An Introduction To Cost Terms And Purposes

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Question 1
Free
Multiple Choice

Which of the following would be considered an actual cost of a current period?

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A

The $25 of materials in a manufactured chair that is ready to be shipped to the customer

B

The $22 of direct material cost per unit assumed in the actual budget of a manufacturer of chairs

C

The expected cost of materials for a chair as a result of engineering specifications

D

The average of historical material cost data for a chair manufactured in several past accounting periods

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Question 2
Free
Multiple Choice

The collection of cost data in an organized way, such as in various categories such as materials, labor, and manufacturing overhead, is called:

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A

cost application

B

cost accumulation

C

cost assignment

D

cost reporting

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Question 3
Free
Multiple Choice

Budgeted costs are ________ .

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A

the costs incurred this year

B

the costs incurred last year

C

planned or expected costs

D

competitor's costs

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Question 4
Free
Multiple Choice

Cost assignment ________ .

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A

includes future and arbitrary costs

B

associates accumulated costs with certain cost objects

C

is the same as cost accumulation

D

is the difference between budgeted and actual costs

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Question 5
Free
Multiple Choice

A cost system determines the cost of a cost object by ________ .

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A

accumulating and then assigning costs

B

accumulating costs

C

assigning and then accumulating costs

D

assigning costs

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Question 6
True/False

A cost object is anything for which a cost measurement is desired.

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True
False
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Question 7
True/False

Costs are accounted for in two basic stages: assignment followed by accumulation.

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True
False
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Question 8
True/False

An actual cost is the cost incurred-a historical or past cost.

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True
False
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Question 9
True/False

Accountants define a cost as the amount of money spent on a resource.

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True
False
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Question 10
True/False

A cost is a resource sacrificed or forgone to achieve a specific objective.

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True
False
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Question 11
True/False

Managers use assigned cost information to make decisions and implement them.

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True
False
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Question 12
Essay

Lucas Manufacturing has three cost objects that it uses to accumulate costs for its manufacturing plants. They are:
Cost object #1:The physical buildings and equipment
Cost object #2:The use of buildings and equipment
Cost object #3:The availability and use of manufacturing labor
The following manufacturing overhead cost categories are found in the accounting records:
a.Depreciation on buildings and equipment
b.Lubricants for machines
c.Property insurance
d.Supervisors salaries
e.Fringe benefits
f.Property taxes
g.Utilities
Required:
Assign each of the above costs to the most appropriate cost object.

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Question 13
Multiple Choice

Which of the following factors affect the direct/indirect classification of a cost?

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A
the level of budgeted profit for the next year
B
the estimation of time required to complete the order
C
the ability to execute an order in the most cost-efficient manner
D
the design where a particular area is dedicated to a specific cost object
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Question 14
Multiple Choice

All of the following are factors affecting direct versus indirect cost classification except:

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A
materiality of the cost
B
cost accuracy
C
information technology's ability to trace costs in an economically feasible way
D
design of operations
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Question 15
Multiple Choice

When costs can be traced to a particular cost object in an economically feasible way, the cost is a:

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A
direct cost
B
indirect cost
C
allocated cost
D
budgeted cost
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Question 16
Multiple Choice

Which of the following statements about the direct/indirect cost classification is true?

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A
Indirect costs are always traced.
B
Indirect costs are always allocated.
C
The design of sales target affects the direct/indirect classification.
D
The direct/indirect classification depends on the cost control measures.
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Question 17
Multiple Choice

Cost tracing is ________ .

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A
the assignment of direct costs to the chosen cost object
B
a function of cost allocation
C
the process of tracking both direct and indirect costs associated with a cost object
D
the process of determining the actual cost of the cost object
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Question 18
Multiple Choice

Cost allocation is ________ .

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A
the process of tracking both direct and indirect costs associated with a cost object
B
the process of determining the opportunity cost of a cost object chosen
C
the assignment of indirect costs to the chosen cost object
D
made based on material acquisition document
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Question 19
Multiple Choice

The determination of a cost as either direct or indirect depends upon the ________ .

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A
accounting standards
B
tax system chosen
C
inventory valuation
D
cost object chosen
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Question 20
Multiple Choice

Classifying a cost as either direct or indirect depends upon ________ .

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A
the behavior of the cost in response to volume changes
B
whether the cost is expensed in the period in which it is incurred
C
whether the cost can be traced to a particular cost object in an economically feasible way
D
whether a cost is fixed or variable
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