Cost Test 1

Question 1

Actual Cost

Answer 1

Cost incurred (a historical or past cost) as distinguished from a budgeted or forecasted cost.

Question 2

Average Cost

Answer 2

Cost computed by dividing total cost by the number of units. Aka Unit Cost.

Question 3

Budgeted Cost

Answer 3

Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.

Question 4

Conversion Cost

Answer 4

All manufacturing costs other than direct material costs.

Question 5

Cost

Answer 5

Resource sacrificed or forgone to achieve a specific objective.

Question 6

Cost Accumulation

Answer 6

Collection of cost data in some organized way by means of an accounting system.

Question 7

Cost Allocation

Answer 7

Assignment of indirect costs to a particular cost object.

Question 8

Cost Assignment

Answer 8

General term that encompasses both (1) tracing accumulated costs that have a direct relationship to a cost object and (2) allocating accumulated costs that have an indirect relationship to a cost object.

Question 9

Cost Driver

Answer 9

Variable, such as the level of activity or volume, that causally affects costs over a given time span.

Question 10

Cost Object

Answer 10

Anything for which a measurement of costs is desired.

Question 11

Cost of Goods Manufactured

Answer 11

Cost of goods brought to completion, whether they were started before or during the current accounting period.

Question 12

Cost Tracing

Answer 12

Describes the assignment of direct costs to a particular cost object.

Question 13

Direct Costs of a Cost Object

Answer 13

Costs related to the particular cost object that can be traced to that object in an economically feasible (cost-effective) way.

Question 14

Direct manufacturing Labor Costs

Answer 14

Include the compensation of all manufacturing labor that can be traced to the cost object (work in process and then finished goods) in an economically feasible way.

Question 15

Direct Material Costs

Answer 15

Acquisition costs of all materials that eventually become part of the cost object (work in process and then finished goods), and that can be traced to the cost object in an economically feasible way.

Question 16

Direct Materials Inventory

Answer 16

Direct materials in stock and awaiting use in the manufacturing process.

Question 17

Factory Overhead Costs

Answer 17

All manufacturing costs that are related to the cost object (work in process and then finished goods) but that cannot be traced to that cost object in an economically feasible way. AKA manufacturing overhead costs and indirect manufacturing costs.

Question 18

Finished Goods Inventory

Answer 18

Goods completed but not yet sold.

Question 19

Fixed Cost

Answer 19

Cost that remains unchanged in total for a given time period, despite wide changes in the related level of total activity or volume.

Question 20

Idle Time

Answer 20

Wages paid for unproductive time caused by lack of orders, machine breakdowns, material shortages, poor scheduling, and the like.

Question 21

Indirect Costs of a Cost Object

Answer 21

Costs related to the particular cost object that cannot be traced to that object in an economically feasible (cost-effective) way.

Question 22

Indirect manufacturing Costs

Answer 22

All manufacturing costs that are related to the cost object (work in process and then finished goods) but that cannot be traced to that cost object in an economically feasible way. Aka manufacturing overhead costs and factory overhead costs.

Question 23

Inventoriable Costs

Answer 23

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 24

Manufacturing Overhead Costs

Answer 24

All manufacturing costs that are related to the cost object (work in process and then finished goods) but that cannot be traced to that cost object in an economically feasible way. Aka indirect manufacturing costs and factory overhead costs.

Question 25

Manufacturing-Sector Companies

Answer 25

Companies that purchase materials and components and convert them into various finished goods.

Question 26

Merchandising-Sector Companies

Answer 26

Companies that purchase and then sell tangible products without changing their basic form.

Question 27

Operating Income

Answer 27

Total revenues from operations minus cost of goods sold and operating costs (excluding interest expense and income taxes).

Question 28

Overtime Premium

Answer 28

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

Question 29

Period Costs

Answer 29

All costs in the income statement other than costs of goods sold.

Question 30

Prime Costs

Answer 30

All direct manufacturing costs.

Question 31

Product Cost

Answer 31

Sum of the costs assigned to a product for a specific purpose.

