Accy 309 Test 1
What was the cost of goods manufactured? Direct materials purchased $80,000 Direct materials used 76,000 Direct manufacturing labor costs 10,000 Indirect manufacturing labor costs 12,000 Sales salaries 14,000 Other plant expenses 22,000 Selling and administrative expenses 20,000
$120,000
HL Co. uses the high-low method to derive a total cost formula. Using a range of units produced from 1,500 to 7,500, and a range of total costs from $21,000 to $45,000, producing 2,000 units will cost HL:
$23,000
Under the absorption method, Year 1 Cost of Goods Sold will be: Sales $5,000,000 Direct materials 850,000 Direct manufacturing labor 1,700,000 Variable manufacturing overhead 400,000 Fixed manufacturing overhead 750,000 Variable SG&A 150,000 Fixed SG&A 250,000
$3,700,000
A firm uses simple linear regression to forecast the costs for its main product line. If fixed costs are equal to $235,000 and variable costs are $10 per unit, how many units does it need to sell at $15 per unit to make a $300,000 profit?
107,000
"Knowledge of technical issues such as computer technology is a necessary but not sufficient condition to becoming a successful management accountant." Do you agree? Why? A) Agree. A successful management accountant requires general business skills and people skills as well as technical skills. B) Agree. A successful management accountant requires a CMA certificate as well as technical skills. C) Agree. A successful management accountant requires a CMA certificate and a CFA certificate in addition to proficient technical skills. D) Disagree. Virtually all of the management accountant's role is technical-based. Thus, knowledge of technical issues such as computer technology is a necessary and sufficient condition to becoming a successful management accountant.
A
Choose the correct description of variable and fixed costs. A) A variable cost changes in total in proportion to changes in the related level of total activity or volume, such as a sales commission that is a percentage of each sales revenue dollar. A fixed costs remains unchanged in total for a given time period, despite wide changes in the related level of total activity or volume, such as a fixed annual leasing cost of a machine. B) A variable cost is related to a particular cost object and can be traced to it in an economically feasible way, such as the cost of steel in the manufacturing of a luxury car. A fixed cost is related to a particular cost object but cannot be traced to it in an economically feasible way, such as the salary of a plant manager who oversees production of many different types of luxury cars produced at the same plant. C) A variable cost is considered to be a unit cost, such as the per-attendee-cost of hiring a musical group to perform at an event. A fixed cost is considered to be a total cost, such as the total fee paid to the musical group for performing at the event. D) All of the above.
A
Define cost object and give three examples. A) A cost object is anything for which a separate measurement of costs is desired. Examples include a product, a service, and a customer. B) A cost object is a cost incurred (historical or past cost), as distinguished from a budgeted cost, which is a predicted or forecasted cost (a future cost). Examples include materials, labor, and overhead. C) A cost object is a resource sacrificed or forgone to achieve a specific objective. Examples include direct materials, direct labor, and advertising. D) A cost object is the collection of cost data in some organized way by means of an accounting system. Examples include accumulated costs, overhead, and direct labor.
A
Distinguish between inventoriable costs and period costs. A) Inventoriable costs are 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 when the product is sold. Period costs are all costs in the income statement other than cost of goods sold. Period costs are treated as expenses of the accounting period in which they are incurred because they are expected to not benefit future periods. B) Inventoriable costs include material costs and are capitalized as assets to the company until the items are sold. Period costs include labor and overhead costs and are expensed as incurred. Period costs are reported in the income statement within the cost of goods sold account. C) Inventoriable costs are all costs of goods purchased that are resold in a subsequent period. Period costs are all costs of goods purchased that are resold within the same period. D) Inventoriable costs include direct manufacturing materials and direct manufacturing labor costs that are capitalized into inventory and remain on the balance sheet until sold. Period costs include indirect manufacturing (or manufacturing overhead) costs and are expensed as incurred through the cost of goods sold account.
A
Factors affecting the classification of a cost as direct or indirect include A) materiality of the cost, available information-gathering technology, and design of operations. B) materials, labor, and factory overhead. C) unit costs, inventory production stage, and contractual agreements. D) cost behavior patterns, cost drivers, and relevant ranges.
