Management Accounting Concepts

Question 1

Direct Costing

Answer 1

is a method of costing where only variable manufacturing costs are included in the cost of goods sold. Fixed manufacturing overhead costs are treated as period expenses and are not included in the cost of inventory.

Question 2

Indirect Costing

Answer 2

also known as absorption costing, involves allocating both variable and fixed manufacturing overhead costs to products. This method treats all manufacturing costs, both variable and fixed, as product costs.

Question 3

Prime Cost:

Answer 3

Refers to the direct costs of production, including direct materials and direct labor.

Question 4

Conversion Cost:

Answer 4

represents the costs incurred to convert raw materials into finished products, including direct labor and manufacturing overhead.

Question 5

Work in Process

Answer 5

refers to inventory that is in the process of being manufactured but is not yet complete.

Question 6

Tracing

Answer 6

refers to the process of directly assigning a cost to a specific cost object or activity.

Question 7

Intangible

Answer 7

are non-physical assets that lack physical substance, such as patents, trademarks, and goodwill.

Question 8

Tangible

Answer 8

are physical assets with a physical form and substance, such as machinery, equipment, and buildings.

Question 9

Overhead Cost:

Answer 9

are indirect costs that cannot be directly traced to a specific product or activity. These costs include items such as rent, utilities, and depreciation

Question 10

Variable-Costing Income:

Answer 10

is the profit calculated using the variable costing method, which includes only variable manufacturing costs in the cost of goods sold.

Question 11

Cost of Direct Labour:

Answer 11

refers to the total wages and benefits paid to employees directly involved in the production of goods or services.

Question 12

Total Overhead Cost:

Answer 12

represents the sum of all indirect costs incurred in the production process, including both fixed and variable overhead expenses.

Question 13

Total Manufacturing Cost

Answer 13

includes all costs incurred in the production process, including direct materials, direct labor, and manufacturing overhead.

Question 14

Factory Overhead Cost:

Answer 14

also known as manufacturing overhead cost, refers to indirect costs incurred in the manufacturing process, such as utilities, maintenance, and depreciation of factory equipment.

Question 15

Administrative Expense:

Answer 15

are non-manufacturing costs related to the general management and administration of a business, such as salaries of administrative staff, office rent, and utilities.

Question 16

Variable Production Overhead:

Answer 16

costs are indirect manufacturing expenses that vary with changes in production levels, such as supplies, maintenance, and utilities.

Question 17

Fixed Production Overhead:

Answer 17

Costs are indirect manufacturing expenses that remain constant regardless of changes in production levels, such as rent, property taxes, and depreciation of factory equipment.

Question 18

Overhead

Answer 18

refers to indirect costs incurred in the production process that cannot be directly traced to specific products or activities. It includes both fixed and variable manufacturing expenses.

Question 19

Material Requisition:

Answer 19

is the process of requesting and obtaining materials from the inventory or purchasing department for use in production or other activities.

Question 20

Selling Cost:

Answer 20

are expenses incurred in promoting and marketing products or services to customers, including advertising, sales commissions, and distribution expenses.

Question 21

Distribution Cost:

Answer 21

also known as distribution expenses or logistics costs, are expenses associated with the transportation, warehousing, and delivery of products to customers.

Question 22

Finance Cost:

Answer 22

Also known as financing expenses or interest expenses, are the costs associated with borrowing funds or financing operations through debt instruments.

Question 23

Period Cost:

Answer 23

expenses that are not directly associated with the production of goods or services and are incurred over a specific accounting period. These costs are expensed in the period in which they are incurred.

Question 24

Production Cost:

Answer 24

Also known as manufacturing costs, are the expenses incurred in the process of producing goods or services, including direct materials, direct labor, and manufacturing overhead.

Question 25

Manufacturing Cost:

Answer 25

synonymous with production costs, refer to the expenses incurred in the production of goods, including direct materials, direct labor, and manufacturing overhead.

Question 26

Control:

Answer 26

refers to the process of monitoring and regulating activities within an organization to ensure that they align with organizational objectives and standards. It involves setting performance targets, measuring actual performance, and taking corrective actions as needed.

Question 27

Planning

Answer 27

involves setting goals and objectives for the future and developing strategies to achieve them. It is a systematic process that helps organizations anticipate future events, allocate resources, and make informed decisions.

Question 28

Raw Materials:

Answer 28

are the basic materials or components used in the production of goods. They are typically unprocessed or in their natural state and undergo transformation during the manufacturing process.

Question 29

Work in Process:

Answer 29

refers to inventory that is in the process of being manufactured but is not yet complete. It includes partially completed products and the associated costs of materials, labor, and overhead.

Question 30

Finished Goods:

Answer 30

are products that have completed the manufacturing process and are ready for sale to customers. They are in their final form and packaging and are awaiting distribution.

Question 31

Cost of Goods Sold (COGS):

Answer 31

refers to the direct costs associated with producing goods or delivering services that are sold to customers. It includes the cost of raw materials, direct labor, and manufacturing overhead.

Question 32

Cost Driver:

Answer 32

is a factor that influences or causes changes in the cost of an activity or process. It is used to allocate indirect costs to cost objects based on the level of activity or usage.

Question 33

Fixed Cost:

Answer 33

are expenses that remain constant regardless of changes in production volume or activity levels within a certain range. They do not vary with changes in output.

Question 34

Mixed Cost:

Answer 34

Also known as semi-variable costs, have both fixed and variable components. They include elements that remain constant within a certain range of activity but increase or decrease beyond that range.

Question 35

Variable Cost:

Answer 35

Variable costs are expenses that vary directly with changes in production volume or activity levels. They increase or decrease in proportion to changes in output.

Question 36

Variable Cost per Unit:

Answer 36

represents the cost incurred to produce one additional unit of output. It is calculated by dividing total variable costs by the number of units produced.

Question 37

Contribution margin

Answer 37

represents the amount of revenue remaining after covering the variable costs associated with producing goods or services.

Question 38

Variable costs change in direct proportion to the level of production or activity but…

Answer 38

remain constant in total within a relevant range.