Question 32

Relevant Range

Answer 32

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 33

Revenues

Answer 33

Inflows of assets (usually cash or accounts receivable) received for products or services provided to customers.

Question 34

Service-Sector Companies

Answer 34

Companies that provide services or intangible products to their customers.

Question 35

Unit Cost

Answer 35

Cost computed by dividing total cost by the number of units. All called average cost.

Question 36

Variable Cost

Answer 36

Cost that changes in total in proportion to changes in the related level of total activity or volume.

Question 37

Work-In-Process Inventory

Answer 37

Goods partially worked on but not yet completed. Also called work in progress.

Question 38

Work in Progress

Answer 38

Goods partially worked on but not yet completed. Also called work-in-process.

Question 39

Actual Costing

Answer 39

Cost incurred (a historical or past cost) as distinguished from a budgeted or forecasted cost.

Question 40

Actual Indirect-Cost Rate

Answer 40

Actual total indirect costs in a cost pool divided by the actual total quantity of the cost-allocation base for that cost pool.

Question 41

Adjusted Allocation-Rate Approach

Answer 41

Restates all overhead entries in the general ledger and subsidiary ledgers using actual cost rates rather than budgeted cost rates.

Question 42

Budgeted Indirect-Cost Rate

Answer 42

Budgeted annual indirect costs in a cost pool divided by the budgeted annual quantity of the cost allocation base.

Question 43

Cost-Allocation Base

Answer 43

Factor that links in a systematic way an indirect cost orr group of indirect costs to a cost object.

Question 44

Cost-Application Base

Answer 44

Cost-allocation base when the cost object is a job, product, or customer.

Question 45

Cost Pool

Answer 45

Grouping of individual cost items.

Question 46

Job

Answer 46

Unit or multiple units of a distinct product or service.

Question 47

Job-Cost Record

Answer 47

Source document that records and accumulates all the costs assigned to a specific job, starting when work begins. Also call job-cost sheet.

Question 48

Job-Costing System

Answer 48

Costing system in which the cost object is a unit or multiple units of a distinct product or service called a job.

Question 49

Labor-Time Sheet

Answer 49

Source document that contains information about the amount of labor time used for a specific job in a specific department.

Question 50

Manufacturing Overhead Allocated

Answer 50

Amount of manufacturing overhead costs allocated to individual jobs, products, or services based on the budgeted rate multiplied by the actual quantity used of the cost allocation base. Also called manufacturing overhead applied.

Question 51

Materials-Requisition Record

Answer 51

Source document that contains information about the cost of direct materials used on a specific job and in a specific department.

Question 52

Normal Costing

Answer 52

Costing system that traces direct costs to a cost object by using the actual direct-cost rates times the actual quantities of the direct-cost inputs and that allocates indirect costs based on the budgeted indirect-cost rates times the actual quantities of the cost-allocation bases.

Question 53

Overallocated Indirect Costs

Answer 53

Allocated amount of indirect costs in an accounting period is greater than the actual (incurred) amount in that period. Also called overapplied indirect costs and overabsorbed indirect costs.

Question 54

Process-Costing System

Answer 54

Costing system in which the cost object is masses of identical or similar units of a product or service.

Question 55

Proration

Answer 55

The spreading of underallocated manufacturing overhead or overallocated manufacturing overhead among ending work in process, finished goods, and cost of goods sold.

Question 56

Source Document

Answer 56

Original record that supports journal entries in an accounting system.

Question 57

Underallocated Indirect Costs

Answer 57

Allocated amount of indirect costs in an accounting period is less than the actual (incurred) amount in that period. Also called underapplied indirect costs or underabsorbed indirect costs.

Question 58

Variable Costing

Answer 58

Method of inventory costing in which only all variable manufacturing costs are included as inventoriable costs. also called direct costing.

Question 59

Throughput Costing

Answer 59

Method of inventory costing in which only variable direct material costs are included as inventoriable costs. Also called super-variable costing.