A
How does management accounting differ from financial accounting? A) Management accounting measures and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. Financial accounting measures and records business transactions and provides financial statements that are based on generally accepted accounting principles (GAAP). B) Management accounting measures, analyzes, and reports financial and nonfinancial information relating to the costs of acquiring or using resources in an organization. Financial accounting measures and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. C) Management accounting measures and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. Financial accounting measures, analyzes, and reports financial and nonfinancial information relating to the costs of acquiring or using resources in an organization. D) Management accounting measures, analyzes, and reports financial and nonfinancial information relating to the costs of acquiring or using resources in an organization. Financial accounting measures and records business transactions and provides financial statements that are based on generally accepted accounting principles (GAAP).
A
Identify how manufacturing-, merchandising-, and service-sector companies differ from each other. A) Manufacturing-sector companies purchase materials and components and convert them into various finished goods, for example automotive companies and textile companies. Merchandising-sector companies purchase and then sell tangible products without changing their basic form, for example retail stores and distribution companies. Service-sector companies provide services or intangible products to their customers, for example legal advice or audits. B) Manufacturing-sector companies purchase and then sell tangible products without changing their basic form, for example retail stores and distribution companies. Merchandising-sector companies provide services or intangible products to their customers, for example legal advice or audits. Service-sector companies purchase materials and components and convert them into various finished goods, for example automotive companies and textile companies. C) Manufacturing-sector companies provide services or intangible products to their customers, for example legal advice or audits. Merchandising-sector companies purchase and then sell tangible products without changing their basic form, for example retail stores and distribution companies. Service-sector companies purchase materials and components and convert them into various finished goods, for example automotive companies and textile companies. D) Manufacturing-sector companies purchase materials and components and convert them into various finished goods, for example legal advice or audits. Merchandising-sector companies purchase and then sell tangible products without changing their basic form, for example automotive companies and textile companies. Service-sector companies provide services or intangible products to their customers, for example retail stores and distribution companies.
A
Manufacturing overhead costs A) All manufacturing costs related to the cost object but cannot be traced to the cost object. B) All direct manufacturing costs. C) Costs of all materials that can be traced to the cost object. D) All manufacturing costs other than direct material costs. E) Compensation of all manufacturing labor that can be traced to the cost object.
A
The business functions in the value chain include: A) Research and development, Design of products and processes, Production, Marketing, Distribution, and Customer service B) Manufacturing, Packaging, and Distribution C) Research and development, Making decisions by choosing among alternatives, Production, Distribution, and Customer service D) Identifying the problem and uncertainties, Obtaining information, Making predictions about the future, Making decisions by choosing among alternatives, and Implementing the decision
A
What are three different types of inventory that manufacturing companies hold? A) Direct materials, work-in-process, and finished goods B) Production, retail, and merchandising C) Variable, fixed, and overhead D) Direct materials, direct labor, and overhead
A
What is a cost driver? Give one example. A) A cost driver is a variable, such as the level of activity or volume, which causally affects total costs over a given time span. A change in the cost driver results in a change in the level of total costs. For example, the number of vehicles assembled is a driver of the costs of steering wheels on a motor-vehicle assembly line. B) A cost driver is a cost that is related to a particular cost object but cannot be traced to it in an economically feasible way, such as the salary of a plant manager who oversees production of many different types of luxury cars produced at the same plant. C) A cost driver is a cost that changes in total in proportion to changes in the related level of total activity or volume. For example, the tons of steel needed to produce a vehicle is a driver of the total cost for that vehicle. D) A cost driver is a factor affecting direct or indirect cost classifications. For example, the availability of information-gathering technology is a driver as to whether certain low-cost materials used in the manufacturing process is considered a direct or indirect cost of producing a motor-vehicle.
A
Which of the following is not a primary function of the management accountant? A) Communicates financial results and position to external parties B) Uses information to develop and implement business strategy C) Aids in the decision making to help an organization meet its goals D) Provides input into an entity's production and marketing decisions
A
Applewhite Corporation, a manufacturing company, is analyzing its cost structure in a project to achieve some cost savings. Which of the following statements is/are correct? I. The cost of the direct materials in Applewhite's products is considered a variable cost. II. The cost of the depreciation of Applewhite's plant machinery is considered a variable cost because Applewhite uses an accelerated depreciation method for both book and income tax purposes. III. The cost of electricity for Applewhite's manufacturing facility is considered a fixed cost, even if the cost of the electricity has both variable and fixed components. A) I, II, and III are correct. B) I only is correct. C) II and III only are correct. D) None of the listed choices is correct.
