Cost: chapter 3

Four types of cost drivers

-Activity based -Volume based -Structural -Executional

Since indirect cost cannot be conveniently or economically traced directly to a cost pool or cost object, the management accountant will: Multiple Choice Assign them by means of cost allocation. Assign them where needed. Assign them randomly to even out these costs. Not assign them at all. Assign them in low cost areas.

A

cost driver

A factor that causes or relates to a change in the total cost of an activity.

overhead

All the indirect costs commonly combined into a single cost pool; called factory overhead in a manufacturing firm.

factory overhead

All the indirect manufacturing costs commonly combined into a single cost pool in a manufacturing firm.

Which of the following describes Work-in-Process Inventory? Multiple Choice Cost of the supply of materials used in the manufacturing process or to provide the service. The cost of goods that are ready for sale. The sum of materials used, labor, and overhead for the period. An inventory account that contains all costs put into the manufacture of products that are started but not complete at the financial statement date. A method that updates the finished goods inventory account for each purchase or sales transaction.

An inventory account that contains all costs put into the manufacture of products that are started but not complete at the financial statement date.

cost object

Any product, service, customer, activity, or organizational unit to which costs are accumulated for some management purpose.

Direct costs

Can be conveniently and economically traced to a cost pool or cost object

The cost of goods that were finished and transferred out of work-in-process during the current period is: Multiple Choice Cost of goods sold. Cost of goods available for use. Cost of goods manufactured Cost of goods available for sale. Cost of goods purchased.

Cost of goods manufactured

The term relevant range as used in cost accounting means the range over which: Multiple Choice Costs may fluctuate. Cost relationships are approximately linear. Production may vary. Relevant costs are incurred. Relevant costs are avoided.

Cost relationships are approximately linear.

Which one of the following is not a type of cost driver? Multiple Choice Structural cost driver. Executional cost driver. Volume-Based cost driver. Differential cost driver. Activity-Based cost driver.

Differential cost driver.

conversion cost

Direct labor and factory overhead combined into a single amount.

Which of the following best describes a fixed cost? Multiple Choice It may change in total when such change is unrelated to changes in production volume. It may change in total when such change is related to changes in production volume. It is constant per unit of change in production volume. It may change in total when such change depends on production volume within the relevant range.

It may change in total when such change is unrelated to changes in production volume.

indirect labor cost

Labor costs associated with production that are not considered direct labor. Examples include supervision, quality control, inspection, purchasing and receiving, and other labor-related manufacturing support costs; a component of total manufacturing overhead.

Manufacturing firms use which of the following three inventory accounts? Multiple Choice Materials, Work-in-process, Transferred-out. Materials, Work-in-process, Finished goods. Materials, Finished goods, Transferred-out. Work-in-process, Finished goods, Transferred-out. None of these answers are correct.

Materials, Work-in-process, Finished goods.

he range of the cost driver in which the actual value of the cost driver is expected to fall is called the: Multiple Choice Actual cost range. Driver range. Activity range. Expected cost range. Relevant range.

Relevant range.

Which of the following is a period cost for a manufacturing firm? Multiple Choice Direct materials costs. Salary of the receptionist. Direct labor costs. Factory overhead costs.

Salary of the receptionist.

allocation bases

The cost drivers used to allocate or assign costs to cost objects.

indirect materials cost

The cost of materials used in manufacturing that are not part of the product or are not easily or economically traceable to the finished product; a component of total manufacturing overhead.

direct materials cost

The cost of the materials in the product and a reasonable allowance for scrap and defective units.

direct labor cost

The labor used to manufacture the product or to provide the service.

cost pools

The meaningful groups into which costs are collected.

cost assignment

The process of assigning costs to cost pools or from cost pools to cost objects.

cost allocation

The process of assigning indirect costs to cost pools and cost objects.

prime costs

The sum of direct materials and direct labor.

Indirect cost

cannot be traced conveniently or economically to a cost pool or a cost object

Any product, service, or organizational unit to which costs are assigned for some management purpose is a(n): Multiple Choice Cost object. Direct cost. Indirect cost. Cost driver. Allocation base.

cost object

here is no convenient or economical way to trace a(n) __________ from the cost to the cost pool or from the cost pool to the cost object. Multiple Choice Direct cost Indirect cost Cost assignment Cost allocation Cost driver

indirect cost

Variable cost

is the change in total cost associated with each change in quantity of a selected cost driver.

Fixed cost

is the portion of total cost that does not change with changes in quantity of the selected cost driver.

Mixed cost

is used to refer to a total cost figure that includes both a fixed and variable component

All indirect manufacturing costs are commonly combined into a single cost pool called: Multiple Choice Activity cost pools. Value streams. Resources. Overhead. Other manufacturing costs.

overhead

What are internal accounting controls? Multiple Choice Policies and procedures that are meant to speed up the accounting process. Policies and procedures that are meant to increase revenue. Policies and procedures that restrict and guide activities in the processing of financial data. Policies and procedures that are meant to facilitate new product lines. Policies and procedures that are meant to increase employee morale.

policies and procedures that restrict and guide activities in the processing of financial data.

Which of the following is not used to calculate total manufacturing cost? Multiple Choice Prime cost Materials Labor Indirect Labor Indirect Materials

prime cost

The additional cost incurred as the cost driver increases by one unit is: Average cost. Controllable cost. Variable cost. Unit cost. Fixed Cost.

variable cost

Step cost

varies with the change in cost driver volume but does so in steps

Activity based

•Developed at a more detailed level where a cost driver is determined for each activity

Volume-based cost drivers

•Developed at an aggregate level and relate to the amount produced

Structural cost drivers

•Involve plans and decisions that have long-term effects •Scale, experience, technology, and complexity are considered

Executional cost drivers

•facilitate operational decision making by focusing on short-term effects •e.g., Workforce involvement, design of the production process, and supplier relationships

Period costs

•include all other costs incurred by the firm in managing or selling the product •(costs outside the manufacturing step of the value chain)

Product costs

•the costs necessary to complete the product at the manufacturing step in the value chain •or to purchase and transport the product to the location of sale (merchandising)