costs

Question 45

The standard deviation of the sampling distribution of a statistic. Also refer to an estimate of that standard deviation, derived from a particular sample use to compute the estimate.

Answer 45

Standard Error