B
As a new controller, reply to this comment by a plant manager: "As I see it, our accountants may be needed to keep records for shareholders and Uncle Sam, but I don't want them sticking their noses in my day-to-day operations. I do the best I know how. No bean counter knows enough about my responsibilities to be of any use to me." A) Reply by suggesting that the plant manager review the plant controllers resume and explain about the success with assisting of budgets and making sure plant managers do not exceed their budgets. B) Respond by demonstrating to the plant manager a good knowledge of the technical aspects of the plant and spend some time on the plant floor speaking to plant personnel to get a better understanding of the facility. C) Reply by explaining to the plant manager the importance of keeping tabs on production personnel to be sure they are following all the generally accepted accounting principles. D) Reply by emphasizing that the plant manager cannot make accurate decisions without a controller to provide the proper guidance.
B
Comprehensive Care Nursing Home is required by statute and regulation to maintain a minimum 3 to 1 ratio of direct service staff to residents to maintain the licensure associated with the Nursing Home beds. The salary expense associated with direct service staff for the Comprehensive Care Nursing Home would most likely be classified as: A) Variable cost B) Fixed cost C) Overhead costs D) Inventoriable costs
B
Define product cost. Describe three different purposes for computing product costs. A) A product cost is the sum of all direct material costs and direct labor costs assigned to a product. Purposes for computing a product cost include (1) choosing a supplier with competitive prices, (2) employee wage-rate analysis, and (3) analyzing fluctuations in material and labor costs. B) A product cost is the sum of the costs assigned to a product for a specific purpose. Purposes for computing a product cost include (1) pricing and product mix decisions, (2) contracting with government agencies, and (3) preparing financial statements for external reporting under GAAP. C) A product cost is the sum of all indirect costs assigned to a product. Purposes for computing a product cost include (1) valuinginventory, (2) product mix decisions, and (3) analyzing production efficiencies. D) A product cost is the sum of all manufacturing costs other than direct materials assigned to a product. Purposes for computing a product cost include (1) analyzing fluctuations in the non-material costs of a product, (2) product pricing decisions, and (3) preparing financial statements for internal reporting purposes.
B
Describe the overtime-premium and idle-time categories of indirect labor. A) Idle time is the wage rate paid to workers (for both direct labor and indirect labor) in excess of their straight-time wage rates. Overtime premium is a subclassification of indirect labor that represents wages paid for unproductive time caused by lack oforders, machine breakdowns, poor scheduling, etc. B) Overtime premium is the wage rate paid to workers (for both direct labor and indirect labor) in excess of their straight-time wage rates. Idle time is a subclassification of indirect labor that represents wages paid for unproductive time caused by lack of orders, machine breakdowns, poor scheduling, etc. C) Overtime premium is calculated by multiplying the total overtime hours worked by the workers' straight-time wage rates. Idle time costs are calculated by multiplying the number of unproductive hours by the overtime premium wage rate. D) Both A and B
B
Name the four areas in which standards of ethical conduct exist for management accountants in the United States. What organization sets forth these standards? A) Competence, Confidentiality, Honesty, and Fairness. These standards are set by Generally Accepted Auditing Standards (GAAS). B) Competence, Confidentiality, Integrity, and Credibility. These standards are set by the Institute of Management Accountants (IMA). C) Honesty, Fairness, Integrity, and Objectivity. These standards are set by the Council of Management Accountants (CMA). D) Honesty, Fairness, Objectivity, and Responsibility. These standards are set by the Institute of Management Accountants (IMA).
B
Prime costs A) All manufacturing costs related to the cost object but cannot be traced to the cost object. B) All direct manufacturing costs. C) Costs of all materials that can be traced to the cost object. D) All manufacturing costs other than direct material costs. E) Compensation of all manufacturing labor that can be traced to the cost object.
