Chapter2 Cost Concept and Terms-1.pdf

Cost

What is the sacrificed resource used to achieve a specific objective?

Monetary measure

What reflects the value of resources given up to acquire a good or service?

Actual cost

What is the term for a cost that has already occurred?

Budgeted cost

What is the term for a predicted or forecasted cost?

Cost object

What is the term for anything of interest for which a specific cost is desired?

Future benefits

For what purpose are costs incurred in a profit-making firm?

Revenue

In the context of a profit-making firm, what do future benefits usually represent?

Expenses

What are expired costs used for producing revenue benefit?

Income statement

In which financial statement are expenses deducted from revenue?

Period profit

What is determined by subtracting expenses from revenue for a specific timeframe?

Loss

What is a cost that expires without producing any revenue benefit?

Product costs

What costs are classified based on their direct relation to the product?

Manufacturing costs

What is another common term for product costs?

Direct materials

What is the first of the three integral components of a product?

Direct labor

What is the second of the three integral components of a product?

Factory overhead

What is the third of the three integral components of a product?

Period costs

What costs are classified as being unrelated to the manufacturing of a product?

Non-manufacturing costs

What is another common term for period costs?

Marketing or selling expenses

Name the period cost category related to securing orders and distribution.

General and administrative expenses

Name the period cost category related to executive and clerical functions.

Variability

What is the basis for classifying costs as variable, fixed, or mixed?

Variable costs

Which costs change in total directly and proportionately with activity level changes?

Constant

How does a variable cost behave on a per-unit basis at every level of activity?

Fixed costs

Which costs remain the same in total regardless of changes in the activity level?

Inversely

How do fixed costs per unit vary in relation to activity levels?

Declines

What happens to the unit fixed cost as production volume increases?

Mixed costs

What is the term for costs containing both a variable and a fixed element?

Semivariable costs

What is another name for mixed costs?

Not proportionately

How do mixed costs change in total in response to activity level changes?

Manufacturing department

What is the basis for classifying costs as direct or indirect departmental charges?

Direct departmental charges

What are costs that can be immediately and conveniently identified with a specific department?

Indirect departmental charges

What are costs originally charged elsewhere that are later allocated to a department?

Common costs

What costs relate to facilities or services used in two or more accounting periods or operations?

Joint cost

What is the cost of materials, labor, and overhead incurred for multiple products simultaneously?

Allocation

Joint costs are specifically subject to what accounting process?

Accounting period

What is the basis for distinguishing between capital and revenue expenditures?

Capital expenditure

What expenditure is intended to benefit more than one accounting period?

Asset

How is a capital expenditure initially recorded in the books?

Depreciation

What is the allocation of cost for fixed tangible assets over different periods?

Amortization

What is the allocation of cost for intangible assets over different periods?

Depletion

What is the allocation of cost for wasting assets over different periods?

Revenue expenditure

What expenditure benefits only the current period?

Expense

How is a revenue expenditure recorded in the books?

Planning, control, and analytical processes

What is the final basis for classifying costs mentioned in the source objectives?

Standard costs

What is the term for predetermined costs for materials, labor, and overhead?

Benchmark

Standard costs serve as what within a budgetary system?

Budget

A standard cost is essentially a what for the production of one unit?

Opportunity costs

What is the benefit given up when choosing one alternative over another?

No

Are opportunity costs usually recorded in the formal accounting system?

Decision making

In what process should opportunity costs be considered when evaluating alternatives?

Differential costs

What cost is present under one alternative but absent in another?

Incremental cost

What is the term for an increase in cost from one alternative to another?

Decremental cost

What is the term for a decrease in cost from one alternative to another?

Marginal revenue

What is the revenue obtained from selling one more unit of product?

Marginal cost

What is the cost involved in producing one additional unit?

Sunk cost

What is a cost that has already been incurred and cannot be changed by future actions?

Controllable cost

What is a cost that a manager has the power to influence?

Direct costs

What costs can be conveniently and economically traced to a cost object?

Tracked

What is the synonym for traced used in the context of direct costs?

Indirect costs

What costs cannot be conveniently or economically traced to a cost object?

Rational and systematic

In what manner are indirect costs allocated to a cost object?

Finished product

Direct materials are materials that physically become part of what?

Economically

Direct materials must be traceable to units conveniently and in what other way?

Factory

Direct labor is compensation for employees working in which specific location?

Specific work

Direct labor includes labor costs for what performed on products?

End products

Direct labor must be conveniently and economically traceable to what?

Factory overhead

What category includes manufacturing costs that are not DM or DL?

Production related

Factory overhead is a varied collection of what kind of costs?

Practically

Factory overhead costs cannot be traced to end products conveniently or how else?

Indirect materials

What are minor materials or supplies that cannot be traced economically to specific units?

Indirect labor

What production labor costs cannot be traced conveniently to specific products?

Prime cost

What is the collective term for direct materials and direct labor?

Conversion cost

What is the collective term for direct labor and factory overhead?

Secure customer orders

Marketing expenses include all costs necessary to do what?

Customer

Selling expenses cover the cost of getting the finished product into the hands of whom?

Administrative

Executive and organizational expenses are logically included under what category?

Committed fixed cost

Which fixed cost category represents a relatively long-term commitment?

Managed fixed costs

Which fixed cost category is incurred on a short-term basis and is easily modified?

Management objectives

Managed fixed costs are modified in response to changes in what?

Activity level

Costs are fixed or variable only with respect to a given time period or what?

Total Peso

In a summary table, which column shows variable costs changing in proportion with output?

Cost per unit

In a summary table, which column shows variable costs as unchanged?

Unchanged

How do total fixed costs behave in relation to output levels?

High-low method

Which mathematical method uses peak and valley activity levels to split mixed costs?

Variable cost per unit

In the high-low method, what is calculated by dividing change in cost by change in activity?

Fixed cost

In the high-low method, what is found by subtracting total variable cost from total cost?

Estimate

What level of accuracy does the high-low method generally produce?

Precise

The high-low method does not produce what kind of measurement because it ignores middle data?

Material requisition document

On which document is the cost tracing of direct materials based?

No requisition document

What is the document status for the allocation of indirect costs?

Cost materiality

Name the first factor listed that affects the classification of direct versus indirect costs?

Information gathering technology

The availability of what affects the classification of direct versus indirect costs?

Operational design

What is the third factor listed that affects the direct or indirect classification of costs?

Manufacturing sector

Which companies convert materials and components into finished products?

Merchandising sector

Which companies sell tangible products without changing their basic form?

Service sector

Which companies provide intangible products?

Finished goods

Which inventory consists of products completed and ready for sale?

Work in process

Which inventory consists of products started but not yet completed?

WIP

What is the standard abbreviation for work in process?

Direct materials inventory

Which inventory consists of resources in stock available for use?