B
The five-step decision-making process includes: A) (1) Identifying the problem and uncertainties, (2) Research and development, (3) Making decisions by choosing among alternatives, and (4) Implementing the decision, evaluating performance and learning, and (5) Customer service B) (1) Identifying the problem and uncertainties, (2) Obtaining information, (3) Making predictions about the future, (4) Making decisions by choosing among alternatives, and (5) Implementing the decision, evaluating performance and learning C) (1) Research and development, (2) Production, (3) Marketing, (4) Distribution, and (5) Customer service D) (1) Research and development, (2) Making decisions by choosing among alternatives, (3) Production, (4) Distribution, and (5) Customer service
B
What is the difference between a linear and a nonlinear cost function? Give an example of each type of cost function. A) A linear cost function is a cost function where, within the relevant range, the graph of total costs versus the level of a single activity related to that cost is a straight line. Examples include economies of scale in advertising where an agency can double the number of advertisements for less than twice the costs, step-cost functions, and learning-curve-based costs. A nonlinear cost function is a cost function where, within the relevant range, the graph of total costs versus the level of a single activity related to that cost is not a straight line. Examples include a cost function for use of a telephone line where the terms are a fixed charge of $10,000 per year plus a $2 per minute charge for phone use. B) A linear cost function is a cost function where, within the relevant range, the graph of total costs versus the level of a single activity related to that cost is a straight line. An example of a linear cost function is a cost function for use of a videoconferencing line where the terms are a fixed charge of $10,000 per year plus a $2 per minute charge for line use. A nonlinear cost function is a cost function where, within the relevant range, the graph of total costs versus the level of a single activity related to that cost is not a straight line. Examples include economies of scale in advertising where an agency can double the number of advertisements for less than twice the costs, step-cost functions, and learning-curve-based costs. C) A linear cost function is a cost function where, within the relevant range, the graph of total costs versus the level of a single activity related to that cost is not a straight line. An example of a linear cost function is a cost function for use of a copier where the terms are a fixed lease payment of $1,000 per month plus a$0.01 per page charge for each copy. A nonlinear cost function is a cost function where, within the relevant range, the graph of total costs versus the level of a single activity related to that cost is a straight line. Examples include quantity discounts for material purchases for each 1,000 units of material purchased. The cost per unit of material will fall for each 1,000 unites purchased at a time. D) A linear cost function is a cost function where, within the relevant range, the graph of total costs versus the level of a single activity related to that cost is not a straight line. Examples include economies of scale in advertising where an agency can double the number of advertisements for less than twice the costs, step-cost functions, and learning-curve-based costs. A nonlinear cost function is a cost function where, within the relevant range, the graph of total costs versus the level of a single activity related to that cost is a straight line. An example of a linear cost function is a cost function for use of a videoconferencing line where the terms are a fixed charge of $10,000 per year plus a $2 per minute charge for line use.
B
What steps should a management accountant take if established written policies provide insufficient guidance on how to handle an ethical conflict? A) The management accountant need not take any further action if established written policies provide insufficient guidance on how to handle an ethical conflict. B) Discuss the problem with the immediate superior (except when it appears that the superior is involved). Clarify relevant ethical issues by confidential discussion with an IMA Ethics Counselor or other impartial advisor. Consults your own attorney as to legal obligations and rights concerning the ethical conflicts. C) Discuss the problem with any manager. clarify relevant ethical issues by public discussions with the board of directors. Consult local law enforcement officials. D) Discuss the problem only with the immediate superior. The management accountant need not take any further action if the supervisor does not take appropriate action.
B
"Management accounting deals only with costs." Do you agree? Explain. A) No. Management accounting only analyzes the manufacturing of products for customers in order to assess product and customer profitability. B) No. Management accounting does not use cost information, it only records financial activities of the company in accordance with GAAP. C) No. Management accounting measures, analyzes, and reports financial and nonfinancial information that helps managers define the organization's goals, and make decisions to fulfill them. D) Yes. Management accounting only measures, analyzes, and reports financial
C
"Management accounting should not fit the straitjacket of financial accounting." Explain and give an example. A) Management accounting does not allow managers to charge interest on owners' capital to help judge a division's performance, even though such a change is required under GAAP. B) Management accounting and financial accounting can use asset or liability measurement rules, such as present values or resale prices, whichever is more reasonable at the time. C) Management accounting does not have to comply with the same standards of financial accounting such as generally accepted accounting principles. D) Management accounting cannot include assets or liabilities with nicknames that are developed internally, which is allowed under GAAP.
C
Direct materials costs A) All manufacturing costs related to the cost object but cannot be traced to the cost object. B) All direct manufacturing costs. C) Costs of all materials that can be traced to the cost object. D) All manufacturing costs other than direct material costs. E) Compensation of all manufacturing labor that can be traced to the cost object.
C
Distinguish planning decisions from control decisions. A) Planning decisions are budget oriented, where control decisions focus on financial reporting. B) Planning decisions focus on organizational goals without consideration of past performance. Control decisions focus on predicting results under various alternative ways of achieving those goals, deciding how to attain the desired goals, and deciding how to evaluate performance. C) Planning decisions focus on selecting organizational goals, predicting results under various alternative ways of achieving those goals, deciding how to attain the desired goals, and communicating the goals and how to attain them to the entire organization. Control decisions focus on taking actions that implement the planning decisions, deciding how to evaluate performance, and what related feedback to provide that will help future decision making. D) Planning decisions focus on examining past performance and systemically exploring alternative ways to make better-informed decisions and plans in the future. Control decisions focus on taking actions that implement the planning decisions, deciding how to evaluate performance, and what related feedback to provide that will help future decision making.
C
Explain the term supply chain and its importance to cost management. A) Supply chain describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers within an individual organization. Cost management is most effective when it integrates and coordinates activities across each business function in an individual company's value chain. B) Supply chain describes the sequence of business functions in which customer usefulness is added to products or services. Cost management is most effective when it integrates and coordinates activities across each business function in an individual company's value chain. C) Supply chain describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers, regardless of whether those activities occur in the same organization or in other organizations. Cost management is most effective when it integrates and coordinates activities across all companies in the supply chain as well as across each business function in an individual company's value chain. D) Supply chain describes the sequence of business functions in which customer usefulness is added to products or services. Cost management is most effective when it integrates and coordinates activities across all companies in the supply chain as well as across each business function in an individual company's value chain.
C
Frisco Corporation is analyzing its fixed and variable costs within its current relevant range. As its cost driver activity changes within the relevant range, which of the following statements is/are correct? I. As the cost driver level increases, total fixed cost remains unchanged. II. As the cost driver level increases, unit fixed cost increases. III. As the cost driver level decreases, unit variable cost decreases. A) I, II, and III are correct. B) I and II only are correct. C) I only is correct. D) II and III only are correct.
C
How can management accountants help improve quality and achieve timely product deliveries? A) Management accountants can help improve quality and achieve timely product deliveries by analyzing and evaluating the costs of only financial information, to correct any irregularities and provide faster customer service. B) Management accountants can improve quality by only reporting an organization's current quality controls and correct any irregularities. C) Management accountants can help improve quality and achieve timely product deliveries by recording and reporting an organization's current quality and timeliness levels and by analyzing and evaluating the costs and benefits of both financial and nonfinancial information, to suggest new quality initiatives such as TQM or providing faster customer service. D) Management accountants can help improve quality and achieve timely product deliveries by focusing on reporting to external parties such as investors, government agencies, banks, and suppliers.
C
Three criteria for evaluating cost functions and choosing cost drivers are: A) Economic plausibility, goodness of fit, the speed with which cost estimates can be determined B) Goodness of fit, slope of regression line, the speed with which cost estimates can be determined C) Economic plausibility, goodness of fit, slope of regression line D) None of the above
C
What assumption(s) are frequently made when estimating a cost function? A) Cost behavior is approximated by a linear function within the relevant range. B) Variations in the level of a single activity explain the variations in the related total costs. C) Both of the above. D) Neither of the above.
C
What is the relevant range? What role does the relevant-range concept play in explaining how costs behave? A) The relevant range is the band of normal activity level or volume in which there is a specific relationship between the level of activity or volume and the related fixed costs. Costs are described as direct or indirect with respect to a particular relevant range. B) The relevant range is the band of normal activity level or volume in which there is an abnormal relationship between the level of activity or volume and the variable cost per unit. Costs are described as relevant or irrelevant with respect to a particular relevant range. C) The relevant range is the 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. Costs are described as variable or fixed with respect to a particular relevant range. D) The relevant range is the band of normal activity level or volume in which there is no relationship between the level of activity or volume and the cost in question. Costs are described as relevant or irrelevant with respect to a particular relevant range.
C
Why must unit costs often be interpreted with caution? A) Unit costs often fall outside of the relevant range of predicting total cost for an activity at different levels of activity or volume. When costs fall outside of the relevant range, the predictive nature of estimating the total cost may be impaired, and thus unit costs must be interpreted with caution. B) Unit costs include overtime premium and idle time charges. It can be erroneous, then, to multiply the unit cost by activity or volume change to predict changes in total costs at different levels of production efficiencies. C) Unit costs are computed by dividing some amount of total costs by the related number of units. In many cases, the total costs include a fixed cost that will not change despite changes in the number of units. Therefore, it can be misleading to multiply the unit cost by activity or volume change to predict changes in total costs at different activity or volume levels. D) Units costs are related to a particular cost object, but cannot be traced to it in an economically feasible way. The assignment of units costs is much more subjective than the assignment of direct costs, and therefore, unit cost information should be interpreted with caution.
C
List the six steps in estimating a cost function on the basis of an analysis of a past cost relationship in the correct order. Which step is typically the most difficult for the cost analyst? A) Collect date on the dependent variable B) Estimate the cost function C) Choose the dependent variable D) Evaluate the cost driver of the estimated cost function E) Identify the independent variable or cost driver F) Plot the data
C, E, A, F, B, D Step 3
When using the high-low method, should you base the high and low observations on the dependent variable or on the cost driver?
Cost driver
"High correlation between two variables means that one is the cause and the other is the effect." Do you agree? Explain. A) Yes, high correlation always means the variables have a cause and effect relationship. B) No, there must be a contractual arrangement to have a cause and effect relationship. C) No, high correlation means there is no cause and effect relationship between variables. D) No, you must also consider economic plausibility before determining there is a cause and effect relationship.
D
A management accountant can help formulate a strategy by A) measuring business transactions that are based on generally accepted accounting principles (GAAP), which will then determine financial figures that effect managers' compensation. B) providing information about historical financial results. C) providing information about the cost of a product which will help to determine which products to offer. D) providing information about the sources of competitive advantage, such as the cost, productivity, or efficiency advantage of their company relative to competitors.
D
Conversion costs A) All manufacturing costs related to the cost object but cannot be traced to the cost object. B) All direct manufacturing costs. C) Costs of all materials that can be traced to the cost object. D) All manufacturing costs other than direct material costs. E) Compensation of all manufacturing labor that can be traced to the cost object.
D
Distinguish direct costs from indirect costs. A) Direct costs are historical or past costs incurred while indirect costs are predicted or forecasted costs. B) Direct costs include the acquisition costs of all materials that eventually become part of the cost object and can be traced to the cost object in an economically feasible way while indirect costs include compensation of all manufacturing labor that can be traced to the cost object in an economically feasible way. C) Direct costs are those that change in total in proportion to changes in the related level of total activity or volume while indirect costs are those that remain unchanged in total for a given time period, despite wide changes in the related level of total activity or volume. D) Direct costs are related to the particular cost object and can be traced to that cost object in a cost-effective way while indirect costs are related to the particular cost object but cannot be traced to that cost object in a cost-effective way.
D
Where does the management accounting function fit into an organization's structure? A) The external auditor is the chief management accounting executive. The external auditor reports to the internal auditor, a staff function. Companies also have business unit auditors or regional auditors who support regional managers in major geographic regions. B) The internal auditor is the chief management accounting executive. The internal auditor is the highest position within an organization. The internal auditor does not report to anyone. C) The internal auditor is the chief management accounting executive. The internal auditor reports to the external auditor, a staff function. Companies also have business unit auditors or regional auditors who support regional managers in major geographic regions. D) The controller is the chief management accounting executive. The corporate controller reports to the chief financial officer, a staff function. Companies also have business unit controllers who support business unit managers or regional controllers who support regional managers in major geographic regions.
D
Why do managers consider direct costs to be more accurate than indirect costs? A) Allocating indirect costs is more subjective and generally more difficult to assign to a cost object than are direct costs.Therefore, direct costs are deemed by managers to be more accurate costs than indirect costs. B) Cost tracing, which is used when assigning direct costs to a particular cost object, is more accurate than cost allocation, which is used to assign indirect costs to the same cost object. C) When costs are allocated, managers are less certain whether the cost allocation base accurately measures the resources demanded by a cost object, and therefore, direct costs are considered to be more accurate. D) All of the above.
D
Direct manufacturing labor costs A) All manufacturing costs related to the cost object but cannot be traced to the cost object. B) All direct manufacturing costs. C) Costs of all materials that can be traced to the cost object. D) All manufacturing costs other than direct material costs. E) Compensation of all manufacturing labor that can be traced to the cost object.
E
A cost function in which total costs do not change with changes in the level of activity in the relevant range.
Fixed cost function
A cost function that has both fixed and variable elements. Total costs change but not in the proportion to the changes in the level of activity in the relevant range.
Mixed cost function
A cost function in which total costs change in proportion to the changes in the level of activity in the relevant range.
Variable cost function